State of Our Schools: A Need for Financial Stability
The State of Our Schools series explores several of the major systemic issues facing public schools within and near Indianapolis Public School (IPS) boundaries. Over 60% of IPS-area public school students attend charter or innovation network schools, and that percentage continues to increase each year. Conversely, the district faces deepening enrollment and financial challenges, raising questions about its sustainability.
The Indianapolis Local Education Alliance (ILEA) marks a once-in-a-generation moment to reimagine education for 46,000 Central Indianapolis public school students and forge a sustainable system. As the ILEA meets to form recommendations to help solve these issues, this series outlines challenges that their proposals should address and presents a range of potential solutions that should be considered. Read our other blogs in this series on governance and transportation and facility management.
As conversations continue about the future of public schools in our city, Indianapolis Public School (IPS) commissioners have acknowledged the tenuous financial position the district is in. Creating a pathway for sustainable district finances should be tied with systemic change that includes innovation network and independent charter schools. The Indianapolis Local Education Alliance (ILEA) should consider recommendations that put the district on solid financial footing without relying on a continuous series of referenda that only maintain the status quo.
How has declining enrollment contributed to IPS financial challenges?
Official 2025-2026 enrollment data from the Indiana Department of Education has not yet been released. However, the district published 2025-2026 enrollment data in their November 2025 quarterly finance update (slide 41 on this presentation), showing a 6% decrease in enrollment at IPS-operated schools, now serving just over 17,000 students. Over the last two years, IPS-operated enrollment has decreased by 9%. According to IPS’ presentation, innovation school enrollment has risen 5% during the same time period, to now serve 13,175 students.
In that same time period, charter and innovation school enrollment has seen an 18% increase, from about 23,600 students to just under 28,000. As of the 2024-2025 school year, charter and innovation schools serve 61% of public school students within and near IPS boundaries. Since the 2014-2015 school year, charter and innovation school enrollment has risen 123%. With the decreases reported by IPS, these percentages will likely rise.
Despite declining enrollment, there have been no major reductions to central office spending or school building closures. The Rebuilding Stronger plan closed six buildings while simultaneously re-opening two large former high school buildings as middle schools that were closed just a few years prior due to low enrollment. The shift to standalone middle schools caused significant enrollment drops, with 800 students leaving IPS middle school grades in 2024-2025 alone. As a result, Rebuilding Stronger made the district’s enrollment and financial challenges significantly worse and there are no clear plans to change course.
Charter and innovation schools serve more students of color and more low-income students than IPS-operated schools. In the 2024-2025 school year:
- IPS-operated schools served:
- 15,400 students of color
- 11,000 students who qualified for free or reduced lunch
- Charter and innovation schools served:
- 24,500 students of color
- 20,139 students who qualified for free or reduced lunch
Over the last decade, Indianapolis’ education landscape has seen significant shifts that reflect the choices and preferences of students and families. The ILEA should consider recommendations that take the growth of charter and innovation schools into account, while also preserving IPS as an option for families. However, significant changes to central office spending are needed to ensure financial sustainability.
Has district revenue increased or decreased over the last few years?
Since 2018, IPS’ property tax revenue has increased by 125% and overall revenue has steadily increased by 60%, even as enrollment in IPS-operated schools has decreased. Despite revenue growth, IPS has been projecting a financial cliff for several years (even before last year’s property tax reforms), and without additional taxpayer support, the district is expected to be insolvent by the middle of next school year.
While revenue has increased, there have been no significant changes to district expenses that could prevent or lessen their predicted budget shortfall of $44 million this school year and $70 million next year. Instead, district leadership has signaled that they plan to campaign for another large operating referendum. Receiving an infusion of taxpayer dollars without any major changes to expenses will not provide a long-term solution to IPS’ financial crisis. Even a referendum close to $1 billion would only hold IPS’ revenue steady, where they are still operating at a budget shortfall. S&P Global recently revised IPS’ credit outlook to negative due to a growing structural budget deficit and dwindling reserves. In a release about the outlook change, S&P Global shared, “The negative outlook reflects our view that there is at least a one-in-three chance we could lower the rating over the next two years.”
How much does IPS spend per pupil compared to other township districts and charter schools?
According to the district’s 2024 Every Student Succeeds Act per pupil expenditure report, IPS spends just over $24,000 per pupil, the highest out of any district in Indiana and significantly higher than suburban districts like Carmel ($11,671 per pupil) and Zionsville ($11,420 per pupil). Fifteen of the 16 highest spending schools in the state are IPS-operated schools. In comparison, Paramount Brookside spends $14,247 per pupil, Christel House Academy South spends $13,426, and Victory College Prep spends $13,749 per pupil. Each of these charter schools serve a high percentage of students of color and low-income students.
In 2023, researchers at the University of Arkansas found that Indianapolis had the third-largest funding disparity between charter schools and traditional school districts out of the 18 cities analyzed, with charter schools receiving an average of $7,863 less per pupil than district schools. This gap will begin to narrow in 2028 when local property tax sharing from Senate Enrolled Act 1 phases in, though charter schools will still not have access to local property tax funds to support debt service.
All public school types are funded at the same per pupil rate at the state and federal level, $6,681 per student this year as a base for state funding, with additional funding for students in high-need groups. However, because local funding is not tied to enrollment, significant disparities exist between school types. Until 2025, charter school funding came from only state and federal sources, not local property taxes. In addition to state funding and federal grants for specific purposes and programs, IPS receives several local revenue sources that are not traditionally available to charter schools, unless IPS voluntarily shares those funds. Property taxes represent the largest share of these local revenue sources.
How will property tax sharing impact IPS and charter schools?
Beginning in 2021, IPS began sharing $500 per student who lived within IPS from its operating referendum with innovation charter schools. Additionally, the Indiana General Assembly recently passed legislation in 2023 and 2025 that directs a fair share of local funds for operations to charter schools, with a full phase-in beginning in 2028. These shifts will ensure charter and innovation school students receive funding at a level more comparable to their public school peers who attend traditional district schools. In Indianapolis, these shifts in resources reflect the significant enrollment changes that have occurred over the last ten years.
It is important to note that IPS’ financial challenges were not caused by shifts in property tax revenue. The district projected that they would become insolvent well before any recent property tax reforms, which also were not responsible for other recently cut programs. The federal government provided three rounds of COVID-19 relief dollars to schools nationwide through Elementary and Secondary School Emergency Relief (ESSER) funding. This temporary funding ended in early 2025. IPS received nearly $217.5 million through the ESSER program and used the funds to support teacher salaries, zero-cost Pre-K, student learning recovery, and other initiatives. As the funding sunset approached, IPS began signaling in early 2024 that it would need to replace those federal dollars with other sources. The district was unable to find other funding sources, and had to cut programs like, zero-cost pre-k.
Could shrinking down to Center Township help improve district finances?
Recently, local media have reported on the idea to shrink IPS boundaries to Center Township, which has been discussed by IPS commissioners at community conversations. IPS commissioners have included the idea during these presentations, but have not shared any rationale for how the change could benefit families or create long-term financial stability.
One potential change that could benefit the district is to create an independent transportation and facility authority, which would manage operations, logistics, and finances for each. Removing the financial and staffing burden of transportation and facility management from IPS, charter, and innovation schools would benefit each public school type. It could also help create more streamlined decision-making for building usage and transportation services, lessening division between school types and allowing educators more capacity to focus on student learning.
Indianapolis has a vastly different education landscape than it did twenty years ago. The systems we have based schools on have become outdated and are now creating inefficiencies, financial strain, and overlapping services. We are hopeful for the ILEA to take our current system into account through their recommendations. Indianapolis families deserve an education system that puts students first and ensures strong public schools for our community well into the future.