What Indiana’s Funding Waiver Means for State Education Finance

June 29, 2026

By Betsy Garcia and Kelsey Krausen

On June 16, the U.S. Department of Education (ED) approved Indiana’s Returning Education to the States Waiver. Indiana is the third state to receive a waiver, after Iowa and Louisiana, with Vermont following as the fourth on June 24. The central change that was approved in the waiver–pooling state-level activities funds across Elementary and Secondary Education Act (ESEA) title programs into a single consolidated fund–is consistent across all four state waivers. What Indiana’s waiver adds is small but notable: the inclusion of a fifth program (Title I-B) in the state-level consolidation of funds and a pilot allowing select local education agencies (LEAs) to test similar funding flexibility.

Companion posts examine what this period of increased federal flexibility means for state assessment and accountability systems and the trade-offs states should consider as flexibility expands. This post turns to the funding side of the equation, exploring what ESEA waivers mean in operational terms for state education finance leaders.

What the Waiver Does

Indiana’s waiver does two things.

First, at the state level, it grants the Indiana Department of Education (IDOE) authority to consolidate state-level activities funds from five federal programs into a single Consolidated State Activities Fund. These State Activities Funds include the following:

• Title I-B (statewide assessments) 
• Title II-A (educator professional development) 
• Title III-A (support for English Learners) 
• Title IV-A (well-rounded education and enrichment) 
• Title IV-B (21st Century Community Learning Centers)

For comparison, Iowa’s and Louisiana’s waivers only applied to the last four programs. 

Rather than maintaining separate applications, allowable-use determinations, and reporting systems for each program, IDOE can now manage these dollars as one pool of funds directed toward its highest priority state-level activities within the bounds of what remains allowable across the included programs. This flexibility applies only to the state set-aside portion of their Title funding. In Indiana, these consolidated resources amount to approximately $50 million over 4 years.

Second, at the local level, Indiana’s waiver goes further than Iowa’s or Louisiana’s by piloting some LEA-level consolidation. By waiving ESEA sections 8203(a) and (d)(1), the waiver lets up to 15 percent of Indiana’s LEAs consolidate their Title II-A and Title IV-A funds, directing the combined resources toward locally determined needs without requiring districts to track expenditures for each program separately. The stated goal of the pilot is to reduce the administrative burden of participating in ESEA programs. Indiana requested broader local consolidation across more title programs, but ED only approved the Title II-A/Title IV-A pilot.

The flexibility through the pilot comes with a reporting condition: IDOE must document annually how participating LEAs used consolidated funds, how that use differed from prior practice, and how consolidation contributed to student achievement progress. There are no prescribed benchmarks for what sufficient progress looks like, however, which leaves ED with broad discretion to judge the pilot’s effectiveness. How Indiana designs and documents this work will likely shape the case for expanding this flexibility in future waivers. 

The Opportunity: Organizing Funding Around Priorities, Not Programs

Each ESEA title carries its own application, allowable-use rules, and reporting requirements. Managing them in parallel requires states to maintain separate systems for planning, compliance, reporting, and oversight. In its application, Indiana reported spending roughly $1.7 million on the administrative infrastructure needed to keep separate plans, accounts, and audit trails for compliance and reporting.

Consolidation offers a chance to reclaim a meaningful portion of that capacity (and resources) and redirect it toward implementation. Rather than first asking which federal program can support an activity, states can begin with the priority itself and draw from a consolidated pool to fund it. The pilot brings the same logic to districts: A coordinator who supports both Title II-A and Title IV-A activities no longer has to attribute staff time and shared costs to each program separately, freeing them to manage resources more holistically while still meeting federal program requirements.

Flexibility can also create room for a clearer, more transparent funding strategy—aiming consolidated funds at a focused priority such as early literacy, high-dosage tutoring, or the teacher supply line rather than spreading resources thinly across categories. But flexibility without a strategy simply moves money around. A state needs well-articulated goals before it can decide where consolidated investments will have the greatest benefit.

The Challenge: Flexibility Jeopardizes Fulfillment of the Intended Purpose of Funding

The flexibility that makes consolidation appealing also creates new responsibilities for states. Some funding streams exist to support specific student groups or programs, and the program-by-program structure is part of how states have been able to show that those groups and programs are actually resourced. Title III-A’s support for English Learners is the clearest example in Indiana’s waiver: Once it is pooled at the state level with other funds, the line that used to show how much funding was specifically targeted to Multilingual Learners or programs that support these students can disappear into broader literacy or intervention spending. The same logic extends to Title I-B: The dedicated line showing what the state spends to develop and administer its statewide assessments can fold into general program spending once the funds are pooled. In both cases, consolidation removes the public’s line of sight into the state’s obligation without ending the requirements to provide services.

At the LEA level, Indiana’s pilot covers only Title II-A and Title IV-A, neither tied to a single student group. But the pilot may open the door to more expansive consolidation of program funds in the future. Flexibility does not remove the obligation to serve specific student groups. It just makes how they’re served harder to see. Pooling the funds removes the program-by-program tracking that was used to make spending visible. That tracking created administrative burden, but it was also a structuring mechanism: It created boundaries that let states confirm that specific obligations to students were being met. Consolidating funding and reporting requirements means that states need to build new strategic resource allocation strategies and approaches to confirming that the money still reaches priority students.

How We Help 

WestEd partners with state and district leaders to optimize the opportunities presented by new funding structures: clarifying goals before pursuing systemic changes, aligning changes with those key priorities, and designing funding and reporting systems to ensure student outcomes improve. 

We help leaders work through the questions a waiver raises, including what problem they are solving, which flexibilities their LEAs most need, how to engage interest holders and run a meaningful public comment period, and how to mitigate risk when requesting and implementing flexibility in the use of federal program funds. We pair that guidance with the technical support to develop updated monitoring systems for federal funding, ensuring transparency in the use of funds and leveraging new funding flexibility to drive educational achievement.  

About the Authors

Betsy Garcia is an education finance associate at WestEd. She conducts education finance analysis, cost modeling, and funding research to help state education agencies and school districts improve how resources support students.

Kelsey Krausen is Director of Education Finance at WestEd, where she leads a team specializing in funding formula design and evaluation, strategic resource allocation, school-based health coordination, and accountability system design.