By Lesley Weidenbener
Lawmakers sent Gov. Mike Pence a tax package Friday night that majority Republicans called a win for Hoosiers but Democrats lambasted as a joke.
One day after Republicans reached a deal months in the making, the two-year budget and tax bill passed easily — but largely along party lines.
It cuts individual income tax cuts by 5 percent – phased in through 2017. It boosts funding for schools and transportation. And it eliminates the inheritance tax.
The budget "protects Hoosier taxpayers – taxpayers in every walk of life, taxpayers in every segment of society," said House Ways and Means Chairman Tim Brown, R-Crawfordsville, the chamber's chief budget writer.
Republicans were selling the plan as a $1.1 billion tax cut over three years but the total included money that businesses will save under a corporate tax cut the General Assembly began phasing in two years ago.
Democrats called the rhetoric an "illusion" and complained that the budget bill did little for the middle class.
House Minority Leader Scott Pelath, D-Michigan City, said the average Hoosier family will save only a buck or two per week – enough for a cup of coffee – under the individual income tax cut. He called the tax cuts a "lose-lose" because the state will take in less revenue and yet the savings will be tiny for taxpayers. He called the cuts "pathetic."
The income tax cut will occur in two phases. On Jan. 1, 2015, the rate will drop from the current 3.4 percent to 3.3 percent. For the median Hoosier household with a taxable income of $46,000, the savings would be $46 annually.
Then two years later, the rate will drop again, this time to 3.23 percent.For that same household, the additional savings would be about $32.
"Indiana will continue to see growth because of the conservative principles put to action and the tax relief provided for Hoosiers to invest and spend their hard-earned money back into the economy," Brown said. "I would always rather see more money in the pockets of Hoosiers than in state coffers. This budget does that."
Democrats, though, were as critical of the two-year,$30 billion budget plan as much for what it didn't do as they were for what it did.
They complained that it didn't expand the state's Medicaid program, as called for by the federal Affordable Care Act. The budget authorizes Pence to ask federal officials to send Indiana its Mediciad expansion money as a block grant to be used as Indiana officials see fit. But it doesn't require Pence to act.
And Pelath said it also has no backup plan if federal officials say no.
"You're going to have to explain" to constituents why other Americans have health care and they don't, Pelath said. "You're out of luck."
And Democrats said the budget doesn't give enough cash to schools.
The plan provides a 2 percent increase to schools in 2014 and 1 percent more in 2015. Brown said the total — about $13.3 billion over two years — will be the most money ever given to schools.
But Democrats said it's not enough to make up for $300 million in cuts imposed several years ago after a recession ate into the state's tax revenues. And House Minority Leader Tim Lanane, D-Anderson, said the funding is especially inadequate given that some of the money will be used to fund private school vouchers.
"There are schools that are cut all over Indiana," Pelath said.
But Senate Appropriations Chairman Luke Kenley, R-Noblesville, said the key is to consider the per-student funding.
"You're not going to find any school system where we don't fund more money for every child in that school corporation," Kenley said.
The budget also puts $34 million into a fund to be spread among high-performing teachers and schools and directs the Department of Education to spend another $2 million rewarding top teachers in struggling districts.
The plan designates $215 million more for state and local road projects annually by dedicating 1 percent of the state sales tax revenue to transportation and capturing gas tax money now used to help fund the state police and the Bureau of Motor Vehicles. Money for those agencies will now come from the state's main checking account.
Brown said the money for roads will provide "jobs right now."
"It's roads and transportation, local bridges, local roads, projects that can happen July 1," he said. "Those orange cones can be out there right now."
The budget sets aside another $400 million for major highway projects — including the widening of Interstates 65 and 70 and the completion of I-69 — that will be built in the future.
The plan is expected to leave the state with more than $2 billion in the bank when the two-year budget cycle ends on June 30, 2015. That includes the cash set aside for future road projects.
That's equal to about 13 percent of state spending, but it won't be enough to trigger an automatic taxpayer refund put in place under Gov. Mitch Daniels.
The plan will also:
- Pay off debt on the Indiana State Museum and the Forensics and Health Sciences Lab.
- Provide $25 million over two years for the Indiana Biosciences Research Institute, a public-private program advocated by Pence.
- Allocate $25 million for skills enhancements programs to help connect workers with available jobs.
- Transfer $250 million in 2014 to a new reserve account that would be used to help pay Medicaid costs that could be associated with implementation of the federal Affordable Care Act.
-Authorizes Pence to negotiate with federal authorities to give Indiana a block grant through which it could expand health care for the poor.
- Increases funding for the Department of Child Services by $35 million per year to pay for additional caseworkers and make improvements in the agency's abuse and neglect hotline.
"Legislators this session crafted a number of public policy initiatives aimed at making Indiana a better place to live, work and raise a family," said Senate Majority Leader David Long, R-Fort Wayne. "Indiana's responsible track record means we had the opportunity this year to move our state forward while many other states are still struggling."
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