Elected Officials and State Government and Mike Pence and Government & Economic Development and Government

Pence agenda includes tax cuts, pre-K vouchers

December 5, 2013

Gov. Mike Pence will ask lawmakers in 2014 to cut more than $1 billion in taxes for businesses, parents and individuals and spend hundreds of millions more on roads, workforce development and preschool for poor Hoosier children.

But in an address at the BGD Legislative Conference in Indianapolis Thursday, the governor steered clear of any details—including how he would pay for his proposals—saying he’ll provide more specifics in the coming weeks. His speech came just after some legislative fiscal leaders had expressed skepticism about too much new spending.

“Our intention today was to lay out a very bold agenda for the upcoming session of the General Assembly,” Pence said. The goal was to begin “with policies that will increase employment in Indiana and also increase private sector investment.”

“I hope this gives you all something to think about and something to talk about,” he said during the conference, where lawmakers and lobbyists were gathered for a pre-session event.

The day included sessions with legislative leaders and fiscal experts, some of whom had warned they were unlikely to spend much new money in 2014, a so-called short session. The state’s two-year budgets are created during long-sessions, which will next take place in 2015.

House Ways and Means Chairman Tim Brown, R-Crawfordsville, said his mantra for the session has been “don’t open the budget.” House Minority Leader Scott Pelath, D-Michigan City, said, “As I look at the scope of these proposals, I wonder how he plans to reconcile new spending with his own reputation as a rabid fiscal conservative.”

And Sen. Ryan Mishler, a Bremen Republican who serves on both tax and appropriations committees, said the state should probably have even more in the bank than the $2 billion cash surplus it currently boasts.

But Pence said lawmakers should act now.

The Republican said phasing out the personal property tax—a tax on business equipment—will be a key part of his agenda. But he provided no details about how local governments would deal with $1 billion in lost revenue, which is used to fund cities, counties, schools, libraries and other local services.

The governor said he will seek to “ensure that this reform does not unduly harm local government.” And he said lawmakers could approve a phase out of the tax and decide in future years how to replace the lost revenue, something he said would be more of a “tax reform” than a tax increase.

But Sen. Brandt Hershman, R-Buck Creek, said that absent identifying a revenue source for local government, “we’ve got to be cautious” about eliminating the personal property tax.

House Speaker Brian Bosma, R-Indianapolis, said his caucus will also propose cuts in the personal property tax but he said the plan will likely give local officials some discretion. He said the plan’s details are yet to be worked out but lawmakers could approach the issue like they did the elimination of the inventory tax.

In that case, lawmakers launched a phase out the inventory tax but also gave local officials the opportunity to eliminate it more quickly. That law also let local raise income taxes to help make up the lost revenue.

Pelath called the personal property tax plan a “corporate giveaways” that “is going to end up hurting families.”

Pence also said he will ask lawmakers to create a voucher program to help needy Hoosier children go to preschool, although he did not say how it would be funded.

“The time has come for Indiana to provide access to pre-kindergarten for all the disadvantaged children in our state,” Pence said. “It’s time for us to give our most disadvantaged kids a better chance at success.”

His plan would make vouchers available to children in families with household incomes of up to 185 percent of the federal poverty level, which is currently $43,567 for a family of four. Children could use those vouchers to attend a private or public preschool program that met state standards, he said.

Pence did not say how much the plan voucher plan would cost or how it would be funded.

Preschool is expected to be a priority for some Republicans and Democrats as well, although fiscal leaders in the House and Senate have expressed concern about the costs.

Brown said Thursday that lawmakers could put a preschool structure in place that determines who qualifies for the program. Then, he said, “it can be funded in a budget year.” That would be 2015.

Pence said he will also ask lawmakers to:

— Release $400 million in transportation money the General Assembly set aside last year for future road projects.

— Index the state’s $1,000 personal exemption and $1,500 dependent child exemptions to inflation, meaning they would increase over time to save individuals and parents more money.

— Streamline adoptions in Indiana.

— Develop a plan to raise public and private sector money to boost development in the state’s cities.

— Create an Indiana Teacher Innovation Fund to promote classroom innovation.

Pence said the changes are necessary to keep the state competitive in the race for economic development and job growth.

“We will rise to this challenge because the people of Indiana are the best people on earth,” Pence said. “They deserve nothing less.”

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