Indiana’s Senate Republicans nixed a major voucher school expansion in favor of increased Medicaid funding under their latest state budget proposal released Thursday, April 13.

That’s a significant shift from the House GOP spending plan, which sought to allocate $1.1 billion in fiscal years 2024 and 2025 to expand eligibility for the Choice Scholarship program.

The new voucher dollars accounted for roughly a third of the $2 billion in new, additional state funds that House Republicans wanted to earmark for K-12 education. K-12 tuition support increased by 8.5% in the first year and 2% in the second year in the House budget. On the Senate side, tuition support goes up 4.68% in the first year followed by a larger 9.43% bump in the next year.

But Senate budget writers opted to keep the Choice program as-is, meaning vouchers will stay limited to Hoosier families that make less than 300% of free and reduced lunch eligibility, equal to about $154,000 annually for a family of four.

“Medicaid is now outpacing K-12,” said Sen. Ryan Mishler, R-Mishawaka, who chairs the Senate Appropriations Committee. “(Medicaid) has already grown at a rapid pace. Everybody wanted to expand it more in their bills. And this is the thing that scares me the most .. we have to figure something out.”

The two-year budget spends $43.3 billion overall and ends the biennium with $3.2 billion in reserves.

Sen. Ryan Mishler, R-Mishawaka, outlines the Senate budget proposal in a press availability on April 13, 2023. (Whitney Downard/Indiana Capital Chronicle).

The Senate also included a separate, $160 million annual line item to eliminate K-12 student textbook fees. House budget writers, on the other hand, required schools to dip into their foundational funding to fully pay students’ curricular materials costs.

Advocates for vouchers blasted Senate Republicans, who have long been more cautious than their House counterparts.

Betsy Wiley, the president & CEO of the Institute for Quality Education said in a statement that six other states had adopted universal choice but senators did “nothing to expand eligibility for the largest single voucher program in the nation.”

“The two-year budget proposed by the Indiana Senate Republicans today ignores the students and families in Indiana who want educational freedom and choice,” Wiley said in a statement. “…Adoption of the Senate budget plan would be a huge step backward for Hoosier students and a complete assault on Hoosier voters who support educational freedom and universal school choice.”

Sen. Mishler offered the following statement in a press release regarding the unveiling of the Senate budget proposal:

“Senate Republicans have worked together to craft yet another balanced budget for our state. Through our collaborative discussions, we have come up with a budget that reflects our continued support for education and desire to maintain healthy state reserves.

“One of our main priorities is ensuring the state is paying down the pre-1996 Teachers’ Retirement Fund, and this budget proposal is no different, providing an additional contribution of $1 billion to the fund in fiscal year 2023, as agreed to during special session.

“In addition to paying down debt, we are investing a historic amount of funding for our future generation, providing K-12 education with a $2.5 billion increase over the biennium. Our budget also increases funding for special education and the Non-English Speaking program by $240 million and $46 million, respectively, over the biennium.

“The Indiana State Police work hard every day to protect Hoosiers, and Senate Republicans have prioritized the inclusion of a pay increase in our budget proposal. This ensures officers are properly compensated for their time and efforts in the field.

“Indiana has shown consistent economic growth over the past several years, and to encourage the continuation of that growth, our proposal provides $500 million to the Collaborative Communities program. The program promotes partnerships between counties, cities and towns to create and roll out programs, initiatives and projects to help us retain talent and make Indiana more attractive to current and new families.

“The funding we provide can pave the way for our state’s growth and development. The fiscal discipline shown by Senate Republicans in our budget proposal ensures a healthy and prosperous future for Indiana.”

Property Taxes Going To Charter Schools

Mishler noted that while the education budget shrunk from 50% in the last biennium to 48% in both the House and Senate proposals, Medicaid expenses had increased from 15% to 17%.

Spending on the healthcare assistance program would total $7.5 billion in the budget and includes the federally required equalization between programs while maintaining a 90% reimbursement rate from the House proposal.

Senate Democrats signaled their support for the Senate version of the budget over the House voucher expansion but were concerned about new funding language for charter schools.

That new language would allow eligible charter schools to receive a portion of property tax collections starting in 2024 but only incremental, or new, revenue. The base would still go to traditional schools.

“We know many of our school populations are in impoverished areas. They’re struggling with assessed value and they still struggle with a variety of funding issues,” Sen. Eddie Melton, D-Gary, said. “We do not support the House version… (but this) is a new model that hasn’t been fully vetted and discussed.”

The property tax could not be distributed to virtual, adult or distressed charter schools. For schools that qualify, the property taxes would eventually replace the charter school grants, which Mishler said would be phased out.

According to the budget presentation, the Charter and Innovation Network School Grants will decrease from $1,250 per average daily membership (ADM) in fiscal year 2024 to $937 in fiscal year 2025 – though the property taxes start in calendar year 2024.

Charters would receive an estimated $313 per student from property taxes in 2025 as the grants decrease.

Public Health, Mental Health Funding TBD

Mishler said the Senate GOP plan also commits the same as the House budget — $225 million — for public-private partnerships meant to increase public health services across the state. That’s still only two-thirds of Gov. Eric Holcomb’s ask for the statewide program, and less than half what the Governor’s Public Health Commission originally proposed.

And while Senate Bill 1, which shores up the state’s crisis response system, finally got an explicit amount of funding – $35 million over two years – legislators still haven’t come to an agreement on a phone fee for 988.

Sens. Fady Qaddoura, D-Indianapolis, and Eddie Melton, D-Gary, share their budget concerns. (Whitney Downard/Indiana Capital Chronicle).

The hotline, designed to be a mental health counterpart to the public safety services under 911, would connect Hoosiers to resources that could include short-term crisis stabilization centers.

Federal law allows states to charge a phone fee up to $1 monthly for 988 – though the highest state-implemented tax is $0.27. Indiana already has a $1 cell phone fee per month for 911 but hasn’t set a dollar amount for 988.

“We agree; we didn’t fully fund it. We just put some general fund dollars and there’s got to be something else in there,” Mishler said. “But I think we need to decide — what is that going to be?”

Mishler said a fee could be implemented to supplement the fixed appropriation dedicated to mental health services.

Senators in the Appropriations Committee did not implement a cigarette tax increase, despite support from House Republicans and some senators.

Senate Republicans have long resisted increasing the state’s cigarette tax, though all three other caucuses seem to approve of one. Melton said Thursday that increasing the tax could help fund mental health and public health priorities.

“We’re going to continue to push that on the Senate floor and hopefully we’ll come to the conclusion there,” Melton said. “It’s a piece of the puzzle. I think the cigarette tax increase in addition to the 988 solution… will fully address the issues.”