Basics of the Funding Formula
The Indiana State K-12 Education Funding Formula is found in Indiana Code 20-43. Yes, there is an actual statute with the verbiage of the funding formula. Each year the Indiana Department of Education provides a formula simulation for school corporations to enter estimated data and forecast state tuition support distributions for their district. The funding formula has gone through many changesover the years. Terms like deghoster, minimum guarantee, transition to foundation, and others have all played different roles in the legislation.
During the biennium budget session, the Indiana General Assembly modifies the school formula to address changes in public policy and school corporations. Possible changes in public policy could be new programs, refinement of previous formulas to match new political landscapes, or the change with the largest impact,the financial health of the state. Changes in school corporations would include overall enrollment, special education, English language learners, or any variety of demographic changes in smaller sub-groups. These changes both at the state level and the local school corporation level create many moving parts to compare the year-to-year change in the funding formula.
Funding Formula
The Funding Formula is divided into separate grants; Basic Tuition Support, Honors Diploma Grant, Special Education Grant, Career and Technical Education Grant, and Complexity Grant. Recently the Full-Day Kindergarten Grant had been included, but its elimination is one of the changes for the 2015-2016and 2016-2017 formulas.
Basic Tuition Support
Previous Year Revenue
The formula starts with Previous Year Revenue. It is exactly what its name suggests, each school district’s previous year revenue for Basic Tuition Support.
Average Daily Membership (ADM)
The next section determines a district’s Average Daily Membership. In previous years this section calculated the Adjusted ADM. It has gone through a variety of different calculations. This year’s formula eliminates any adjustment for ADM. The only other change is the counting of Full-Day Kindergarten (FDK) students as a whole student instead of a ½ student as long as the student attends for a full day. Since the FDK students are now counted as one it eliminates the need for a separate FDK Grant as in previous formulas. There continues to be two counts, fall and spring, which determines funding for July-December and January-June respectively.
Foundation Amount
In recent years the foundation amount is becoming the most important factor in the funding formula.As the formula has shifted to the concept of money following the student, the amount that each student generates grows in importance. In past years there were different limitations used in the formula to restrict variances from one year to the next in the amount each school corporation would receive per student. The first year of this formula does the same in limiting the change in the foundation amount to 1/3 of what it should be. For 2016-2017 the formula brings every school corporation to the foundation amount. The foundation amount will be equal for every student in the state of Indiana. The concept is that no matter where the student lives the student generates the same dollar amount to the school corporation. Differences in students’ backgrounds/needsnow produce revenue in other areas of the funding formula which we will cover later. For the 2015-2016 formula, the amount is $4,967 per ADM and $5,088 per ADM in 2016-2017. Below is a chart of previous year’s foundation amounts.
*On July 1, 2013 the funding formula changed to a fiscal year instead of a calendar year as in previous years.
The increase from 2014-2015 to the first year of the new formula in 2015-2016 is $380 per pupilfor the foundation amount. The overall increase to the state support for K-12 education was 2.3%. In addition, money came from other areas inside the school funding formula. One of those areas was in the Transition to Foundation. School corporations were limited due to different variances. For those school corporations that were already at the foundation amount, they benefitted from capturing all of the increase to the Foundation Amount. It is understandable why many think the school formula is confusing after reading this section. The good news is that going forward every school corporation in the state, starting with the 2016-2017 funding formula, will have the same Foundation Amount per Pupil.This is why it has become one of the most important factors into how much each school corporation receives in State Support.
Calculation of Basic Tuition Support
Now that we have worked through the components of the Basic Tuition Support, we are ready to calculate it. The calculation for 2015-2016 is the product of the corporation’s fall 2015 ADM and either the Transition to Foundation Amount or its Foundation Amount, whichever is greater divided by two. Its product is divided by two because the funding is only for the first six months of the formula from July 2015 to December 2015. The second half of the Basic Tuition Support for 2015-2016 is the spring 2016 ADM times the same Transition to Foundation or Foundation Amount whichever is greater divided bytwo. The Basic Tuition Support for 2015-2016 is the sum of the result for each half of the year.
For the 2016-2017 portion of the funding formula, the calculation becomes much simpler. It is the fall 2016 ADM count times the Foundation Amount of $5,088 divided by 2 and the spring 2017 ADM count times the same Foundation Amount of $5,088 divided by 2. The sum of the two products is the annual Basic Tuition Support for 2016-2017.
Honors Diploma Grant
In recent years the Honors Diploma Grant has gone through some changes and this year is no different. A few years ago, there was an addition to the grant that added a Core 40 diploma with Technical Honors. This year another addition was made to award additional dollars to those students who earn one of the several qualifying diplomas and receive Supplemental Nutrition Assistance Program (SNAP) benefits, Temporary Assistance for Needy Families (TANF) benefits, or foster care services.
For every student that earned a qualifying diploma in the previous year, the school corporation will receive $1,000 per student. If the student also was receiving benefits under SNAP, TANF, or foster care and earned one the qualifying diplomas, the school corporation received an additional $400 for each of those students.
Special Education Grant
This is one grant that has not experienced the number of changes that the other grants have in policy terms. All K-12 students who are identified as needing special education services are categorized into three categories; Severe, Mild or Moderate, and Communicationor Homebound. The students primary disability is only counted once under the Severe, Mild, or Moderate categories. The Communication disabled student, no matter what their primary disability, also counts in the Communication portion of the grant.
What has not changed in sometime is the dollar amount for each student with a qualifying disability. For students with a severe disability, the school corporation receives $8,800, up from $8,350 previously. Each Mild or Moderate student generates $2,300. In previous years this amount was $2,265. For every Communication disabled student, the school corporation receives $500. This is a decrease from previous years when the grant amount was $533 per student.
Another portion of this grant is the Special Education Pre-School for those 3, 4, and some 5 year old students. This amount has not changed in a long time. Each student, without regard for their disability, generates $2,750.
Career and Technical Education Grant
This grant can be divided into two parts. The first is funding that is provided based on the number of credit hours students take in courses identified by the Department of Workforce Development in consultation with the Department of Education and Indiana Works Council. Each course is then placed into a matrix with regard to the wage level and need for workers in the respective fields. Each of the nine boxes is then given a dollar value per student credit hour.
Value per Credit Hour / Labor Market NeedMore than Moderate / Moderate / Less than Moderate
Wage Level / High Wage / $500 / $450 / $300
Moderate Wage / $450 / $300 / $225
Less than Moderate / $300 / $225 / $150
To calculate the value of the first part of the grant, a school corporation simply takes the sum of the number of credit hours for each course, times the number of students in the course, times the appropriate wage and need matrix result.
The second portion of the grant counts the number of students in different types of programs. If students are enrolled in an introductory career and technical education course or an apprenticeship, a cooperative education program, or a work based learning course the school corporation will receive $300 per student. If students are enrolled in a foundational career and technical education course or are part of a cooperative career and technical education program, the school corporation receives $150 per student. The sum of the results of the first and second parts results in the Career and Technical Education Grant.
Complexity Grant
During this past legislative session, there were some significant changes to the Complexity Grant. The biggest change is in the calculation of the Complexity Grant. In FY2015 the grant used the percentage of students that received textbook assistance. For the FY2016 and FY2017 formulas, the calculation uses the percentage of students who are receiving SNAP, TANF, or Foster Care Assistance.Also included in the complexity index is an adjustment for schools with an English Language Learner percentage greater than 25% and a calculated factor less than (-0.1).Due to this significant change, a transition from each corporation’s previous complexity index was placed in the formula. This is done similar to the Transition to Foundation discussed earlier. The transition in the complexity index similar to the Transition to Foundation is only allowed to be reduced by 1/3 of the reduction. In the second year the reduction is ½ of where it should be. This is different from the earlier transition which went to the foundation amount in the second year.
The other change in this grant is the value of each student who is classified as “complex.” In the past it was based off of each school corporation transition to foundation amount established earlier in the formula. For the next two years that amount will be the same for all school corporations at $3,489 in 2015-2016 and $3,539 for 2016-2017.The complexity grant is the product of the complexity index, the number of ADM, and the value per student each year. Since the ADM is taken in both the fall and the spring of each year, this grant, similar to the Basic Tuition Support,is divided into two six month periods and reconciled each period.
Other Funding Sources for the General Fund
Indiana State also provides grants for special purposes that are outside of the funding formula. The remediation grant provides support for those students who were not successful on the state assessments. On the reverse of that is the performance grant which provides money to school districts that must be distributed to teachers based upon students’ successeson state assessments and graduation rates. A change for this year is that theperformance grant is outside the collective bargaining agreement. Another funding source is a reimbursement program the state provides for summer school. The summer school grant is a reimbursement of actual expenditures that were incurred by the local school district to provide summer school.
Other miscellaneous revenue sources will vary for each school corporation. Most will have interest income. Some other potential sources are facility rentals, supply fees, indirect costs, and reimbursementsfrom extracurricular accounts.
Other Funding Sources
Property Tax Funds
The Property Tax Funds that are controlled by the school corporation include but are not limited to: Debt Service Funds, Capital Project Fund, Transportation Operating Fund and Bus Replacement Fund. Each of these funds is limited to specific uses, and the funds cannot be comingled.
Federal Grants
Other funds that go towards operational expenses for school corporations are federal grants. The main programs that receive those funds are Title I, Special Education, and Career and Technical Education. Food Service is also a federally funded program that is combined with local support.
Self-Supporting Funds
Some self-supporting funds that school corporations may have are self-insurance funds, textbook rental, and other miscellaneous funds as determined by the school corporation. The Rainy Day Fund is an important fund for school corporations. It is listed here under self-supporting because its receipts are transferred from existing funds.
Summary
The funding formula the state develops every two years has many moving parts. This version of the formula brings the state closer to funding schools based on their specific characteristics without limitations. Formulas that use transitions allow for gentle landings when changes are made; however, they also create irregularities that do not allow schools to be funded at the level that the formula intends. The natural trend to look at winners and losers each year the formula is developed does not give a true review of the formula. If every school corporation stayed exactly the same as previous years, then looking at winners and losers based on additional dollars would make sense. However, we all know every school corporation has a different make up every year. We also know that no two districts are the same and there has to be a way to fund districts based on differences. This new formula goes a long way to making the distribution of dollars to schools clean.
Definitions and Helpful Websites for School Funding in Indiana
- Indiana Department of Education – School Finance
- Indiana Department of Local Government Finance
- Indiana State Board of Accounts
– Indiana University – Center for Evaluation & Education Policy
– Indiana Gateway for Government Units
Definitions
ADM – Average Daily Membership – A count of enrolled students. The count is taken on a day in September and again in February.
Foundation Amount – Amount established within the funding formula for an amount every district receives for each student. This is the minimum amount to educate a student.
Transition to Foundation – The amount a school corporation receives as they move to the foundation amount.
Complexity Grant – This is a grant within the funding formula to provide resources to districts for students who are considered “at-risk.”
Honors Diploma Grant –This is a grant within the school funding formula to provide resources to districts for encouraging and providing programs to assist students in achieving an Honors Diploma.
Cooperative Education Program – A group of school districts who combine to provide services to their students.
Rainy Day Fund – A fund established to provide resources when funds are unavailable from traditional funding sources. The fund is funded through excess funds from the General, Capital Projects, and Transportation Funds.