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School funding will be a key issue this year. Here’s a reminder of how it works in Indiana.

This story has been corrected to reflect what dollars make up the state’s contribution to schools.

The drafting of Indiana’s next state budget is already underway, a centerpiece of this year’s session given that education funding is more than half the state’s budget.

Proposals are in from Gov. Eric Holcomb and state Superintendent Jennifer McCormick — both suggesting a 3 percent, $280 million increase in basic state aid to schools. But House and Senate lawmakers, the key players in the process, have yet to detail their own plans. The House is expected to make its amendment to the budget, House Bill 1001, in the coming weeks.

Ultimately, lawmakers are responsible for creating and tweaking the formula that determines school funding (a complex process you can brush up on with our school funding explainer).

The biggest question is whether lawmakers will stick with Holcomb and McCormick’s conservative funding asks or boost money to education. It’s not yet clear which strategy will win out, especially when the state has already cautioned that it’s working with less revenue than previously expected.

It’s possible we have a scenario like what happened in 2015: Then-Gov. Mike Pence also proposed a 3 percent increase for schools — a $200 million bump. But later, legislative leaders came back with more money for schools, totaling more than $460 million in additional funding when all was said and done.

So how does the state decide how much money schools get?

The money comes primarily from state sales and income tax dollars that are funneled into the state’s general fund. After lawmakers settle on a final amount, it’s run through a formula to divvy it up among schools, based partially on enrollment and partially on whether schools enroll certain groups of students, such as those with special needs or those from low-income families.

Because of an adjustment all districts now receive the same basic state aid amount. Extra money for the various student groups is added through what is called a “complexity index.”

Currently, that amount is based on how many children receive welfare services or are in foster care, rather than the number of children who qualify for the federal free lunch program as it was in prior years. That could see debate this year, as some educators and policymakers have complained that the change has meant schools that need the funding the most have gotten less than before.

For more on the history and inner-workings of Indiana school funding, check out our basics post: The basics of school funding in Indiana: Difficulty defining fairness.

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