Published Online: November 24, 2008

New Indiana Budget Could be Tough on Schools

Lawmakers often say schools are the top priority when it comes to creating the state's budget.

But in the legislative session beginning in January, legislators have a challenge on their hands as they attempt to come up with an education-friendly, balanced two-year budget despite the slumping economy. Schools worry that flat or declining state tax revenues could lead to consequences such as teacher layoffs and larger class sizes.

School districts across Indiana are facing increased costs for salaries, and many are also paying more for health insurance. With increasing costs, even a budget equal to last year could mean some tough choices.

"When we get the same amount of money, that's like a cut for schools," said Dennis Costerison, executive director of the Indiana Association of School Business Officials. "And if that happens, we're talking about much higher class sizes."

The state's revenue growth in the first quarter of the current fiscal year, which began July 1, has been flat. Some fear that a Dec. 11 revenue forecast will predict declines in state sales and income tax revenues.

Lawmakers can cut spending in other areas to funnel more money into schools, or could tap into state reserve funds in hopes that the economy will rebound. Or lawmakers can keep education funding flat and let schools figure out how to deal with the problem.

"Boy, I just don't have good answers," said state Sen. Luke Kenley, the Noblesville Republican who chairs the Senate Appropriations Committee.

Rep. Jeff Espich, a Republican from Uniondale who has worked on state budgets since 1995, said it will be difficult to come up with a balanced budget.

"I think it has to be the toughest (budget) that we have faced in decades," Espich said.

Gov. Mitch Daniels says the state should not raise taxes, use accounting gimmicks or dip into reserves. The state has cash reserves of $1.4 billion, but Daniels says that money might be needed in the future if the economy gets even worse.

Staff Cuts Likely

House Speaker Pat Bauer, D-South Bend, said using part of the Rainy Day Fund might be necessary to get through without severe cuts.

"This is a rainy day," he said.

Many educators are worried. Mark Eastridge, superintendent of Crawford County Schools, said the district has many fixed costs like health insurance, salaries and utilities.

"If we're going to cut, we unfortunately have to look at staffing," he said.

Tony Bennett, who will become the state's new superintendent of public instruction in January, said schools should prepare for bad news. But he said tighter budgets will force districts to find new ways to save money.

"I think the current economic conditions will serve as a catalyst for creativity in all areas," Bennett said. "We are going to have to look at how we can help schools become creative and we are going to see schools take and seek innovative measures to deal the financial situation."

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