Indiana legislators pare back business tax plan

While backpedaling on major tax reform, GOP lawmakers are planning an aggressive approach toward education. That includes overhauling the state’s K-12 school funding formula and stepping into the thorny issue of making the state schools superintendent a job appointed by the governor rather than elected by the people.

The latter two measures are supported by the influential Indiana Chamber of Commerce, which held a legislative preview luncheon Monday featuring the four caucus leaders in the state General Assembly.

The chamber still wants to end the business equipment tax — an idea championed by Republican Gov. Mike Pence in the last session — but GOP leaders say the timing isn’t right.

“We do need to catch our breath a little bit, if for nothing else to make sure we have the revenue to pay for the services we have to provide,” said Senate President David Long, R-Fort Wayne.

House Speaker Brian Bosma has called for a “moratorium” on tax reform for the session that begins in January. At the chamber event Monday, he said he would only consider proposals that don’t significantly harm local governments and schools — the major benefactors of the business-equipment tax revenue.

Instead of wiping out the business equipment tax, the Legislature may consider allowing businesses to take a greater degree of depreciation on equipment and machinery. That would result in a loss of only $7 million in revenue statewide — far from the $1 billion loss if the tax was eliminated.

That legislation could also include a blanket exemption for about 150,000 small businesses that pay less than $500 in business equipment taxes each year. If every county opted in, tax revenues would go down by $13 million statewide.

The more surprising news from Monday’s event was the chamber’s call for the Legislature to eliminate the election of the Superintendent of Public Instruction by making it a gubernatorial appointment.

If such a measure were passed to go into effect in 2016, it would mean the current state superintendent, Democrat Glenda Ritz, wouldn’t be allowed to run for re-election.

Both Long and Bosma support the notion but warned of the political optics of Republicans terminating the only the Democrat currently in statewide office.

“To eliminate that now as an elected position would start a firestorm of protest,” Long said.

Still, he and Bosma said the current system isn’t working. Since Ritz was elected in 2012, she’s been locked in a battle with the state Board of Education, whose members are appointed by Pence.

“We can't go another two years like we had the last two years,” Long said.

Indiana is one of only 12 states that elects its state schools chief. The job elsewhere is filled by the governor or a state school board.

Bosma predicted the Legislature may move to minimize the authority of Ritz and the state school board, though he declined to be specific.

"The bickering on the front page of the paper has to stop or the General Assembly will take action and it'll probably be action nobody will like," he said.

Senate Minority Leader Tim Lanane, D-Anderson, said he doubts that Indiana voters would support the idea. “On their list of burning issues, this is not very burning,” he said.

Bosma was more specific about his intent to change the school funding formula, calling the “disparity” between better-funded urban schools and their lesser-funded suburban counterparts unfair. Schools with the highest percent of low-income students now get about $5,000 more per-pupil than schools in the state’s wealthiest districts.

In addition to changing the formula, Bosma said he’ll support measures that compel schools to spend more state dollars on classroom teaching and less on what he called the “grand abyss” of administration.

Lanane predicted a contentious fight over school funding if legislation, as expected, results in less money for the state’s poorest school districts, which are mostly represented by Democrats.

“I can tell you the schools that will take it on the chin,” he said. “It’s going to be in the urban areas, in districts that can least afford it.”