The Indianapolis Star reports the debate this week centered on the state's private school voucher program after Roncalli High School was criticized last year for putting a guidance counselor on leave because of her same-sex marriage.
Shelly Fitzgerald has accused the Catholic school and the Archdiocese of Indianapolis of discrimination.
Indianapolis Archbishop Charles Thompson has said teachers and guidance counselors are ministers of the faith whose obligations are clearly spelled out in contracts.
Democratic state Rep. Dan Forestal of Indianapolis proposed an amendment on the House floor that would have put strings on that money. The House's Republican majority disagreed. The amendment failed on a largely party-line vote.