INDIANAPOLIS - State lawmakers negotiating a massive property tax plan focused Monday on how to give homeowners tax relief while minimizing the financial hit to local governments and schools.
Republicans and Democrats on a House-Senate conference committee met for a second time about House Bill 1001, a proposal that would cap property tax bills, shift some local levies to the state and increase the sales tax to help pay for the relief. Legislative leaders are working to hammer out a compromise between the House and Senate versions of the plan - both of which include key parts of Gov. Mitch Daniels' proposal - by the time the session ends March 14.
Much of the negotiations take place behind closed doors. House Ways and Means Chairman William Crawford, D-Indianapolis, did not set a date Monday for the next public conference committee meeting on House Bill 1001.
The majority House Democrats and Senate Republicans also have not reached accord on SJR 1, the separate proposal to amend the state constitution to cap property taxes. The Senate Republican version would cap homestead property taxes at 1 percent of a home's assessed value, while a change the House Democrats made to their version would cap homestead taxes at 1 percent of household income and exempt government debt from the caps.
"We're just talking right now," the top Senate negotiator, Tax and Fiscal Policy Chairman Luke Kenley, said. "We've got a long way to go."
House Democrats said they tied SJR 1 to income to protect senior citizens and homeowners on fixed incomes; Senate Republicans want to keep it tied to assessed value. "I think there's a way to address (the House Democrats') concerns, through other mechanisms and other tools, rather than changing the whole formula here at the last minute," Kenley, R-Noblesville, said.
One of the biggest sticking points on House Bill 1001 will likely be finding a way to deal with the effects of the caps on schools and local governments. Caps on property tax bills mean schools and local governments would receive nearly $600 million less in revenue, which some officials have said could lead to cuts in services.
Rep. Jeff Espich, R-Uniondale, said counties have options to mitigate the impact of the caps, such as passing local-option income taxes. Taxing units with unusual circumstances could ask an appeal board to set aside the caps on property tax bills. But that would mean less help for homeowners.
Sen. Lindel Hume, D-Princeton, said the plan should be easier to understand.
"How are we going to be able to explain this to our constituents?" he asked.
But Rep. Eric Turner, R-Marion, said homeowners will appreciate the plan when they see their property tax bills cut. "I think they'll clearly understand that," he said.
Both versions of House Bill 1001 would cap a homeowner's property tax bill at 1 percent, with limits of 2 percent of assessed value for rental property and agricultural land and 3 percent for businesses. They would raise the state sales tax from 6 percent to 7 percent.
House Bill 1001 is 882 pages long. With the Legislature likely to work until midnight the night of its adjournment deadline, it's not yet clear when negotiators will reach accord, so the final package can be reviewed by all legislators.
"I don't have a very good feel for that right now, to be honest with you," Kenley said.