Larry DeBoer
Professor of
Agricultural Economics
Purdue University

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School Formula Arithmetic

The school funding formula was one of the sticking points in this year's state budget debate. To understand why, consider an example.

Suppose the state has $20 million to divide between two school districts. Each district has 2,000 pupils. An easy way to slice this pie is to distribute $5,000 per pupil, so each district gets $5,000 times 2,000 pupils, which is $10 million.

Suppose, though, that one school district is growing and the other is declining, each by 100 pupils per year. Last year, the declining school district had 2,100 pupils, and the growing school district had 1,900 pupils. So, at $5,000 per pupil, last year the declining school district got $10.5 million and the growing district got $9.5 million. If each gets $10 million this year, the growing district gets an increase and the declining district gets a cut.

The growing school district is fine with that. "Our costs depend on the number of kids we need to educate," its superintendent would say. "Now that we have 100 more pupils, we'll need money for added teachers, desks and maybe even a temporary classroom building. We need that extra half-million."

"Not so fast," says the superintendent of the declining school district. "Not all costs depend on pupils. We still have to pay utilities and insurance for our buildings. We may be able to close a building, if enrollment keeps dropping, but the neighborhoods hate it when we do that. And besides, our one-and-only high school has to stay open. We have 100 fewer pupils, but we can't live with a full half-million dollar budget cut."

Growing and declining school districts have different ideas about how the school funding formula should divide up available revenues.

Now consider the 10 most rapidly growing school districts over the past five years. They're mostly suburban districts. Hamilton Southeastern in Hamilton County is No. 1 on this list. Its enrollment grew 46 percent over this period. This list also includes Clark-Pleasant in Johnson County, Crown-Point in Lake County, and Brownsburg in Hendricks County. These 10 districts are represented in the Indiana House by 13 legislators. Of these, 11 are Republicans and two are Democrats.

How about the 10 most rapidly declining school districts? They're a combination of urban and rural districts. Gary Schools in Lake County has had the biggest enrollment drop, 28 percent over the past five years. Also on this list are Indianapolis Public Schools, West Washington Schools in Washington County, and North Judson-San Pierre Schools in Starke County. These 10 districts are represented in the House by 26 legislators, 20 Democrats and 6 Republicans.

In the House, Democrats are more likely to represent declining districts, and Republicans are more likely to represent growing districts. The pattern is similar in the Senate; however, since there's a big Republican majority there, Republicans represent more of both kinds of districts.

Elected legislators represent the interests of their constituents. So, the Senate (controlled by Republicans) originally proposed that, in the school formula, enrollment be measured by the current enrollment number. The House (controlled by Democrats) originally proposed that enrollment be measured based on a five-year average, or current enrollment, whichever is greater.

A five-year average will produce a bigger enrollment figure for a declining school corporation. Those higher pupil numbers from past years will still influence this year's revenue distribution. Averages of past enrollments won't help growing districts.

In our example, a five-year average sets the declining district's enrollment at 2,200. The five-year average for the growing district is 1,800, so its formula enrollment would be the current figure, 2,000. Dividing the $20 million by total formula enrollment, 4,200, gives $4,762. The declining district would receive a little less than $10.5 million; the growing district a little more than $9.5 million. The changes from the previous year would be very small.

At the end of the special session the two sides compromised, at the greater of a three-year average or current enrollment.

Democrats supported formula arithmetic that helped declining districts more. Republicans supported formula arithmetic that helped growing districts more. That means that some of the partisan divisions that helped prolong the 2009 legislative session were based on real differences in the needs of legislators' constituents.



Writer: Larry DeBoer
Editor: Cindie Gosnell