Opponents of the bill say it will drain money from the traditional public school system.
Under current law, anyone buying alcohol must be asked to show identification.
The bill lost support from two sides – those who believe a smoking ban constitutes government intrusion and those who want a more comprehensive law.
The Senate also passed an amendment raising the percentage of charter school teachers who must be licensed.
The senate voted 40-10 to constitutionally ban same-sex marriage.
Republicans lowered a cap on the number of vouchers available to 7,500 in the first year and 15,000 in the second year.
Cicero Representative Eric Turner, the bill’s author, says the amendment would open a huge loophole.
A proposed constitutional amendment banning gay marriage and civil unions in Indiana passed a Senate committee Wednesday.
Indiana Superintendent of Public Instruction Tony Bennett testified on a number of ideas, including the new school funding formula.
Right to Work committees began an ad campaign aimed at pressuring the Governor and the Speaker to bring back Democrats and vote on Right to Work legislation.