Financially troubled school districts in Gary and Muncie would be taken over by the state under a bill passed by the Indiana House.
The bill would allow the state to appoint emergency managers to assume broad control of the districts. It also creates a blueprint that could be used to take over other distressed districts in the future.
Gary is more than $100 million in debt and officials say Muncie has a negative cash balance of $18 million.
Some Democratic lawmakers say the fiscal problems are rooted in Republican-championed property tax caps and changes in education funding over the last decade. They expect many more school districts to have financial troubles in the coming years.
But Republicans say school districts need to adjust to a new reality and cut costs. Education allocations are actually on the rise. Indiana school funding for the 2016-17 school year is up 4.75 percent compared to the 2014-15 school year.
The measure passed 77-19 Thursday and returns to the Senate to reconcile changes the House made.