The Indiana state government didn’t hand out any favors to local schools this legislative season. It moved Indiana away from generating revenue based on property taxes towards sales tax income. The cuts affect the funding of Montgomery County’s three school corporations. Then, in a double whammy, the legislature passed another bill that diverts almost half of the state’s general fund for schools towards school vouchers – these are now available to any family regardless of household income.
While Montgomery County has no brick-and-mortar charter schools competing for per-pupil funds, a small portion of students may qualify for funds diverted to charter and private schools. What is the effect of this, really, on local school districts? Over the next few weeks, we’ll chat with superintendents about the funding (and other) changes that will affect their staffing, resources, and policies.
This week, we feature perspectives from Southmont Superintendent Stephanie Hofer EdD, who is in her first year at the helm of the district. The picture that emerges from our conversation with her is one of cautious stability, careful planning, and a steadfast commitment to protecting the classroom.
Hofer began with the basics, explaining that Southmont’s funding is a mosaic of federal grants (such as Title I and special education funds), the state’s basic grant (tied to student enrollment), property taxes, miscellaneous revenue, and proceeds from debt issuance. Of these, local property taxes have consistently accounted for about 40% of the district’s total budget—39.93% in 2023, 41.52% in 2024, and a projected 41.12% in 2025. This relative stability masks deeper currents of change, particularly as state-level property tax reforms take effect.
According to the Indiana Legislative Services Agency tables, published by WFYI, Southmont funding decreases will be close to $370,000, or about 33%, in 2026; a little under $400,000, about 3.4%, in 2027; and over $577,000, or 4.9%, in 2028. While Hofer says that the district has been well managed, the average teacher’s salary is just under $52,000. The funding decreases would be equivalent to the salaries of about seven teachers the next year, eight the following year, and eleven teachers in 2028. The good news is that with funding streams as they are, and with Southmont’s fiscally responsible planning, the impacts will be cushioned. Staffing and student services stand to be protected. It will be building and grounds funds that will bear the brunt of the impact.
Indiana’s new property tax credit, which caps losses at 10% or $300, and reductions in farm ground assessments, will directly impact district revenues. The new deduction, starting at 6% and rising to 33.3% by 2031, is expected to erode the property tax base further. These changes will make it more challenging across local governments, including school districts. Southmont’s challenge will be maintaining the district’s buildings and grounds, especially as the Debt Service Fund will also lose property tax revenue. Even if the district holds its tax levy steady, a shrinking assessed valuation will force the debt service rate higher in the coming years.
Hofer is clear-eyed about the practical impacts. With multiple funds and some leeway, the district may need to transfer the maximum allowable 15% from the Education Fund to the Operations Fund each month to offset property tax losses. While the Operations Fund levy will rise by 4% in 2026, this will not fully compensate for the anticipated revenue decline. The upshot: long-term upkeep of facilities, transportation, and technology will require even more careful management.
For a rural district like Southmont, transportation is a perennial concern. Long bus routes—sometimes up to an hour for students—mean that maintaining a reliable, up-to-date fleet is essential. Hofer emphasizes the importance of not consolidating routes or extending ride times, both for student well-being and educational equity. The district’s bus replacement plan is under pressure, but maintaining current service levels remains a priority.
Much of Southmont’s budget planning hinges on enrollment. While the district has seen some growth in assessed valuation—14.18% in 2023 and 9.17% in 2024—the projected increase for 2025 is a modest 1.23%. The tax rate, meanwhile, has held steady at .96% since 2022. New housing developments could eventually boost enrollment and, by extension, state funding, but these gains are likely to be incremental rather than transformative in the short term.
Despite these fiscal headwinds, Hofer is adamant that classroom instruction will be shielded from cuts. “Protecting the classroom is always going to be my number one priority,” she said.
As noted, Hofer expects staffing levels to remain stable, with reductions considered only as a last resort. The district does not anticipate changes to student nutrition, wraparound services, library resources, technology access, or extracurricular programs like music and athletics. Federal nutrition funding and other support programs remain intact for now, which is important because about 40% of students qualify for free or reduced lunch—a reminder of the district’s vital social role.
To date, the expansion of Indiana’s school voucher program and the presence of virtual charter schools have had only a minor impact on Southmont. While a handful of students have left for virtual options, most eventually return, Hofer noted. The absence of brick-and-mortar charters in the county has helped insulate the district from more significant enrollment losses. Hofer’s message to families is clear: Southmont is committed to offering a comprehensive, supportive educational environment that meets the needs of all students, something that many charter and private schools cannot and do not offer.
Southmont’s financial outlook is best described as steady but vigilant. Years of prudent fiscal planning have given the district a cushion to absorb current shocks, but continued vigilance is required. The district’s long-range financial plan is a “living, breathing document,” subject to regular review as legislative and economic conditions evolve. While some Indiana districts may face more acute challenges, Southmont’s approach is to adapt, prioritize the classroom, and avoid drastic measures like staff reductions or program cuts.
Hofer and her team are navigating a complex financial environment with transparency and resolve. The community can take comfort in the district’s commitment to stability, educational quality, and the well-being of every student. As state and local conditions continue to shift, Southmont’s watchwords remain adaptability and student-centered stewardship—a model for rural school finance in uncertain times.