BY DEANNA MARTIN Associated Press

INDIANAPOLIS -- In some tiny school districts, Spanish is the only foreign language students can take. Other small districts offer no physics or advanced placement science classes. And districts across Indiana spend more than half of their state money on non-instructional expenses such as school construction and legal services.

Republican Gov. Mitch Daniels wants small school districts to consolidate operations to give students more learning opportunities. He says districts need to direct more cash to classroom expenses -- especially since his lean budget proposal doesn't include spending increases for K-12 education.

"There is a massive new funding source available to us that won't cost taxpayers an additional cent, and that is to begin spending the education dollar more efficiently than we do today," Daniels said in his State of the State address Tuesday.

Moving "tax dollars out of the back office and into the classroom" makes for a good sound bite, critics claim, but school districts are already trimming budgets during this slumping economy.

And some worry that efforts to force efficiency, rather than encourage it, could erode local control.

"Maybe we ought to use a carrot instead of a stick," said House Speaker Patrick Bauer, D-South Bend, who called Daniels' dollars-to-the-classroom proposal an "artful dodge" of the real issue of properly funding schools.

Of every tax dollar going toward education, a statewide average of 61 cents was spent on classroom expenses such as teacher salaries, textbooks, superintendents and school boards in the 2006-2007 school year, according to the latest information available from the state Office of Management and Budget. Levels range from less than 40 percent on classroom spending in some districts to more than 75 percent in others.

But schools couldn't run without spending money on non-instructional items, too, such as transportation, food services and maintenance.

"They're making it sound like schools are taking this 39 percent and throwing it down a rat hole," said Dennis Costerison, executive director of the Indiana Association of School Business Officials.

"You've got to feed the kids. You've got to get the kids from home to school and back. We've got to pay our debt. Where are you going to find this magical amount of money to put into the classroom?"

Procurement contracts are the first place to look for savings, according to new state school superintendent Tony Bennett. Bennett and Daniels want lawmakers to force school districts to purchase supplies like computers through a state bulk purchasing contract unless districts can negotiate better prices on their own.

Daniels and Bennett also support legislation that would allow school districts to shift money they save in certain accounts, such as transportation funds, to classroom expenditures.

"The discussion is going to change from 'how do we get more money to education' to 'how do we get more education for our money,"' Bennett said.

Republicans want schools to spend at least 65 percent of their funds on classroom expenses. The Indiana State Teachers Association says it backs that suggestion -- as long as classroom expenses include some personnel costs now considered non-instructional costs, such as bus drivers and janitors.

Just because a district spends more on classroom expenses doesn't necessarily mean that educational achievement is higher than in other districts. Indianapolis Public Schools spends 67 percent of funds on classroom expenses but less than half of its students graduate.

On the other hand, nearly 95 percent of students in Zionsville Community Schools graduate, but the district directs just 52 percent of its money to the classroom.

Critics also question whether money will be saved or student learning boosted by Daniels' other major education proposal -- having districts with fewer than 1,000 students combine their central offices unless they already are part of a countywide district. Under his proposal, no high schools in merging districts could be closed within five years.

Daniels says education experts agree that districts with fewer than 1,000 students cannot offer the educational opportunities students need to succeed academically in the 21st century.

"A superintendent and staff for 800, 600, 500 students but only one choice of foreign language? That's not right -- put children first," Daniels said in his State of the State speech. "Three, four, five school bureaucracies in counties that do not provide modern science labs, advanced placement courses or licensed physics teachers? No, put the children first."

Superintendent Fran Thoele, who runs tiny New Harmony Schools in Posey County, argues that small districts do put children first.

Her district of fewer than 200 students spends 68 percent of its funding on classroom expenses, and Thoele tries to keep costs low by going without a secretary and coordinating bus routes herself.

Although Spanish is the only foreign language taught in the district, students can take distance learning classes in other languages or other subjects, she said.

The small district offers some educational opportunities that bigger districts would struggle to achieve.

The entire high school -- about 60 students in total -- is going to Washington, D.C. to watch the inauguration of President-elect Barack Obama next week, a trip Thoele said was paid for by community donations.

The district's size also allows Thoele to know all the students and their families personally.

"You lose that when you just become a number in a large corporation," Thoele said. "We're doing a lot of things right, and that ought to be part of the consideration."