Senate could restore votes on construction as part of reform for property taxes

February 6, 2008

By Mary Beth Schneider

Referendums will likely be required for all major local government building projects, including those for growing school districts, under changes now being considered to property tax reforms by the Indiana Senate.

After hearing nearly five hours of testimony Tuesday, almost all of it from lobbyists representing groups affected by the proposed property tax changes, Sen. Luke Kenley, R-Noblesville, said he expects the Senate to make “an awful lot of changes” to the package passed by the House.

A key change, he said, will be to restore a proposal affording voters the right to give the final OK on major building projects.

Gov. Mitch Daniels had proposed the referendums in the property tax package he unveiled in October. The Senate earlier this year voted to exempt growing school districts from having to win voter approval for their projects, and the House, in House Bill 1001, voted to exempt all classroom-related projects.

Groups representing schools and teachers have tried to convince lawmakers that the existing petition and remonstrance system, in which a group can kill a project by gathering more signatures than supporters do, works just fine.

But Kenley, chairman of the Senate Tax and Fiscal Policy Committee, said referendums are an important part of the reforms.

“Referendums are one of the ways of providing for control going forward. We think it’s a pretty bright-line test for the public,” he said.

“The public’s lost some confidence in government’s ability to make these decisions. They want a direct voice in these building projects.”

That includes referendums for growing school districts, he said.

Kenley earlier thought those projects should be exempted, as a school with a burgeoning enrollment would have no choice but to build new classrooms.

“There seemed to be a lot of backlash” that different school districts were being treated inequitably, he said in explaining his switch.

Kenley said his committee will debate changes and vote on HB 1001 on Feb. 19, with the bill then moving to the full Senate for debate.

Whatever changes the Senate makes must be approved by the House, or the bill will move to a final joint House-Senate committee that must negotiate a final version of the plan by the March 14 legislative deadline.

One change the House made that Kenley said the Senate is unlikely to keep is increasing the earned income tax credit for the working poor to 9 percent from 6 percent.

On Tuesday, several representatives of social service groups argued that the income tax issue is directly tied to the property tax relief package.

Alison Cole of the Indiana Coalition on Housing and Homeless Issues told lawmakers that the plan’s sales tax increase, to 7 percent from the current 6 percent, will hit those with low incomes the hardest.

A family of four with an income of $20,650, she said, would pay an additional $157 a year in sales taxes. Increasing the earned income tax credit would help those poor families absorb that tax hit, she said.

Kenley and Sen. Robert L. Meeks, the LaGrange Republican who is chairman of the Senate Appropriations Committee, said that debate probably will have to wait until next year, when the next state budget is crafted.

“We don’t think the state is in good enough fiscal position to be able to consider that issue,” Kenley said.

A new state revenue report released Tuesday showed that Indiana’s tax collections are continuing to slump, with the state taking in nearly $28.8 million less than expected in January, and nearly $43 million less than expected so far this fiscal year.

However, Kenley said the Senate will consider another change the House made: doubling the renter’s deduction on state income taxes to $5,000 from the current $2,500.

Help for renters, he said, does relate to property taxes. “We need to continue to look at solutions in that area.”

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