Tsunami in Indiana: Emerging K-12 School Funding Issues

1. Tsunami in Indiana: Emerging K-12 School Funding Issues Armstrong Teacher Educator Program Presentation Terry Spradlin April 28, 2010

2. About the Center for Evaluation & Education Policy • The Center for Evaluation & Education Policy (CEEP) is a client-focused, self-funded research center associated with the School of Education at Indiana University • CEEP provides a wide range of evaluation and nonpartisan policy research services to policymakers, governmental entities, and non-profit organizations • CEEP is continually looking for new opportunities to help inform, influence, and shape the development of P-16 education policy not only in Indiana, but across the nation

3. CEEP Associates focus their broad spectrum of experience and capabilities to produce high impact within the following "Areas of Excellence": • Educational Evaluation • Early Childhood Education Evaluation • Literacy Evaluation • Math, Science and Technology Evaluation • Education Policy Research & Technical Assistance • Health, Human Services & Community Development Evaluation

4. Table of Contents • State Revenue Trends • School Budgets and Referenda in Indiana • School Funding Lawsuit • Federal Stimulus Dollars in Indiana • Indiana and the Race to the Top (RTTP/R2T) • Federal School Improvement Grant • Investing in Innovation Fund (i3)

5. I. State Revenue Trends

6. Annual Tuition Support Increases 1990-2010

7. Increase in Total Tuition Support From 1990 to Current Year

8. Indiana 2009-2011 Biennium Budget • In May 2009, the Indiana Legislature passed the 2009-2011 biennium budget which called for: • General Fund Expenditures of $27.684 billion • Projected Revenue of $26.746 billion • The budget deficit is to be paid through reserve funds. • The revenue forecast breakdown for the biennium as of May 2009: • Forecast 2009: $12.932 billion (-1.1% decrease from 2008 revenue) • Forecast 2010: $13.143 billion (1.6% increase from 2009 forecast) • Forecast 2011: $13.660 billion (3.9% increase from 2010 forecast)

9. Indiana Updated Revenue Forecast • In December 2009, the state made an updated forecast of 2010 and 2011 revenues. • Newly projected revenue for 2010 was $12.076 billion, representing a 6.4% decrease from actual 2009 revenue and a 7.9% decrease from the May 2009 projection. • Revenue projections for 2011 are $12.835 billion, a 5.8% decrease from the original May 2009 forecast.

10. Nationwide State Tax Revenue Trends • Through the first 8 months of FY 2010: • 25 states reported personal income tax collections below their latest targets • 23 states had general sales tax revenues below their most recent forecasts • 21 states already project budget gaps of at least $64.7 billion in FY 2013 • Since the recession began in December of 2007, states will have addressed budget gaps in excess of $531 billion

11. Falling Revenues • Until March 2010, Indiana faced 17 consecutive months of lower-than-forecast tax revenue collections. • In the first nine months of FY10, revenues were $867 million less than projected, representing a 9.4% decrease from FY09 which itself saw a 7.4% decrease from FY08.

12. Indiana Budget Reductions • In December 2009, Gov. Daniels began announcing budget reductions to cope with the falling revenues. • 10% in executive branch agencies • 6% in higher education ($150 million) • 4.5% in public school funding ($300 million) • In April 2010, state agencies have been asked for an additional 5% reduction, for a total 15% reduction in their budgets for the FY11 which begins on July 1. • One hopeful sign: March 2010 tax revenue collections increased $7 million, or 0.8%, from March 2009. • This is $2 million above the original revenue forecast in May 2009; • And is $48 million above the revised revenue forecast in Dec. 2009.

13. House Enrolled Act No. 1367 • The 2010 Indiana General Assembly passed House Enrolled Act (HEA) 1367 to allow school corporations greater flexibility in conducting inter-fund transfers. • The Act specifies that an amount equal to 5% of a school corporation’s Capital Projects Fund levy may be transferred (except from Debt Service and Racial Balance Funds). • However, a corporation whose employees will not receive a general wage and salary increase for the 2010-11 school year may transfer an amount up to 10% of the school corporation’s Capital Projects Fund Levy to the General Fund. (WLSC)

14. II. School Budgets and School Referenda in Indiana

15. School Budget Cuts • School corporations across the state are looking to more substantial budget reduction measures including faculty and staff reductions, building closures, program reductions or eliminations, and operating and construction referenda to close budget deficits. • The following slides describe approved or proposed reductions in selected school corporations across the state.

16. Northwest and Northern Indiana Budget Reductions • In Northwest Indiana: • Kankakee Valley School Corporation, a rural district, will eliminate 25 teaching positions; • School City of East Chicago, an urban district, will eliminate 12 administrative positions; • School City of Highland, an urban district, will eliminate 12 teachers, 2 administrators, and cut administrator pay 5%. • In Northern Indiana: • South Bend Community School Corporation, an urban district, proposes $7 million in cuts, including 10-20 teachers; • School City of Mishawaka, an urban district looks to cut 54 positions, including 38 teachers; • Fort Wayne Community Schools plans to close 2 elementary schools, cut 91 teachers and 9 administrators for approx. $15 million in cuts.

17. Indianapolis Area Budget Reductions • Indianapolis Public Schools proposed cutting 80 teachers, 15 high school administrators, 20 custodians, and 20 school resource officers. • In other metropolitan districts: • M.S.D. of Perry Township looks to cut 43 teachers; • M.S.D. of Lawrence Township plans to cut 25 teaching positions; • M.S.D. of Decatur Township looks to cut 62 teachers; • M.S.D. of Warren Township plans to close 2 elementary schools and eliminate 10 teaching position.

18. Indianapolis Area Budget Cuts (continued) • In Indianapolis suburbs: • Noblesville Schools plans to cut 54 teaching positions; • Center Grove Community School Corporation looks to close an elementary school and cut 10 teachers; • Carmel Clay Schools plan to eliminate 40 teachers. • Elsewhere in Central Indiana: • Muncie Community Schools announced in February plans to borrow $7.4 million at 1.75% interest to close the budget gap. • Tippecanoe School Corporation plans to cut 150 teachers (20% of teaching force)

19. Southern Indiana Budget Cuts • Vigo County School Corporation, an urban district, announced recently it plans to make approximately $4.7 million in reductions. • New Albany-Floyd County Consolidated School Corporation, a suburban district, has plans to close 4 schools (losing 70 teachers) and to cut assorted administrative positions. • Monroe County Community School Corporation, an urban district, announced plans to eliminate 88 teachers. • Richland-Bean Blossom School Corporation, a suburban district, plans to cut 17.5 teachers and close its alternative school.

20. School Referenda • In lieu or in addition to budget cuts, some school corporations are pursuing General Fund or construction referenda.

21. School Referenda (continued)

22. School Referenda (continued)

23. Center GroveGeneral Fund Referendum November 2, 2010

24. School Funding in Center Grove General Fund Debt Service Capital Projects Trans-portation Bus Replace-ment Bond Severance $3.2 M $12.8 M $43.1 M $6.9 M $0.9 M $1.1 M

25. Dollars Raised via a GFR • On March 17, the Board approved raising $3,160,000 per year for 7 years for a total of approximately $3,300,000. • This will add $0.15 per $100 of Assessed Valuation to the school corporation tax rate. • This will be in addition to the school corporation’s normal tuition support. • This will increase taxes for a home with an assessed valuation of $200,000 by $147 per year or $12.22 per month.

26. Tax Impact Calculator

27. Johnson County 2010 Tax Rate Comparison

28. Purposes of GFR Dollars • Balance the budget and maintain our current programs as per board direction • Provide additional positions that will work directly with students. (Examples include: Teachers, Classroom Assistants, Support Personnel) • Maintain opportunities for students in the area of instructional technology • Save jobs • Absorb possible future reductions in state funding

29. III. School Funding Lawsuit

30. Hamilton Southeastern Schools, et al. v. Daniels • On February 23, 2010, three suburban corporations and parents of students attending these corporations filed a lawsuit in the Hamilton Superior Court: • Hamilton Southeastern Schools • Middlebury Community Schools • Franklin Township Community School Corporation • Plaintiffs contend that state funding system disproportionately effects their school corporations and favors urban corporations • Denies students a uniform education as provided for in the State Constitution

31. Issue in Contention : Average Daily Membership • Adjusted average daily membership (ADM) • Allows school corporations to choose between the actual ADM for the current year or the average ADM of three previous years when calculating tuition support • Corporations with increasing enrollments use their actual ADM, while corporations with declining enrollments use the adjusted (artificially higher) ADM • Plaintiffs contend that this is disproportionately shifting state revenue from corporations with rising enrollments to corporations with declining enrollments

32. Issue in Contention: Complexity Index • Complexity Index • Increases the amount of funding a school corporation receives based on the number of students who qualify for free or reduced price lunch in the corporation • In 2009 the Complexity Index was $2,400 per eligible student • Plaintiffs argue that the Complexity Index creates non-uniformity and disparate allocation of educational resources

33. Issue in Contention: Reduction in Per-Pupil Funding and Restoration Grants • The state of IN reduced base-line per-pupil funding across all corporations from $4,825 in 2009 to $4,550 in 2010 • Plaintiffs suggest that this reduction impacts students attending some corporations more so than students in other corporations • Restoration Grant limits the change in dollars per-pupil a school corporation receives • Corporations with reductions beyond the specified range are eligible to apply for grant funding • Plaintiffs contend that this unjustly shifts funding away from their corporations

34. Issue in Contention: Property Tax Law • State prohibition on using property tax revenues for general school expenses • Plaintiffs argue that this provision prohibits their corporations from using local resources to provide students with the same funding amount other corporations are receiving under the state formula

35. The Precedent of Bonner v. Daniels • Plaintiffs contended that state’s school funding formula is insufficient to provide an adequate education to all students • Violation of Education, Due Course of Law, and Equal Privileges and Immunities Clauses of the State Constitution • In a 4-1 decision, the Indiana State Supreme Court dismissed the case on June 2, 2009 • Court stated that the plaintiffs claims, even if found true, were not sufficient to establish an enforceable duty on the State

36. IV. Federal Stimulus Dollars and Education in Indiana

37. Federal Stimulus and Indiana • As of March 30, 2010 Indiana has received $1.7 billion in stimulus funding

38. Federal Stimulus and Indiana (Continued)

39. Indiana Stimulus Specifics • Of the state fiscal stabilization funds received by Indiana $610,100,000 went into the school funding formula • For most programs receiving stimulus funding, the funding will expire after two years, however, for some programs, such as Title I, the funding will last for 27 months • Phase II of the state’s application has been given approval by the federal government • Allocation amounts and dispersal timeline have yet to be established

40. V. Indiana and the Race to the Top

41. Indiana’s Race to the Top Application • In January 2010 Indiana submitted a Race to the Top application for $500 million • Indiana’s application scored 355.6 out of 500 possible points • Ranking the state 23rd out of 41 states • The 15 states and Washington, D.C. chosen as finalists had scores of at least a of 400 • States chosen for funding had scores of • Delaware 454.6 points • Tennessee 444.2 points • Delaware will receive $107 million and Tennessee will be awarded $502 million

42. Race to the Top Scores by Selection Criteria Categories

43. At a Glance: State Success Factors, Standards /Assessments, and Data Systems

44. At a Glance: Great Teachers and Leaders

45. At a Glance: Turning Around the Lowest Achieving Schools and General

46. Why Tennessee and Delaware • Secretary of Education Arne Duncan said that no one factor was decisive • Many factors set them apart from the rest of the field • Statewide buy-in from unions and other stakeholders • Dedication to turning around low performing schools • Commitment to installing teacher evaluation systems linked to student achievement • Emphasis on STEM education • Illustrated capacity to implement reforms • Using evaluations to inform decisions • Fully implementing statewide longitudinal data systems

47. Strengths of Indiana’s Application • The state is making progress in narrowing the achievement gap and increasing graduation rates. • Judges praised Governor’s Teaching Corps of Excellence and Lead Indiana programs for producing more equitable distribution in the state’s neediest schools. • The state scored well in ensuring successful conditions for high-performing charter schools and other innovative schools.

48. Weakness of Indiana’s Application • Perceived lack of buy-in from local teachers’ unions • Questioned whether state could implement a teacher evaluation system under local bargaining agreements • Inadequate alternative pathways for teachers to enter the classroom • Professional Development approaches were questioned • Longitudinal Data System not fully implemented • Lack of a demonstrated commitment to STEM education • Cap on enrollment at virtual charter school

49. Second Round Funding • Approximately $3 Billion is available for second round funding • Indiana had the option to revise it’s application and apply for the second round of Race to the Top Funding by June 1, 2010. • Indiana would have been competing for an award of between $150 to $250 million

50. Indiana’s Decision Not to Apply • On Thursday April 22, Dr. Bennett, Indiana Superintendent of Public Instruction, announced that the state will not submit an application for Phase II funding in the Race to the Top competition • Without support from the state’s teachers unions the application would not be competitive • The president of the Indiana State Teachers Association (ISTA), the state’s largest teachers’ union, declined to meet with Superintendent Bennett after a highly public feud, prompting the state’s decision to not apply