Indiana school officials are warning that the state’s new property tax overhaul is pushing districts into an unprecedented financial squeeze — which dozens of Hoosier superintendents say is already forcing staff cuts, delaying maintenance and increasing the likelihood for other reductions.
Their concerns are at the heart of a new statewide survey released Thursday by the Indiana Coalition for Public Education, first published by the Indiana Capital Chronicle.
The report highlights how Senate Enrolled Act 1 is reshaping local school budgets just months after its passage.
The survey — completed by 148 of the state’s 290 traditional public school corporations — found that 95.3% of Indiana districts expect SEA 1 to negatively affect their funding in 2025, and 99.3% expect impacts in future years.
Concerns cut across geography and school size. Large suburban districts worried about their ability to accommodate growth without operational dollars, while small rural districts said they face “existential threats” in the form of potential staff layoffs, school consolidations and the reduction of essential services if operational funding continues to shrink.
Urban districts additionally said long-standing structural disadvantages make them especially vulnerable to revenue compression, noting that dense populations, aging buildings and higher concentrations of high-needs students leave them with fewer ways to absorb shrinking tax collections.
ICPE_2025-School-Funding-Report
For many superintendents, the financial strain isn’t a future concern, but a problem already unfolding inside their buildings.
Survey responses were kept anonymous in ICPE’s published report.
One superintendent described being unable to cover even the most basic operating costs, saying their district’s finances had reached the point where “I cannot pay my utility bill,” and warned that rising gas, electricity and insurance costs are outpacing any funds available to cover them.
Another district leader said the combined effect of inflation and the property tax cap changes mean their operations fund is shrinking each year while costs climb.
“The negative impacts of SEA 1 cannot be overstated,” the superintendent wrote, adding that “uncontrollable cost increases in utilities, transportation and insurance cannot be addressed adequately” under the new levy limits.
Indiana schools depend on local property taxes to fund essential services like custodial work, transportation, facility maintenance and bus purchases — areas where costs have risen sharply in the last decade.
SEA 1 decreases the taxable assessed value available to school corporations through expanded deductions that phase in through 2031. Although the law was intended to provide tax relief to property owners, superintendents emphasized in the survey that it has weakened the financial foundation for operating public schools.
Several respondents pointed to a mismatch between what’s expected of schools and the dollars they receive.
One rural superintendent reported that their district had “a history of doing more with less,” but that the law’s projected reductions in the operations fund would soon make it “very difficult to simply run school.”
A suburban superintendent separately noted that long-range financial planning has become nearly impossible because “constantly changing regulations” leave districts unsure how much revenue they will receive from one year to the next.
Cuts ripple across classrooms, buildings and school services
The survey found that 65.3% of Indiana districts that responded have already reduced or will reduce support staff, and 55.8% have already reduced or will reduce teaching staff.
Combined with the districts that are considering reductions, more than 90% reported that cuts to staffing or facilities are on the table.
In write-in responses, superintendents said they’re postponing or canceling bus purchases, scaling back technology upgrades, holding off on building repairs, and in some cases, preparing for building closures.
A suburban superintendent described a list of cost-saving measures large enough to reshape daily school operations — including the possibility of a four-day week, scaling back HVAC use to the minimum tolerable levels, and even “closing playgrounds if funds do not support adequate repairs after inspections.”
A different rural leader said their district would soon need to choose between raising tens of millions through a referendum or cutting what is, for many rural districts, a critical service.
“We have no choice but to either pass an operating referendum or eliminate transportation,” the superintendent wrote.
Others emphasized in the survey that cuts now reach well beyond the classroom.
One superintendent said increased legislative mandates have made it impossible to balance budgets responsibly, emphasizing that “it’s impossible to ‘do more with less’ when everything else continues to increase in cost.”
Another superintendent detailed how their district’s operations fund will be less than $450,000 by 2028 — falling below the $600,000-per-year utility bill.
Superintendents express frustration
In addition to widespread reports of fiscal stress, other remarks captured anger and exhaustion among school leaders who said the state has placed them in an “impossible” position.
Multiple superintendents stressed that Indiana has simultaneously increased schools’ responsibilities and expanded alternative education models that draw funds away from traditional districts while restricting the revenue streams that public schools rely on to meet those obligations.
One rural superintendent called the situation “a manufactured crisis.”
Another expressed disbelief that state lawmakers embraced referendums as the state’s new funding pressure valve while working to defeat those same measures locally.
“I’m shocked that the politicians made us a referendum state and now one of them actively tried to defeat all referendums,” the superintendent wrote. “You can’t make that make sense.”
A different superintendent wrote that policy shifts have pushed them to consider leaving the state altogether: “I’m seriously considering working as a superintendent in another state. The continuing changes in legislation keep moving the goal line.”
Many survey respondents said they feel the burden now falls on local voters to keep basic school functions afloat.
Leaders in 90% of urban districts and 84.8% of suburban districts said they’re considering or pursuing operating referendums.
“No district should need to run a referendum to adequately pay for expected services in the community,” one suburban superintendent wrote. “Any school below the ‘average’ per pupil funding continues to fall further and further behind.”
What schools need — and expect
When asked what funding increase would be needed to provide the services their communities expect, respondents offered percentages ranging from 2% to 20%, with an average of 7.6% — far above the increases approved by lawmakers in the most recent state budget.
The 2025 state budget increased K-12 tuition support by roughly 2% each year of the biennium.
Several superintendents said the increases championed by lawmakers don’t reflect the true cost of new mandates.
“When you give a 2% increase but force us to pay for curricular material out of (the) Education Fund, that is NOT new money,” one superintendent wrote. “That is a 0% increase.”
Some school leaders said the only workable solution would be a reversal of the property tax changes themselves. An urban superintendent wrote that their district might survive if lawmakers acted quickly.
“If SEA 1 was completely repealed,” the local official wrote, “we could make it work.”
Others were less hopeful, pointing to projections that show continued enrollment declines, rising costs and a shrinking property tax base that will leave districts competing for scarce dollars.
“It continues to cost more to run a corporation,” said one rural superintendent, “but we continually lose funding streams to make it happen.”
Indiana Capital Chronicle is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Indiana Capital Chronicle maintains editorial independence. Contact Editor Niki Kelly for questions: info@indianacapitalchronicle.com.