By Lesley Weidenbener
INDIANAPOLIS – Gov. Mike Pence said Friday he’s “very disappointed” in the budget plan House Republicans have crafted because it doesn’t include the income tax cut that he has championed.
House Ways and Means Chairman Tim Brown, R-Crawfordsville, said Friday that the GOP budget plan includes more money for schools, universities and road funding. Photo by Lesley Weidenbener, TheStatehouseFile.com
Pence said that “Hoosiers deserve better.” And House Minority Leader Scott Pelath of Michigan City said Friday that Democrats are going to ensure there is an “up or down vote on Gov. Pence’s tax cut proposal.”
House Ways and Means Chairman Tim Brown – the plan’s primary architect – said Republicans remain open to discussions about the tax cut but said they were focused on “restoring our priorities and investing for the future.”
The budget proposal spends nearly $30 billion over two years, including more money for schools, highways and universities. It would speed up the elimination of the inheritance tax cut – which is currently being phased out over nine years – and spends nearly $200 million on university projects, all paid for with cash.
The plan would spend 2 percent more on schools in the first year and 1 percent more in the second year, which would send a total of $334 million more to schools.
It also earmarks $16.7 million to be distributed to schools based on an achievement formula that has not yet been determined.
“We know that we need an educated workforce,” said Brown, R-Crawfordsville. “We have a great tax climate, we have great infrastructure presently but the skills of our workforce do need improved when we compare with other states. That will help all of us in the long term.”
That additional spending, though, didn’t leave room for Pence’s tax cut plan, which would reduce the individual income tax rate by 10 percent and save Hoosiers – and therefore decrease state revenues – by $521 million annually.
“Income tax relief will create jobs,” Pence said. “By allowing small businesses to keep more of what they make, we will make Indiana more attractive for investment. Our state is in a race for jobs with states across the country, many of which are reducing and reforming income taxes. Not only can we in Indiana afford to offer tax relief, we can’t afford not to. If we stand still, Indiana will lose.”
Pelath said that median incomes in Indiana are lagging in Indiana and that cutting the income tax rate is the one “bold idea” from Pence to deal with that.
“To ignore it is a mistake,” he said. “We need to have consideration on the House floor. We need to have enlightened debate.”
Some Democrats even plan to support the tax cut, he said. “They don’t think it’s the best idea ever, but they think it’s an idea and they think it might be something that can get Indiana moving again,” Pelath said.
The House GOP budget plan also makes changes to the state’s automatic taxpayer refund program, which former Republican Gov. Mitch Daniels pushed into law. It requires the state to provide tax credits to Hoosiers when the money in the state’s main checking and savings accounts totals more than 12.5 percent of the next year’s budgeted spending.
Brown said the House budget plan will change the formula so that it doesn’t count money set aside in a tuition reserve fund for schools. The GOP proposal puts $300 million over two years into the fund.
And so while Republicans project the state would have $2.12 billion in the bank on June 30, 2015 – nearly 14 percent of spending – that would no longer be enough to trigger the refund because the $30 million in school savings would be subtracted.
Brown said that’s recognition that school funding must be protected during an economic downturn.
“We went through the Great Recession and we used it. It was there and we used it,” Brown said of previous money in the fund. “As we’re coming out and slowly growing, we’re going to put money back into the tuition reserve because we all know the economy is cyclic.”
Despite Pelath’s criticism of the budget overall, he said that the Republican plan has a “couple innovative ideas in there.”
One is a change to transportation funding. The GOP plan takes gasoline tax money now allowed to state police and the Bureau of Motor Vehicles and uses it for road construction. It also transfers some of the sales tax revenue collected from gas purchases for the same purpose.
In all, that will add about $250 million per year to the state’s Motor Vehicle Highway Account, from which about 53 percent of the money is spent on state projects and 47 percent is sent to local governments for their road budgets.
The budget plan would also:
- Boost funding for the Department of Child Services by $40 million annually so the agency can hire new case workers and intake specialists, in part to implement improvement plans for its abuse hotline.
- Increase funding for universities by 3.5 percent over two years.
- Pay off bonds for the Indiana State Museum and the state Forensics Science Laboratory.
- Boosts funding for Medicaid but orders its administrators to make changes that control costs for the aged, blind and disabled programs.
Brown said the Ways and Means Committee will hear testimony on the proposal on Monday and likely vote on Tuesday. Pelath said that Democrats plan to offer a counter proposal.
Lesley Weidenbener is managing editor of TheStatehouseFile.com, a news website powered by Franklin College journalism students.