Lawmakers at odds over funding property tax relief

INDIANAPOLIS | Property tax relief could prove to be a major headache for state lawmakers.

Easing the burden on homeowners is a top priority for the pre-election session of the General Assembly that starts next month. But House Republicans and Gov. Mitch Daniels don't agree on what the state can afford.

Meanwhile, a top Northwest Indiana Democrat argues state government really can't afford to take on any of the local burden.

The debate began to heat up this week, with the first of three legislative hearings on a GOP proposal to begin using state coffers to pay for child welfare programs. Supporters say the plan would cut property tax levies by 5 percent statewide and would mean even greater relief for Lake County and other urban areas of Indiana.

"I see this bill as a starting point," said Rep. Jeff Espich, chairman of the powerful Ways and Means Committee.

"I have two goals in mind, the first of which is to cut the property tax bills of Hoosier homeowners in 2006," said Espich, R-Uniondale. "The second goal is to move the child welfare levy off the local property tax rolls."

Supporters peg the 2006 cost at $150 million, a sum they say the state can cover without busting the two-year budget the Legislature approved last May.

But state Rep. Chet Dobis, D-Merrillville, says the plan is just another example of election-year politicking.

"No question about it," he said. "I think it's a great idea. But I don't think it's sincere."

Lake County has the state's third highest child welfare levy, meaning the GOP plan could cut tax bills by about 10 percent or twice the state average.

Porter County's child welfare levy is much lower, which means homeowners there would see only a 2 percent tax break.

Dobis says he wanted to shift child welfare costs to the state a decade ago, but lawmakers from both parties soundly rejected the idea.

"It's awfully expensive. I don't know where they're going to get the money to fund this continually," he said.

"I think the only way they're going to be able to do this is by raising another tax, and I know they're not willing to do that, especially in an election year."

Some lawmakers suggest a one-year tax break could be had by commandeering a $130 million windfall created by the state's recent tax-amnesty program.

Daniels, however, has told lawmakers to keep their hands off that money. And the Republican governor says he isn't sure the state budget can absorb $150 million in tax relief.

"Someone needs to remember we still owe schools and local governments late payments that were withheld from them from the years of our bankruptcy, and I think those things have to be attended to," Daniels said Friday. "I believe in paying off the credit cards before you buy any new cars."

Like a new car, the GOP tax relief plan would require years of payments.

Homeowners would get relief next year, with businesses, rental properties and farmland phased in by 2010.

By then, the cost to the state could soar to an estimated $346 million a year.

Aside from the price tag, the GOP plan would not absorb the local cost of providing hospital care for the indigent, a program that last year cost Lake County taxpayers $22.5 million -- more than four times any other county.