Indiana public policy has frozen local property tax levies for public education funding since the early 1970s, which has resulted in an educational system largely supported by state fiscal aid. A statistical analysis of the fiscal equity of Indiana's school operating expenditures for the latest school year preceding the freeze (1972-73) and the latest available school year (1985-86) is presented in this paper. School operating expenditures for 303 public school districts are analyzed according to two variables: horizontal equity and fiscal neutrality. A conclusion is that despite increased state support, costs paid by local taxing districts have contributed to inequitable school operating expenditures. A relationship exists between taxing district operating expenditures per student and tax rate, between school operating expenditures per pupil and assessed valuation, and between taxing district tax rate and assessed valuation. The recommendation is made for study of public policy on a state-by-state basis. Nine statistical tables are included. (LMI)