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Senate passes $32.1B budget that avoids cigarette tax hike

April 6, 2017

The Indiana Senate on Thursday passed a two-year, $32.1 billion budget for the state—but there is still considerable debate to be waged before Hoosiers will know the final version of the spending plan.

The budget will need to be hashed out over the next two weeks with House leaders, because that chamber passed a budget bill with significant differences. For example, the Senate budget plan does not raise the cigarette tax by $1 per pack, nor does it shift the sales tax on gasoline purchases to pay for roads.

The bill passed by a 39-9 vote margin.

“The Senate’s budget proposal continues Indiana’s track record of fiscal integrity, and does not include a cigarette-tax increase,” said Senate Appropriations Chairman Luke Kenley in a media statement after the vote. “I believe we are well on our way to a budget that properly funds state services, while maintaining strong reserves in order to protect taxpayers.”

The Senate bill also does not include Gov. Eric Holcomb’s wish to use the state’s $500 million Next Generation Trust Fund, which was generated from the proceeds of the lease of the Indiana Toll Road, to invest in Indiana companies. The House endorsed using half of that fund to invest in firms.

However, Kenley said he was open to discussions over the next two weeks on that topic.

Kenley also appears to be standing firm on his preference not to hike the cigarette tax. He wants to keep that in his toolbox for the future in case the state’s health care burden changes. He said Thursday he does not intend to have a tax hike in the bill after final negotiations.

The Senate budget plan also increases K-12 funding by $358 million over the next two years. The House budget calls for a K-12 education spending increase of $273 million over the biennium.

Democrats raised several concerns with the Senate bill.

One of their key criticisms of the budget lies with the Senate’s approach to the fledgling preschool pilot program. The House budget plan doubles preschool funding from $10 million to $20 million per year. The Senate version of an expansion calls for $3 million in new money, along with $1 million spent on an in-home pre-k software program.

Kenley said he didn’t want the expansion of preschool to become another entitlement program.

Senate Minority Leader Tim Lanane, D-Anderson, said the two caucuses had fundamental differences in their philosophies on preschool funding.

Sen. Mark Stoops, D-Bloomington, said the Senate budget woukd fail thousands of kids "not expanding pre-K to serve them and increase their lifetime earning potential [and] reduce the number who go to prison and drop out of school."

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