Democratic legislative leaders want Indiana to reconsider the way it divvies up school funding, claiming the formula in the new state budget will devastate public education.

Under the budget signed into law Tuesday, schools can lose money if they lose students, while fast-growing suburban schools will receive large funding increases.

Republicans say that's the way it should be, since schools with fewer students don't need as many teachers or classrooms. They point out that some districts losing money overall will actually see increases in per-pupil funding.

Democrats counter that extra cash is needed in districts with disadvantaged students, and that schools with declining enrollments still have to deal with fixed costs and inflation.

In many recent years, Indiana budgets included minimum guarantees that ensured schools got at least as much money as the previous year — a concept Democrats support. The two-year budget passed in 2007 didn't include any guarantees, but overall spending increases of nearly 4 percent each year kept many schools from losing cash.

This year, the sour economy and falling state revenues kept overall spending increases small — about 1.1 percent the first year and 0.3 percent the second year — and there's no minimum guarantee. Education advocates say about 100 of the state's nearly 300 school districts will get less money in 2010 than in 2009, and 160 districts will get less in 2011 than they did in 2010.

"This is a budget that decimates public schools and forces us to choose between our children based on where they live," said Senate Minority Leader Vi Simpson, D-Bloomington.

The funding formula leaves vastly different districts facing similar financial struggles.

Indianapolis Public Schools, with 34,000 students and a budget of nearly $300 million, is the state's largest district. It has a graduation rate of just 47 percent, has met federal progress goals just once and is struggling to stem an exodus of families from the urban district.

The New Harmony district, on the other hand, is tucked into the quiet southwest corner of Indiana. The town was the site of an 1800s utopian society and bills itself as a birthplace of free education in Indiana. The entire district has fewer than 200 students, all of whom attend the same school. Eighty percent of students graduate and the district has met federal accountability standards every year.



Both districts will lose money because they're losing students. IPS will lose 2.8 percent of its budget the first year and another 4.3 percent in the budget's second year. New Harmony will lose 5.6 percent in 2010 and 4.2 percent in 2011.

"If you're declining, whether you're Indianapolis or New Harmony, you're going to lose dollars under this concept," said Dennis Costerison, executive director of the Indiana Association of School Business Officials. "This is detrimental to rural districts just as much as a large urban district."

Simpson and House Speaker Patrick Bauer, D-South Bend, have called for a study of the complex school funding formula and the creation of a new distribution system that doesn't create winners and losers.

Many Democrats cited the formula as they voted against the budget, which cleared both the GOP-led Senate and Democrat-ruled House just hours before state government was poised to shut down for lack of a new spending plan. Opponents said the budget was a "direct assault" on public education and would "dismantle" the K-12 system.

Democrats also objected to other education provisions in the budget, including a pilot program for virtual schools and unlimited charter schools.

Republicans say talk of destroying public education is blown out of proportion.

"I heard it said on floor debate, I think in overheated fashion, that this budget means the end of public education as we have known it — to which I say thank goodness," said Republican Gov. Mitch Daniels. "We have to have change in public education. We have to end these stone-age policies."

Fellow Republican Tony Bennett, the state's superintendent of public instruction, said Indiana is fortunate to increase school spending when so many other states are making cuts.

"In this budget, every area of state government experienced cuts except K-12 education, and that's good news for students," Bennett said.

It remains to be seen how districts will deal with cuts. Bauer has predicted up to 2,000 teacher layoffs. Education advocates say class sizes will increase and programs will be cut.

In tiny New Harmony, Superintendent Fran Thoele said her goal is to keep student achievement high despite the cuts. She said Indiana should invest more in its children so they grow up to be productive members of their communities.

"The true cost of educating a child is not the 12 years they're in school. The true cost of education is what it costs society after they leave," Thoele said. "That's the tragic mistake they're making with all of this."