State Update
On Nov. 19, the Indiana General Assembly reconvened for Organization Day to officially kick off the 2025 budget session. This capped off a late summer and fall of interim study committee meetings in preparation for the legislative session.
Organization Day
Governor-elect Mike Braun sent a letter to every member of the General Assembly detailing his administration's policy priorities and expressing a commitment to an open-door policy and a "spirit of collaboration" with lawmakers.
While he promised to release a more detailed agenda in the coming weeks, this letter previewed his top issues:
- Cut, Cap, and Reform Property Taxes – Provide relief to taxpayers and ensure a fair, predictable system
- Pass a Balanced Budget – Promote fiscal responsibility, government efficiency, and sustainability
- Improve Constituent Services – Deliver faster, more efficient services to Hoosiers
- Universal School Choice and Education Quality – Expand opportunities, improve quality, and increase accountability
- Public Safety – Protect Hoosiers from violent crime and drugs, and support law enforcement
- Lower Healthcare Costs – Tackle rising costs through competition, transparency, and innovation
- Energy and Water – Develop comprehensive strategies for reliable and affordable utilities
In his annual address to the Indiana House of Representative on Organization Day, Speaker Todd Huston (R-Fishers) noted he would normally announce priorities, but “we enter a new time with a new governor.” After highlighting a litany of accomplishments (and thanking Gov. Eric Holcomb) that create the foundation for the work ahead with Governor-elect Braun, the Speaker stated the House would focus on passing “a responsibly, balanced budget, strong education investments, the nation’s best infrastructure plan, energy policy for an energy-dependent economy, additional housing options and common sense property tax reforms while allowing locals to fund law enforcement and education.” House Minority Leader Phil GiaQuinta (D-Fort Wayne), per tradition, will address the full House on Jan. 8, 2025.
On the Senate side of the Statehouse, both Minority Leader Greg Taylor (D-Indianapolis) and Senate President Pro Tempore Rod Bray (R-Martinsville) spoke about their respective 2025 priorities. Leader Taylor comments focused on speaking for those “who feel like they don’t have a voice.” Taylor stated, “my focus, our focus… will be the protection of Hoosiers across the state.” President Pro Temp. Bray echoed Speaker Huston’s comments, saying the session is “unique because we have a transfer of power with Governor-elect Braun and Lt. Governor-elect [Micah] Beckwith.” Bray thanked Lt. Governor Suzanne Crouch for her efforts over the last eight years presiding as the President of the Senate. The Senate will focus on “property taxes - good work for the state and to provide relief;” dealing with the increasing costs of Medicaid; and “offer relief and help to Hoosiers with the costs of electric power and health care,” stated Bray.
Both the House and Senate will reconvene for legislative business on January 8, 2025. Governor-elect Braun, Lt. Governor-elect Beckwith and Attorney General Todd Rokita will be sworn into office on January 13, 2025. By law, the legislative session shall adjourn sine die not later than April 29, 2025.
The IU State Relations team plans to resume weekly Statehouse Updates beginning on January 17, 2025.
State and Local Tax Review Final Report and Recommendations
The State and Local Tax Review (SALTR) Task Force made its final report and recommendations this week on November 20.
Senate Enrolled Act 3-2023 created the task force. By law, the task force met four times in 2023 and four times in 2024, and had until December 1, 2024, to prepare findings and recommendations on the following:
- The state's near-term and long-term financial outlook and overall fiscal position
- The state's appropriation backed debt obligations
- The funded status of pension funds managed by the state, including methods to reduce the unfunded actuarial accrued liability of the pre-1996 account within the Indiana state teachers' retirement fund
- The individual income tax, including methods to reduce or eliminate the individual income tax
- The corporate income tax
- The state gross retail and use tax, including a review of the state gross retail tax base
- The property tax, including methods to reduce or eliminate the tax on homestead properties and reduce or eliminate the tax on business personal property
- Local option taxes, including the local income tax, food and beverage taxes, and innkeeper's taxes
The Legislative Council directed the Task Force to review the following additional topics:
- Requiring certain projects of a political subdivision to be subject to:
- the petition and remonstrance process under IC 6-1.1-20 if the political subdivision's total debt service tax rate is more than forty cents ($0.40) per one hundred dollars ($100) of assessed value, but less than eighty cents ($0.80) per one hundred dollars ($100) of assessed value; or
- the referendum process under IC 6-1.1-20 if the political subdivision's total debt service tax rate is at least eighty cents ($0.80) per one hundred dollars ($100) of assessed value
- Capping the total amount of operating referendum tax that may be levied by a school corporation
- The maximum levy growth quotient formula
- The use of an influence factor or assessed value deduction for assessment of excess residential acreage
- The movement of parcels between allocation areas
- The agricultural land base rate formula
- The use of debt by school corporations.
Over the course of the last two years, the task force found Indiana has a strong, competitive tax environment. Initially formed to consider the elimination of the individual income tax, the task force quickly shifted its focus to property taxes as assessed valuation increased dramatically across the state and nation. The final report was adopted 9-1 (with two absences) but was slightly edited from the draft.
The SALTR Task Force made the following recommendations by tax type beginning with 2025 legislation and beyond:
Property Taxes
- Enact more effective controls on property tax bills particularly for homesteads(amendment approved by consent of the task force)
- All eligible over 65 property taxpayers should receive a credit to ensure a reduction on their property tax bill
- Refine the agricultural land base rate methodology
- Increase the de minimis business personal property tax exemption to help small Hoosier businesses
- Reduce the 30% floor for all business personal property to spur economic development
- Make progress towards a transparent and accountable property tax system that enables taxpayers to see a reduction in their property tax bill when their local unit reduces its tax rate
Local Income Taxes (LIT)
- Enable the collection and distribution of LIT revenue within a county by utilizing GIS (Geographic Information Systems)
- Phase in a reduction to the overall LIT rate cap to match the state income tax rate
- Permit larger municipalities to adopt their own LIT rate under the overall LIT rate cap
Indiana University would like to extend its gratitude and thanks to Dr. Justin Ross, IU Bloomington professor at the Paul H. O’Neill School of Public and Environmental Affairs, for serving as the appointed state educational institution economist on the task force for the last two years.