A lawsuit challenging Indiana’s school finance system was filed in 1987, but the plaintiffs withdrew the case when the state revised the funding formula. No other lawsuit challenging the finance system has been filed. The state allocates education dollars through a foundation formula. The Indiana legislature establishes the foundation level that drives the formula each biennium. It is set at $4,368 for the 2005 calendar year. The total foundation cost for each school corporation is shared between the state and the local district, with the state assuming that each district will levy a certain amount of revenue through local property taxes. The amount of the property-tax levy varies by district, and the foundation level is adjusted for several district characteristics. Indiana has a “complexity index,” which for every district takes into account the percentages of 25-year-olds with less than a 12th grade education, students eligible for free lunches, students classified as English-language learners, families with a single parent, and families with incomes below the poverty level. The state also adjusts funding based on the number of students in special and vocational education. In addition, Indiana provides state aid through 14 categorical programs, totaling $135 million for fiscal 2004.
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