Andrea Neal: Dollars to the Classroom

February 7, 2017

by Andrea Neal

Indiana education spending is at an all-time high, yet the percentage of money going to classroom instruction is dropping. Lawmakers have criticized the trend for more than a decade and are trying to do something about it.

Rep. Mike Karickhoff, R-Kokomo, says it will be a session priority “to make sure more state dollars make it to the classrooms.”

K-12 education is the largest item in the state’s biennial budget — more than half of the $31 billion total — so lawmakers are intensely interested in how those dollars are being spent. Since 2006, the General Assembly has required the Office of Management and Budget to prepare an annual report on the ratio of student instructional expenditures to other costs.

Although school spending has grown faster than inflation in five of the last six years, more of the new money has gone to operations and overhead than to classrooms, the most recent OMB report showed. The biggest amount — $54 million — went to construction.

Gov. Mitch Daniels drew attention to the issue back in 2005 when his State of the State Address described “the imbalance between classroom and non-classroom spending” as a “major defect” of school finance in Indiana.

In 2006, Daniels signed the “Dollars to the Classroom Bill,” which gave school corporations consolidated purchasing authority to help achieve economies of scale. The law encouraged schools to join together in creating insurance pools, buying energy and developing shared services arrangements. The goal, Daniels said, was to “get more funds directly into the classroom for student learning.”

It didn’t happen.

In school year 2006-07, 61.4 percent of the funding went into two categories — Student Academic Achievement and Student Instructional Support — which are considered “Dollars to the Classroom.” These include teacher salaries and benefits, classroom aides, instructional books and technology, social workers, guidance counselors and certified school administrators. By 2014-15, the most recent reporting year, the ratio had dropped to 57 percent.

The rest of the money went to overhead, operational and non-operational categories. These cover maintenance, security, transportation, food services, construction, debt service and salaries of non-certified personnel.

The data is consistent with national reports showing Indiana schools with higher-than-average building costs and below-average teaching staff.

In 2006 the National Center for Education Statistics reported that Indiana ranked 47th in the percentage of K-12 employees who worked as certified teachers in the classroom — 46 percent. In 2013, Indiana ranked last, and the percentage of school employees who were classroom teachers was 41.4 percent, compared with a national average of 50.3.

Non-teacher staffing in Indiana schools has surged over the past 25 years relative to student population. From fiscal 1992 through fiscal 2009, according to the U.S. Department of Education, the number of students rose 9.3 percent, while teaching jobs increased 15 percent and non-teaching staff 46.2 percent.

“I don’t think we’re seeing the result into the classroom we’d like to see,” observes the House Ways and Means Chairman Timothy Brown, R-Crawfordsville.

Brown is a co-author of House Bill 1009, which would change the way schools manage money. The bill, which has bipartisan support, simplifies accounting at the local level and adds flexibility to the way dollars may be spent.

The legislation would replace what is now called the School General Fund with an Education Fund used exclusively to pay expenses related to student instruction and learning. It would set up an Operations Fund to be used for everything else, primarily capital projects, maintenance, transportation, utilities and school bus replacement costs — all which currently are placed in dedicated funds.

Rep. Tony Cook, R-Cicero, the bill’s lead sponsor, believes it will drive more dollars to the classroom because of a provision allowing transfers between the Education Fund and Operations Fund, depending on local priorities. Also, simplified reporting categories will make it easier to examine comparable school systems and identify best practices that can be shared. A complaint of the current system is that spending subcategories are confusing, and it’s hard to make apples-to-apples comparisons between districts.

Lawmakers are reluctant to micromanage how local corporations set budgets because schools have such different student populations and building needs. A rural school, for example, might have lower administrative costs but high busing expenses. A school engaged in a building project might have high debt service.

As one example of the wide range that exists, the Dec. 2 OMB report showed that Muncie Community Schools directed 74.6 percent of expenditures to “academic achievement” or “student instructional support” in 2015 compared with 44.8 percent at North West Hendricks Schools.

In the early 2000s, a fad called the “65 percent solution” swept the country as reformers pushed states to insist on 65 percent of all dollars going into the classroom.

Texas was one of the first to embrace the idea, but studies have been mixed as to its effect. One 2010 study by researchers at Sam Houston State University found statistically significant, higher passing rates on the state’s standardized test in districts that spent 60 percent or more on classroom expenses. The researchers found no distinction between those that spent from 60 to 65 percent or 65 percent and higher.

“Bright-line requirements, like Texas had, add to the bureaucracy and produce more distorted results, not less,” observes Sen. Luke Kenley, R-Noblesville, who chairs the Senate Appropriations Committee. “Generally, bright-line silver-bullet solutions don’t work.”

Indeed, there’s no certainty behind the underlying assumption of HB 1009 — that getting more money into classrooms will improve student achievement. A Fort Wayne newspaper reported recently that five of nine Indiana school corporations that earned D and F letter grades from the state in 2014 were above the state average for dollars to the classroom while 61.4 percent of A schools were below it.

On one point, research is unequivocal. The single biggest factor in student learning is the effectiveness of the teacher, and benefits are cumulative over years. To the extent classroom dollars are targeted to hiring and developing high-caliber teachers, it would be money better spent than on overhead.

Andrea Neal is history teacher at St. Richard’s Episcopal School and adjunct scholar at the Indiana Policy Review. Contact her at


Leave a Reply