STATEHOUSE DISPATCH: Finally, property tax reform takes center stage

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April 2 will start a busy-and important-week in the life of the Indiana General Assembly.

House and Senate c o m m i t t e e s w i l l effectively wrap up their respective work, hearing the bills they choose to after the legislation moved across the Rotunda from their opposite chambers. The following week, you can look forward to a few days of floor votes on amendments and final passage in each chamber, and then legislators will be huddled in conference committee deliberations.

But back up first. Bills must emerge from committee this week to remain alive-if only as vehicles in which other matters can be inserted. For a long session, we didn’t see many bills pass either the House or the Senate, so there might not be quite as many homes for assorted ideas that made it through only one chamber as we get down to the end of April. That’s why it is important that more bills remain alive and pass through the committee process.

In practice, we’re looking at one major concept in particular up for a hearing next week: the long-awaited property tax relief package that Luke Kenley, RNoblesville, chairman of the Senate Tax and Finance Policy Committee, has been crafting for months.

Some might even suggest the Kenley measure has been in the works for years, given its origin in the local-governmentadvocated Hometown Matters plan bouncing around in assorted forms the past few sessions.

But after a Democratic-drafted property tax relief bill failed to achieve a constitutional majority in the House early in the session (it remained eligible for reconsideration at the time of this writing, but a new vote was unlikely), and a property tax abolition measure pushed by Sen. Tom Weatherwax, RLogansport, collapsed in the Tax and Finance Policy Committee around the same time, all eyes turned to Kenley for another shot at the elusive target.

On April 3, two days before the Senate Appropriations Committee likely will consider the budget, Kenley will seek a vote on his “dollar-for-dollar trade” in what will be House Bill 1478.

Kenley wants the state to assume the entire tab for juvenile incarceration costs beginning in 2009, to pay half the increases in child welfare expenses as of 2008; and to cover all the general fund (but not new building) operating expenses for public schools starting next year. He would phase out the $2 billion property tax replacement credit fund (using that money to pay the state share of the costs outlined above), allow local governments to raise local option income taxes as the principal alternative to property taxes, and use some revenue from HB 1835, the slots-at-the-tracks measure, to help fund the state share.

The controversial circuit breaker still would cap property tax bills at 2 percent of gross assessed value for homeowners and landlords, but businesses would take a hit. Instead of becoming eligible for the circuit breaker in 2010, as the law currently stands, the Kenley plan would offer a similar break to businesses only if their property taxes were to exceed 3 percent of assessed value (he says they will still benefit from property taxes being held in check). That provision is not making the business community happy, and it’s seeking some additional relief.

Local tax review boards would review property-tax-funded capital projects with price tags of at least $2 million, but the details are not yet available as to how these boards would be organized, whether they would have veto authority, whether local remonstrances still would be available to taxpayers (regardless of how a board would rule), and other key issues.

As a result, Democrats are still waiting to crunch the numbers to determine how the Kenley proposal would affect renters and working-class Hoosiers. Gov. Mitch Daniels is waiting to see how it fits in with other legislation proceeding through the process, and what the forthcoming mid-April fiscal forecast portends before he formally weighs in, but he seems to be on board with the general principles.

While some stumbling blocks have been removed (Kenley will smooth out any significant short-term winners and losers among counties, for example), obstacles remain. Local governments still want taxing authority well beyond what this package would offer, agricultural interests are wary, and there really won’t be much time to work through all the concerns that are bound to emerge once every interested entity reads the language and runs the numbers.

What this promises is, if a property tax relief package does pass the Senate before taxes are due, there will inevitably be even more compromising than usual on something this important. And because Democrats effectively punted on their first possession, they will be doing more compromising than will Republicans.

Feigenbaum publishes Indiana Legislative Insight. His column appears weekly while the Indiana General Assembly is in session. He can be reached by e-mail at

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