PENN TOWNSHIP — Governor Mitch Daniels is promising the largest tax cut in Indiana state history. He outlined his plan again Tuesday night during his State of the State address. Daniels called for immediate, significant and lasting relief for taxpayers.

Now, school districts are concerned about losing a stable source of funding.

Penn Harris Madison has lost millions in revenue from taxpayers who didn't pay their bills. The associate superintendent wants lawmakers to guarantee their funding, regardless of how the economy is doing. If they can do that, she says the corporation would recover at least $500,000 each year.

Big increases in property tax bills led the governor to make big promises about tax cuts.

"Make the cuts further secure by lifting permanently the costs of child welfare protection and school operations off the property taxpayer altogether," said Governor Mitch Daniels, R-Indiana, during his State of the State address.

His property tax relief proposal was met by applause in Indianapolis and Penn Township. Since 2006, Penn Harris Madison has lost $1.2 million each year in funding because of delinquent taxpayers.

"We did have to cut homeroom resource. We had to cut the middle school teaming program. We had to reduce staff that ended up cutting those programs," said Associate Superintendent Denise Seger about cuts over the last two years.

Under Daniels' plan, the state would allocate money for a school's general fund. That fund covers things like building and employee costs, making up more than 80 percent of most school budgets. The state money would come from a 1 percent hike in sales tax.

Property owners would save money, and some schools, like PHM, wouldn't have to make hard choices.

"You may be able to add staff to certain program enhancements or services to students that help in any type of achievement gap," said Dr. Seger.

But few Indiana educators are giving the plan a passing grade. They want the governor to guarantee the funding in case there's an economic downturn.

"You would be scrambling," said Dr. Seger. "For some reason if sales taxes were down, we would want to make sure it was high enough to support schools and other government entities that would be receiving."

Local property taxes would still fund other parts of the school budget -- things like curriculum and special programs. For that reason, the 1 percent cap on property taxes is a concern for poorer school districts that stand to lose millions.

Republicans say Daniels plan gives lawmakers the framework to overhaul property taxes.

Democrats agree it's a good starting point, but say it shifts taxes which they believe will hurt poorer families.