Legislation to rewrite charter school funding in Indiana advances. Changes would impact IPS

Updated 4:35 p.m., Feb. 20, 2025

Indiana Republican lawmakers moved closer to requiring some public school districts to share local property tax revenue with charter schools, beginning a phase-in period beginning in 2028. 

Senate Bill 518, as amended, would require school districts with at least 100 students attending charter schools to share revenue from property tax levies designated for debt service, school safety referendums, and certain controlled projects with charter schools located within their boundaries.

There are 36 school districts directly impacted by the 100 or more student requirement, said Sen. Linda Rogers (R-Granger), the bill’s author. 

The change will gradually redirect millions of dollars each year from traditional public schools to charter schools. The state and end dayte of the phase-in period would depend on the number of students attending charter schools within each district.

• Districts with fewer than 500 students in charter schools would phase in revenue sharing over three years.
• Districts with between 500 and 5,000 charter school students would phase in sharing over four years.
• Districts with more than 5,000 students in charter schools—such as Indianapolis Public Schools—would have five years to complete the transition, starting in 2028 and ending in 2032.

Rogers said the phase-in period will allow school districts time to look at budget impacts, including from Senate Bill 1, the state’s property tax reform. The current version of that proposal is projected to cost school districts more than $370 million in property tax revenue across three years. 

“This provides school corporations plenty of time to make any needed budget adjustments,” Rogers said.

Senate Bill 518 was passed by the Senate on Thursday with a 28-21 vote after hours of debate. It now heads to the House, where additional changes could be made.

Ongoing debate over charter school funding

The fight over Senate Bill 518 highlights ongoing tensions about the future of Indianapolis Public Schools as charter advocates push for a larger share of property taxes. 

Rogers said extending the phase-in period was a compromise closer to IPS because it gives them space to “right-size” their district. 

“It gives them an opportunity to figure out why they're doing what they're doing,” Rogers said. 

Sen. Shelli Yoder (D-Bloomington) questioned the potential consequences of Senate Bill 518 and Senate Bill 1 on public schools.

“What if the impact of Senate Bill 1 and 518 ends up such that our school corporations actually cannot function, that they cannot continue,” Yoder said. “What then?”

Yoder called for the state to conduct a study of prominent regions for charter schools to “have the information we need in order to make the smartest move in our districts.” 

Rogers told WFYI that the phased-in approach to property tax sharing halts concerns of destabilizations in districts because 

“They have three years right now to at least look forward,” she said. 

According to the Legislative Services Agency, Senate Bill 518 would redirect an estimated $124.4 million to charter schools over three years. An additional $436 million in property tax revenue redistributed among public school districts during the same period. These numbers are expected to change following Rogers’ amendment. 

Rogers told WFYI she would be open to adjusting the legislation if school districts struggle under the new funding model.

“We can always take a look at the fiscal impact and make adjustments as we go forward,” Rogers said. 

Charter school eligibility and restrictions

Any school district that adopts a property tax levy for a controlled project, such as building construction or a school safety referendum, after May 10, 2025, must allocate a portion of the revenue to eligible charter schools. Only charter schools located within the district’s attendance area are eligible to receive these funds, while virtual charter schools and adult high schools would be excluded. 

A current law requires districts in four counties to share referendum proceeds with eligible charter schools.

Unlike traditional public school districts, which receive local property tax revenue, charter schools primarily rely on state funding. However, charter schools have consistently received more state tuition support dollars on a per-student basis than traditional school corporations, according to a report from the state Legislative Services Agency.

Charter schools are tuition-free public schools managed privately by nonprofit boards instead of elected officials. These boards operate under contracts granted by one of several state-approved authorizers.

Dem’s calls to slow charter school expansion

Lawmakers argued on various aspects of regulations for charter schools, including how often they open and close their doors in Marion County.

Sen. Andrea Hunley (D-Indianapolis) proposed an amendment to place a moratorium on new charter schools in the county until 2030.

“If new schools are coming online and schools are closing at a rapid rate, it's very hard to determine what the fiscal impact is when you have an ever changing landscape,” Hunley said.

Rogers, however, pushed back against the idea of limiting school choice.

“Stopping growth of options, it's really a bad policy and bad for families,” Rogers said. “Stabilizing enrollment is not a reason to go against the long standing policy in Indiana to value parental options in education.”

Hunley and other Democrats brought forward several amendments aimed at limiting blows that could come to IPS and other school districts under this bill. All Democratic amendments failed along party lines. 

Rachel Fradette is the WFYI Statehouse education reporter. Contact Rachel at rfradette@wfyi.org.