How Tax Dollars Work in Public Schools
By Terry Spradlin, Executive Director of the Indiana School Boards Association
With the start of the 2025 session of the Indiana General Assembly, the funding of K-12 public education as a part of the two-year state budget will become a focal point. When examining the areas of state government that consume the largest portions of the state budget—while Medicaid is the fastest growing expenditure now at 18 percent of the state budget—K-12 education remains the largest expenditure at 47 percent. This number decreases to 42 percent when deducting the obligations for the pensions of retired teachers. Higher education and health and human services are the next largest portion of the budget, at 10 and 8 percent respectively. The more than $9 billion annual appropriation in K-12 education funds teaching and learning opportunities for more than 1 million Hooser children. About $5 billion of this amount pays for the salary and benefits of the 63,000 teachers in the classroom.
The investment by the state legislature in public schools is a sound one. Adequate funding for schools helps perpetuate a pillar of our democracy, support these anchor institutions that broadly benefit local communities, provide an engine of opportunity for our youngest citizens, and help drive economic and job growth in our state. When successful, schools produce students who are not only law-abiding, tax-paying citizens, but students who are ready for postsecondary education enrollment, military enlistment, or employment in career pathways that become high-wage jobs.
The return on the investment is strong as illustrated by several positive indicators. Most recently, the state announced graduation rates in our public high schools at 92.5 percent, a record high for Indiana. Our students lead the nation in the percentage of students earning college credit while in high schools at 64 percent. On average, these students earn 13.5 college credits. The state has recently approved changes to high school graduation requirements and will provide increased opportunities for work-based learning, internships, and modern youth apprenticeships to help high school students to earn workplace credentials to better prepare them for high demand, better paying jobs. The state has also made investments in programs to focus on reading proficiency and improve student attendance. Indiana has long performed well on national rankings based on the National Assessment for Educational Progress (NAEP) with our fourth and eighth graders ranking above the national average in math, and on par with the national average in reading. While these are positive indicators, we have more work to do (especially to encourage more high school students to pursue a higher education), which requires a continued investment in K-12 public education through the state budget appropriations.
Where does Indiana stand on per public spending? According to a 2024 report from the Reason Foundation, Indiana had the second lowest percent increase in education spending in the nation from 2002 to 2020, with only a 1.9% increase from $13,116 to $13,368 per student. Another 2024 report from the Education Data Initiative indicates that Indiana ranks 37th of the 50 states in education spending per pupil. While state funding increases have jumped in the last four years, the long-term trend in funding for K-12 education has not kept up with inflation and is decreasing as a percentage of the state budget.
These are cautionary trends that policymakers and state leaders should be mindful of as they work to craft the new two-year state budget. Public education continues to be a wise investment that the state makes and continues to be the answer to many issues on public health, safety, and the quality of life we experience. Balancing a budget that addresses a bevy of complex issues and essential programs is not an easy task. Legislators are to be commended when they prioritize the best investment of taxpayers’ dollars in K-12 education, as they have done recently. Let us hope we can celebrate a similar outcome at the end of the budget session and educational progress accelerates for our Hoosier students.