INDIANAPOLIS - Property tax caps passed in March by the Indiana Legislature were praised at the time as a money-saver for homeowners but also reviled by some officials because they ratcheted down the flow of dollars to local government services.
As the Legislature convenes Jan. 7, the other shoe is about to drop. Lawmakers will be asked to begin the process to write those property tax caps into the state constitution.
The difference is significant: A law, or statute, can be overturned through majority votes of the House and Senate, along with a governor's signature. An amendment to the state constitution, once ratified, is much harder and more time-consuming to reverse.
Supporters say amending the property tax caps into the constitution would protect taxpayers and prevent the statutory caps from ever being overturned in court as unconstitutional.
"This is an extremely important objective. I think it's better for everyone here if the General Assembly finishes its part of this process now," said Republican Gov. Mitch Daniels, who originally proposed the tax caps in his relief plan last year.
Opponents say more time is needed to determine the caps' effect on funding local governments and public safety, so they advocate waiting a year.
"One needs to know what the impacts are before we unilaterally stick it in the constitution," said Rep. Russ Stilwell, D-Boonville.
The property tax law, House Bill 1001, reduced homeowners' bills an average of about 29 percent statewide. Starting in 2009, the law will limit property taxes to no more than 1.5 percent of a home's assessed value for residential property; to no more than 2.5 percent of assessed value for rental property and farmland; and to no more than 3 percent for businesses.
In 2010, those limits or caps will adjust even lower to no more than 1 percent of assessed value for homes, 2 percent for rentals and farmland and 3 percent for businesses. Properties could not be assessed for more than those percentages.
A proposal to add the 1, 2 and 3 percent caps to the constitution, Senate Joint Resolution 1, passed in the last Legislature, but it would need to pass a second time in the newly elected Legislature in 2009 or 2010 before it could go to the voters as a ballot question in 2010. If the Legislature doesn't pass the amendment in one of the next two sessions, the amendment won't go to the voters and couldn't until 2014 at the earliest.
"So unless the real game is to kill this thing completely - duck this year and duck next year, block it this year and block it next year - there's no reason in the world not to go ahead and pass the resolution a second time," Daniels said. "It was a great idea nine months ago. It didn't become a bad idea in that period of time."
The amount homeowners will save through property tax caps, an estimated $524 million statewide in 2010, is also revenue that local governments, counties, schools and libraries could not collect to fund their services.
Projections in March showed Evansville city government would receive an estimated $223,539 less in property tax revenue in 2009 and an estimated $3.13 million less in 2010. Vanderburgh County government would receive $103,085 less in 2009 and $1.46 million less in 2010.
To avoid having the circuit breakers affect public safety, the Evansville Police Department has sought efficiencies such as leaving some vacant positions open longer, said Police Chief Brad Hill. The department has 330 employees, including 285 sworn officers. Hill said the full effect of the tax caps won't be seen until 2010, so he is leery of locking them in now.
"I feel like it's too early to carve it in stone, because you have not seen what the real impact is yet of this measure. It should be left more easy to change (by statute), rather than locking it into the constitution, when we may find out at the end of 2010 that we've messed things up here," Hill said, stating his personal opinion and not a departmental position.
At the Vanderburgh County Sheriff's Department, the circuit breakers have not had a huge impact, said Sheriff Eric Williams.
"We're just battening down the hatches a little tighter now. We're always planning for that," he said. "We would not replace vehicles as often as we like."
The Sheriff's Department now includes 60 road deputies and 260 jailers and staff, and the caps would affect how much revenue the county has to pay for services and staff.
"Ultimately, the public will demand a certain level of service. If they perceive that service is being diminished and it is something they need to have and demand, the public will weigh in and see to it that it's done, one way or another," Williams said of the possible voter referendum if the property tax caps are approved by the Legislature.
State Rep. Dennis Avery, D-Evansville, serves on the House Ways and Means Committee that would be assigned the constitutional amendment. He questioned whether there will be time for it during the 2009 budget-writing session. Avery opposed the caps in the past and most likely will again.
"It is a very divisive issue and a very time-consuming issue," he said.
But a prominent Senate Republican, state Sen. Patricia Miller of Indianapolis, believes the caps have to be in the state constitution.
"Over the years ... we have voted for property tax relief time and again, and a couple of years later they start inching up again," Miller said. "Unless there is some kind of permanent control, I'm not sure we'll ever have real property tax relief.
"I think it's an excuse if we don't vote, to put it off. The voters can make their choice in 2010."
Even if the caps are not added to the constitution, the caps passed into statute last March remain in effect. Stilwell noted there is no attempt by any legislator to repeal them statutorily.
The Associated Press contributed to this report.