INDIANAPOLIS — House Republicans are proposing raising the state's cigarette tax by $1 per pack, starting July 1, to fill the budget hole created by their plan to spend all sales tax revenue from gasoline purchases exclusively on road construction.
The cigarette tax hike added Wednesday to House Bill 1001, the two-year state budget, would come on top of the fuel tax increases, higher vehicle registration fees and potential highway tolling included House Bill 1002, the GOP road funding plan.
State Rep. Tim Brown, R-Crawfordville, chairman of the House Ways and Means Committee, said the estimated $287 million in annual revenue generated by the cigarette tax boost would replace current state spending on smoker health care expenses and tobacco cessation programs.
That, in turn, would free up a nearly equal amount of money to cover the approximately $300 million annual General Fund revenue loss from dedicating gasoline sales tax collections to roads.
Altogether, the House Republican spending plan, which is set for a committee vote Thursday, appropriates $15.4 billion for the 2018 budget year that begins July 1, 2017, and $15.9 billion for 2019.
In both years, Indiana would take in more money than it plans to spend with an estimated 2018 surplus of $115.4 million and a 2019 surplus of $252.1 million.
The state's budget reserve fund would remain near the $2 billion mark or equal to about 11-12 percent of annual spending.
The budget plan increases funding for elementary and high schools by $273 million over the two-year period, a 2.8 percent boost and well above the inflation rate, Brown noted.
That money would go toward providing schools a higher basic per student grant, with the current $5,088 foundation level growing to $5,246 in 2018 (a 3.1 percent increase) and $5,325 in 2019 (1.5 percent).
School funding, which comprises 52 percent of the two-year budget, still would follow the child, so corporations with declining enrollment would receive fewer state dollars despite the overall increase in education spending.
Two major Northwest Indiana projects are included in the House Republican budget: $6 million a year for double-tracking the South Shore Line between Gary and Michigan City; and $35 million for construction of the Bioscience Innovation Building at Purdue University Northwest in Hammond.
It also contains language to speed the sale or donation of the lead-impacted Carrie Gosch Elementary School in East Chicago.
Brown said an appropriation to hold harmless the School City of East Chicago for revenue losses due to students leaving because of the city's lead crisis is expected to be added to the budget by the Senate.
Other House budget line items include money to improve workforce development programs, promote entrepreneurship, combat infant mortality, attack the opioid drug epidemic, increase pay for state police officers, help abused children and modernize technology at the Department of Revenue.
The Republican-controlled House is expected to approve the proposed budget by Feb. 27.
It then will go to the Republican-controlled Senate for lawmakers there to revise as they see fit.
In mid-April, leaders from the House and Senate, along with Republican Gov. Eric Holcomb, will negotiate a compromise final state spending plan, subject to approval by both chambers.