Much of this session of the Indiana General Assembly has focused on rebuilding from COVID – but what about building a more resilient economy against the next crisis? As action on the $36+ billion state budget plan shifts to the Senate, a recent report from the Brookings Institution on behalf of the Central Indiana Corporate Partnership reminds us that two-year policy choices can grow into 20-year trends, especially when it comes to education, and issues like state aid to students in poverty.

Much of the economic hardship of the pandemic has fallen on lower-skill, lower-wage employees. A presentation to the State Budget Committee in December confirms that high-wage job losses had fully rebounded from the COVID shock by October, while low-paying positions were stuck 14% below January.  

According to the Brookings analysis, this dynamic pre-dates COVID: Indiana’s economy produces too few high-quality, family-supporting jobs, and we were also slow to recover in employment and earnings from the last two recessions (2001 and 2008). The study tracks a troubling loss of productivity and competitiveness in our advanced industry sector – knowledge-driven clusters within life sciences, manufacturing, information technology. Advanced industries drive wage growth across the economy.

Unsurprisingly, Brookings connects these challenges to education as a catalyst for employment and earning power; a skilled workforce attracts advanced industry investment and high-wage job creation. Education dominates our state budget, but educational attainment is also our top economic priority.

State policymakers have been working for years towards the day when 60% of Hoosier workers hold a post-secondary degree or high-value vocational credential. Today that number hovers around 50%.

Is our education spending optimized to close this gap? Success is rooted in a K-12 system producing well-prepared high school graduates. Indiana ranks 31st in our “college-going” rate; how do we lift more high schoolers into higher education?

National data shows that students from lower-income families are less likely to enroll and earn degrees, as are students generally who attend “high poverty” (often under-resourced) schools. And this finally brings us back to state support for students in poverty – the “complexity” component of Indiana’s school funding formula.

Most state education funding is earmarked for tuition support that ‘follows the student’ to local schools. Tuition support will account for roughly $15.4 billion of the 2022-2023 budget; much of that goes to the foundation grant, core funding applied to every student. The complexity grant is added for students in foster care or whose families are enrolled in federal poverty programs (SNAP and TANF) to address circumstances outside the classroom.

In recent budget cycles, complexity has diminished as a share of total spending. The House plan flatlines complexity at $3,675 per student as the foundation per student grows 3.7% to $5,913 by 2023. It also limits the growth of total complexity funding per school district to 2.5%.

House fiscal leaders argue that adjustments are needed to smooth out fluctuations in funding created by COVID and that putting more resources into the foundation grant benefits all students. The debate pits urban schools against suburban schools while raising deeper issues of equality versus equity in education. It also ties into a broader discussion of how Indiana funds education and priorities like teacher pay.

But staying within the parameters of the current plan, the Brookings findings could be used to build a more straightforward case for complexity: If low-income students in high-poverty communities face the biggest hurdles to post-secondary education, isn’t funding to flatten those barriers an especially smart investment towards moving the needle on educational attainment?  

In addition to growing overall K-12 spending for 2022 and 2023, the House has advanced a $150 million grant program dedicated to helping schools combat learning losses from this year of disrupted education. But strengthening complexity would help districts budget their resources to help vulnerable students in more sustainable ways.

Brookings diagnoses challenges growing for decades pre-COVID – a less favorable climate for advanced industries, a lower-skill job market tied to sluggish income growth – all connected to uneven educational progress. Changing the trajectory of our economy means acting now, before today’s students graduate into tomorrow’s workforce. Fixing our deficit of good jobs depends on fixing deficits in educational achievement…and rethinking complexity as a down payment on stronger recoveries from future recessions.

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