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Leading up to the 2025 legislative session, lawmakers and Gov. Mike Braun made a clear commitment to deliver property tax relief for Hoosiers. While local leaders are eager to provide efficiencies and relief where possible, many communities around the state are beginning to see another side of the ledger emerge.
As local governments work through their first full budget cycles under SEA 1, a clear pattern is emerging: The law significantly constrains long-term revenue growth at the very moment cities and towns are facing rapidly rising costs. When revenue growth is compressed and uncertainty grows, the result is predictable: major cuts to local services.
Employees represent the largest segment of a municipal budget, so the elimination of positions and hiring freezes within municipal government are expected. However, here are a few other examples of the impact across the state: the shelving of new public safety buildings and equipment, cancellation of a neighborhood sidewalk program, community amenities that now won’t open in 2026, and inability to match Community Crossings grants to upgrade failing infrastructure.
For residents, these things don’t show up as lines in a fiscal analysis. They show up as fewer firefighters and paramedics available when a call comes in. They show up as longer 911 response times, slower road resurfacing, delayed sidewalk and drainage projects, and parks and public spaces that decline instead of improving. Over time, these reductions do more than inconvenience people: They undermine the quality of place investments local units and our state government have made over the last decade.
The fiscal challenges are not limited to one city or one region. Under SEA 1, local leaders are grappling with:
— A lack of reliable state projections on income tax revenue for 2026, 2027 and 2028, complicating long-range budgeting.
— A new annual adoption process for the income tax creates instability, made even more challenging for communities under 3,500 residents, which must petition their counties each year for distributions.
— A new, unstable income tax process for communities under 3,500 residents, which now must petition their counties each year for distributions.
— Technical issues with debt coverage and TIF neutralization that threaten infrastructure and economic development projects.
To be clear, local leaders are not opposed to tax reform. They are asking for balance. Communities across the state are already stretched thin trying to meet residents’ expectations and maintain the amenities that attract new residents and businesses. Tax reforms must be designed in a way that complements, rather than undermines, the fiscal health of municipalities. If state and local leaders work together with that shared understanding, the 2026 session can be productive for everyone.
That is exactly the spirit in which Accelerate Indiana Municipalities is approaching SEA 1.
We are not asking lawmakers to repeal the law or walk away from their policy goals. We are asking for targeted amendments that preserve the promise of tax relief while making SEA 1 workable for the cities and towns that have to live under it.
In November, AIM is convening regional roundtables—including in Mishawaka and other nine other communities—to hear in detail how SEA 1 is affecting local budgets and services. Based on what we are already hearing from members, AIM has prepared a package of technical fixes to SEA 1. They include improvements to the annual adoption and distribution process; clearer, more dependable revenue projections; adjustments to rate splits so municipalities are not permanently disadvantaged; more fiscal certainty for small communities; and corrections to debt-coverage and TIF provisions so local infrastructure and economic development tools continue to function as intended.
At the same time, we took seriously the message from lawmakers in 2025 that local government must continue to modernize and seek efficiencies. Alongside our SEA 1 proposals, AIM is advancing a series of modernization and efficiency ideas to help local governments operate at an even more effective level. A key priority is updating the state’s government modernization statute to make it easier and more flexible for units to restructure, share services and collaborate where it benefits taxpayers. We are also exploring streamlined service-delivery approaches and better use of technology and data so communities can stretch every dollar as far as possible.
If we work together in 2026, Indiana can keep its commitment to taxpayers and still ensure that cities and towns have the tools they need to provide core services and build the quality places where Hoosiers want to live and raise their families.•
Greller is the CEO of Accelerate Indiana Municipalities.
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