By Steve Garbacz
How does school funding actually work?
KPC Media Group Inc. dug into that question extensively while putting together a multiday series we’re calling “Funding Our Future?” During the next week, KPC Media Group’s daily newspapers will be printing stories taking a look at both the mechanisms of how school funding works and the impacts that funding has been having on school districts in northeast Indiana.
So to start, let’s look at the basics: Where does the money come from, how does it get to my school and what does it pay for?
Since reforms made during the administration of Gov. Mitch Daniels in 2009, the majority of money for schools comes from the state. The state money comes from sources such as state income tax and sales tax that all Hoosiers pay. Education makes up about 33 percent of Indiana’s $56 billion annual budget.
Residents still pay property taxes toward schools and, in general, about half of your property tax bill goes to local schools. But in the overall scheme, the money that comes from property taxes now makes up only a small percentage of your local school’s annual budget.
Here’s an explanation of the two types of funds schools use to pay for their expenses:
Go to any school district in Indiana and the general fund is by far the largest account.
None of this money comes from your property taxes any more, and most of it is delivered to schools by the state based on a per-student funding formula.
The general fund is primarily used to pay for personnel — faculty and staff — and operating costs such as insurance, utilities and service contracts.
Schools receive a certain amount of money for every student which goes to fund all those costs. At a minimum, schools get about $5,100 per student.
But the school gets more money depending on certain factors such as if that student is from a low-income family, is enrolled in special education, takes career or technical training courses or graduates with an Academic Honors Diploma.
For example, a school receives about $13,900 total for a special education student with a severe disability, $6,100 for a student who graduates with academic honors, or $10,000 for an academic honors graduate who is also from a low-income family.
Generally, districts receive a per-student payment of about $6,500 on average, which will be higher or lower depending on the demographics of the student body.
For a more detailed look at how those amounts are determined, consult the graphic adjacent to this story about the different parts of the per-student formula, check page for a chart of per-student funding for every district in the 11-county region, and view a story about the calculation for low-income students on fwbusiness.com or kpcnews.com.
The property taxes you pay no longer pay for teachers, but they do pay for equipment, buildings and buses.
Property tax funds are divided into four groups: transportation, bus replacement, capital projects and debt service.
Capital projects is typically the largest property-tax driven fund and can have a wide range of uses including new construction, repairs or remodeling, land acquisition and technology such as computers, laptops, devices and networking infrastructure.
The transportation fund raises money to cover the costs of getting students to and from school, except for purchase of new buses, which is paid for out of the bus replacement fund.
And, of course, the debt service fund is used to pay for debt the district has taken out, such as when a school needs to borrow money to fund a multimillion dollar renovation or new construction project.
One catch with property-tax driven funds is that the state requires that debt payments be fully funded first, sometimes at the expense of other tax funds. The state manages and limits the amount of taxes schools can levy, or raise, and property tax caps in Indiana can also put a ceiling on the amount of taxes schools can collect.
Those mechanisms sometimes lead to districts shorting other funds in order to make debt payments or hampers their operations when tax caps limit their ability to generate tax revenue.
One example of this impact is school districts that have canceled or considered canceling bus service, typically because there are insufficient funds available to run transportation while also paying debt and funding necessary purchases and maintenance.
For stories on some issues with tax-driven funds by Business Weekly reporter Bridgett Hernandez, visit fwbusiness.com or kpcnews.com.