A new study from Ball State University’s Center for Business and Economic Research (CBER) finds that significant changes in Indiana’s school funding policies—including property tax caps, operating referenda, and revisions to the state funding formula—have led to shifts in how school districts across the state spend money, particularly on instruction, administration, and staffing levels.
The research, summarized in a new policy brief titled School District Responses to Property Tax Caps, Referenda, and State Funding Formula Changes, uses data from 295 public school districts across Indiana between fiscal years 2000 and 2019. The study analyzes how districts responded to funding changes introduced by the 2008 property tax cap legislation and subsequent shifts in state support and local referenda outcomes.
“Our results show that districts across Indiana have had to make strategic decisions in the face of shifting revenue sources,” said Dr. Dagney Faulk, director of research at CBER and co-author of the study. “While many districts attempted to preserve instructional spending, the effects of funding changes varied depending on geographic location and the ability to pass referenda.”
The study found that property tax rate caps—also known as circuit breaker credits—resulted in an average revenue loss of $78 per student in the typical district. While increases in state aid provided an average of $72 per student, this fell short of fully offsetting the loss. When adjusted for inflation, state support declined for most districts over time.
Districts that successfully passed operating referenda saw significantly larger funding increases—about $535 per student on average—which helped offset other losses. These effects were most pronounced in metropolitan districts and smaller in micropolitan areas, with no statistically significant effects observed in rural districts.
“School leaders had to make tough budget decisions, but the data show they generally prioritized the classroom,” said Dr. Charles D. “Chip” Taylor, co-author of the study and associate professor emeritus of political science at Ball State. “We found little evidence that administrative spending was protected at the expense of instruction.”
Other key findings include:
- As circuit breaker credits increased, school district spending and teacher-student ratios declined, particularly in rural and micropolitan districts.
- Increases in state funding were associated with greater overall spending and more teachers per thousand students, especially in micropolitan areas.
- Referenda were strongly linked to increases in instructional and administrative spending and staffing in districts where they passed.
Since its inception in 1970, Ball State’s Center for Business and Economic Research has been a trusted source for high-quality, nonpartisan, data-focused research, analysis, and visualization.
For more information, visit the CBER website, call 765-285-5926, or email cber@bsu.edu.