Evansville Courier & Press staff and wire report
INDIANAPOLIS - A state Senate committee has made a number of changes to the House version of Gov. Mitch Daniels' property tax relief plan - changes that senators say could soften its impact on school budgets.
Tuesday, the Senate Tax and Fiscal Policy Committee approved the bill 9-0. Now it moves to the full Senate.
If fully implemented in 2010, the Senate plan is projected to cut homeowners' tax bills by about 27 percent on average. That means a homeowner who got a $1,500 bill last year could pay $1,095 in 2010. The cut is slightly less than projected in the Daniels plan and the House version.
House Bill 1001 still includes an increase in the 6 percent state sales tax to 7 percent to cover the cost of property tax relief.
But the Senate version would have the state absorb $1 billion in levies that are paid for through local property taxes, including school operating, child welfare, juvenile detention and school pension costs.
It also would cover 100 percent of pre-1977 police and fire pensions for cities and towns, senators said.
If the bill passes in the Republican-controlled Senate, it would go back to the Democratic-controlled House, which approved a different version of the bill last month. That would trigger conference-committee negotiations.
"The Statehouse is a place of give and take," Senate Tax Chairman Luke Kenley said.
Kenley, R-Noblesville, spelled out the changes:
Creating $600 million in additional homestead credits for taxes due in 2008, beyond the $550 million in relief applied in the current rebate check program.
Phasing in property tax caps of 1 percent for homesteads, 2 percent for rental properties and 3 percent for businesses by 2010.
The bill would result in $342 million in property tax cuts in 2009 and $619 million in 2010 - with corresponding reductions in revenues to schools and local governments that are funded through property taxes.
But if local governments adopted a 0.5 percent local-option income tax to offset their property tax reductions, Kenley said, the impact would be less: $324 million in 2009 and $484 million in 2010.
Senate President David Long, R-Fort Wayne, noted that adopting the new local-option income taxes would be optional for counties. Unlike counties, school districts cannot adopt local-option income taxes.
Effect on schools
The Evansville-Vanderburgh School Corp., for example, would face approximately $1 million less funding each of the next two years under the original caps.
To cushion that impact, the Senate version makes $50 million available to school districts in 2009 and 2010, Kenley said.
Requiring referendums for all public construction projects, including schools, that cost more than $7 million. This is a change from the House version, which exempted school construction from the referendum process.
Having the County Council in each county to make recommendations on all budget increases for all local government units in that county.
The council would not have to approve them, however.
"We felt that was an enormous change in the structure of local government; and if we really want to do that, we really needed to have bills that talk about how you redefine, streamline and organize local government," Kenley said.
But that change would make moot the County Tax and Capital Control Boards created in 2007 and supposed to take effect in 2009 to perform a budget-review function.
Senate Republicans said their plan would help control spending by eliminating loopholes that local governments can use to get extra money.
Changing assessment procedures to eliminate township assessors in all but 44 townships with 15,000 parcels or more.
The House version would have eliminated township assessors in all 1,008 townships and transferred their duties to the 92 county assessors.
"We do think we need to keep discussing what is the best system in the long run," Kenley said.
Mindful of the tough negotiations ahead, state Sen. Robert Meeks, R-LaGrange, said, "This is the most complicated issue the General Assembly has ever addressed."
Meanwhile, a key House committee plans to vote on legislation that would begin the process of amending proposed caps on property tax bills into the state constitution.