As the second half of the Indiana General Assembly ramps back up, the Senate’s leader is optimistic toward reaching a compromise on property tax reform.
After nearly two jam-packed months of legislation and a week-long break, lawmakers will return to the Indiana Statehouse on Monday for the second half of this year’s budget session. Senate President Rod Bray, R-Martinsville, who represents part of western Johnson County, said Thursday that the session has gone how he’d expected so far. On the Senate side, Republicans were happy to get their five priority bills across the finish line and to the House of Representatives for action.
Senate Bills 2 through 5 went smoothly, he said. These bills focus on Medicaid, health care costs, water resources and government accountability. SB 1, which addresses property tax reform, has had pushback from taxpayers, the governor’s office and local government units in some shape or form.
Property tax reform
Property tax reform is a priority of Gov. Mike Braun, who made it a centerpiece of his campaign. Braun sought to reduce property taxes by capping tax increases at 3% and increasing the state’s homestead exemption. It also would have rolled back property taxes to 2021 levels.
Local governments would’ve lost tens to hundreds of millions of dollars just in the first year under the original bill. Under the amended SB-1, the impact to local governments in the first year is nearly $300 million, according to news and fiscal reports.
“We’ve been hearing a lot from local governments about concerns, about cutting too deep and not being able to continue to provide services like public education, police, fire — really important issues like that,” Bray said.
The amended SB 1 offers about $1.4 billion in property tax relief over three years. There are tax cuts for disabled veterans and individuals over the age of 65, Bray said.
The bill would also allow first-time homebuyers who meet income requirements and purchase a home under $250,000 to get a $2,500 tax credit for the first five years of ownership, he said.
SB 1 also would control the growth of property taxes by not allowing tax levies to increase in 2026 before allowing a 1% increase in 2027 and 2% increase in 2028. After 2028, a new calculation would go into effect that would allow the taxes to grow, but at a slower pace so that taxpayers wouldn’t experience the peaks seen over the last few years, Bray said.
The bill also adds controls for school refrenda. Schools would only be allowed to call for a referendum every other year in a general election, and making it more transparent about how much taxes might go up and the impact it would have, he said.
Local governments were concerned the cuts under the original bill would leave them with one option: going back and raising their local income taxes. Johnson County’s local income tax, for example, could’ve risen from 1.4% to 3.75%, an 168% increase, he said.
But the real concern with this move would be that the tax responsibility would shift from business and personal property owners to people who just pay income tax, like individuals and small businesses such as LLCs or sole proprietorships, Bray said.
“It would be shifting to those people and exclusively away from corporations which don’t pay an income tax that applies here. So we didn’t really want that shift to go on to the backs of individuals and small businesses,” Bray said.
Because of these concerns, many of the cuts were changed and removed by the Senate Tax and Fiscal Policy Committee. Braun, along with some property taxpayers, have expressed opposition to the changes imposed by the Senate. On Tuesday, Braun said he would veto the measure “as a last resort” but doesn’t expect he will need to.
Braun said his administration is acting collaboratively to find a compromise on the bill, and that lawmakers are meeting with him frequently. Bray is confident that an agreement will be reached between the Senate, the House and Braun about reform, he said.
In the second half of the session, the House will make additional changes and lawmakers from both chambers will iron out their differences in conference committee.
“But I have every confidence that we’ll reach an agreement, between the governor, the House and us, for something that does balance the interests and gives real property tax relief to homeowners, but allows local governments to continue to fund things they need to,” he said.
Health care priorities
Among the bills addressing healthcare are SB 2 and SB 3, both of which are Senate priorities.
SB 2 looks at implementing controls on Medicaid eligibility and reforming the Healthy Indiana Plan to encourage “personal responsibility.” The bill is being proposed because Indiana’s Medicaid program is growing at rates that have been called unsustainable. Lawmakers say reforms must be made to ensure Indiana can continue to provide coverage for the Hoosiers who need it most, according to the Indiana Senate Republicans’ legislative agenda.
“We have to be able to keep it viable so that it continues to provide for those Hoosiers who really need it,” Bray said. “But in doing so, we can’t be giving that Medicaid services out to folks who might have other means, including their own, to kind of care for those costs.”
Lawmakers have a balancing act to protect the program, but also make sure that spending doesn’t grow to the point other essential parts of the budget suffer, Bray said. Medicaid spending is now the second largest budget item behind education.
SB 3 deals with creating a “fiduciary relationship” that is designed to help people who are trying to buy insurance to get the best deal out there that’s possible, he said.
Water rights, government efficiency
Bray also highlighted SB 4, which regulates water rights in the state. Indiana has an abundance of water, but natural availability doesn’t match demand in some parts of the state.
For a long time, the state has been moving water from one place to another without incident. But the LEAP project near Lebanon brought the issue to the forefront when there were discussions of piping water from the Wabash River down to the project on the outskirts of Lebanon.
“That’s not going to happen. Now, water is coming from different sources,” Bray said. “But it nevertheless caused concern that maybe the state would be taking water from one aquifer or one region, moving it to another, and then kind of crippling the economic opportunities of the place that the water was leaving.”
SB 4 tries to put these concerns at ease, while giving the Indiana Department of Natural Resources and the Indiana Utility Regulatory Commission the opportunity to review plans where water is going to be moved from one place to another, so that no one is taking away water, and therefore opportunity, from one particular region, Bray said.
The last Senate priority bill, SB 5, looks at government efficiency and transparency. Among the items the bill addresses, it would allow state agencies to use artificial intelligence to prepare information and projects for the state budget, require permanent full-time positions that have been vacant for 90 days or more be reviewed and either reauthorized or eliminated, and prohibits any entity that receives state appropriations from entering into a nonpublic contract.
Bray says the goal of the bill is to boost transparency and accountability in government to ensure they’re spending taxpayer funds wisely.