No tax holidays but increased dollars for the Department of Child Services highlight the House Republican version of the state’s two-year budget in comparison to the one proposed by Gov. Mike Braun earlier this year.
Chief budget architect for Republicans, Rep. Jeff Thompson, said both camps found plenty to agree upon, aligning priorities for universal school vouchers and halting several large-dollar funds for the Indiana Economic Development Corp.
“We’ve looked at the governor’s budget and he’s done a wonderful job of setting the framework for opportunity for Hoosiers,” said Thompson, R-Lizton. “We’ll continue discussion with him, consulting with him and look forward to working with him in the future.”
Both the House and governor’s version trim roughly 5% from agency budgets, which Thompson said would be geared toward administrative costs rather than staff or service reductions.
“The way this administration is operating, we’ll do a whole lot more with a whole lot less,” Thompson said. “That’s their mindset and I love that mindset.”
Overall, the House budget will spend $500 million more in 2026 and $380 million more in 2027 than Braun, though the bulk of new spending goes to the Department of Child Services and the Department of Correction. Those new dollars represent just under 2% of a $47 billion budget.
Budget specifics
The appropriation for schools increases by 2% each year, or from $9.03 billion in the 2025 fiscal year to $9.21 billion in 2026 followed by $9.4 billion in 2027. The $160 million for curricular materials is rolled into that foundational amount for schools.
Those dollars also include an estimated $183 million over the next two years to expand school vouchers to all students, including those families earning more than $220,000 annually. Thompson said public schools, where the majority of Hoosier students are educated, could get those dollars if they attract those high-income students.
“If they attract more students, they will get a lot more money. It’s a good thing, because we may have some schools really gaining students and they’ll receive a lot more funds and they’ll have those to spend,” Thompson said.
That philosophy hews closely to Braun, who is a vocal “school choice” advocate. The budget also increases both Education Scholarship Accounts and Career Scholarship Accounts from $10 million to $15 million each year.
But while Braun had identified $700 million in tax relief, much of those dollars won’t carry over to the House’s version. Tax holidays for school and youth athletic supplies as well as outdoor recreational equipment didn’t survive and neither did a proposal to eliminate state income taxes on tips and retirement income.
The House did double the tax credit for low-income seniors. About 335,000 Hoosiers earning under $40,000 qualified for the $500 credit in 2022, which will double to $1,000 under this budget.
Thompson pointed to the General Assembly’s commitment to lowering Indiana’s income taxes to 2.9% by 2027 as well as ongoing property tax relief negotiations. More tax relief isn’t off the table, he said.
Identifying cuts
Both Braun and House Republicans struck funds for the Indiana Economic Development Corp., including a site acquisition and deal closing line items — though Thompson said the quasi-public state agency wouldn’t be barred from such activities within their own budget.
The caucus did, however, restore funding for the 21st Century Research and Technology Fund and the Manufacturing Readiness Grants that Braun had cut. They will be flatlined to the same amounts from the last budget.
In a blow to the state’s local public health departments, funding for Health First Indiana will fall from $150 million this year to $100 million in both 2026 and 2027. Prior to its implementation, Indiana spent some of the least amount of state dollars on public health initiatives nationwide.
Additionally, House Republicans opted not to appropriate more funding to eliminate Medicaid waiver waitlists for services.
“Nothing changes with regard to where we sit now,” said Thompson about Medicaid waitlists.
Medicaid is the second-largest and fastest-growing portion of the state budget, accounting for 22% of state spending — or $10.3 billion — over the next biennium.
Fifteen years ago, Medicaid made up just 9% of the state budget.
The state partners with the federal government to administer Medicaid, with roughly one-third of Medicaid expenses coming from the state’s budget. But the funding from the federal government could be at risk, depending on the actions of the new administration.
“We are watching that closely and continue to watch that. We can’t control that, you know, but we’ll keep our eye on that because that, at some point, may have an effect on the state,” Thompson said.
Whether to reserve more in savings to prepare for such uncertainty was an “ongoing discussion,” he said.
A separate waitlist for subsidized child care will also remain in place, though Thompson said the budget appropriates dollars to keep current participating families covered.
The House version includes very little in terms of one-time spending, especially for capital projects. Federal pandemic funds boosted such spending in recent years, including a multi-billion dollar prison in northern Indiana.
“No capital (projects) for universities, but there are a lot of dollars for maintenance. We believe it becomes dead if you don’t take care of your current facilities and we put a lot of dollars into taking care of those facilities,” Thompson said.
Overall higher education funding remains relatively flat compared to previous year but higher than the amount budgeted under Braun’s version.
The Senate will introduce its own version in the coming weeks, with both sides negotiating a final budget in mid-April following an updated revenue forecast.
“I’m going to say nothing’s off the table. But from what I know, (with) a lot of those things, we probably won’t see a lot of change,” Thompson said. “This would be, I think, a good place for the Senate to start. They’ll improve it — we know that — and then we’ll work with the governor’s office to make it the best for Hoosiers.”