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INDIANAPOLIS – Early legislative hearings got off to a slow start Tuesday when a Senate panel heard testimony on property tax caps and an unemployment tax increase but didn’t have enough members to take a vote.
The Senate Tax and Fiscal Policy Committee took testimony from a handful of lobbyists on the two issues, then set another meeting for next week to vote on the pieces of legislation.
The full General Assembly doesn’t convene until Jan. 5, but leaders in the House and Senate are trying to jump-start the short session with December hearings.
The first bill considered Tuesday was Senate Bill 23 – a one-year delay on the unemployment insurance tax increases that businesses are set to start paying in early 2010. Lobbyists for the Indiana Chamber of Commerce and Indiana Manufacturers Association predicted a “death spiral” for businesses if they have to pay the new rates.
A bipartisan legislature passed the tax increases this year in an attempt to make the state’s unemployment insurance trust fund solvent again. Indiana has borrowed $1.3 billion from the federal government to cover claims because the state fund is bankrupt.
But much of Tuesday’s hearing was spent on Senate Joint Resolution 1 – an effort to amend the Indiana Constitution.
Legislators have enacted property tax caps that prevent a person’s tax bill from exceeding 1 percent of the assessed value for homesteads; 2 percent for agriculture and rental properties; and 3 percent for businesses.
When the caps are fully implemented in 2010, local units of government and schools will get $464 million less in property tax revenue than previously expected, according to estimates released Tuesday.
But Gov. Mitch Daniels and Republican leadership want to make the caps more permanent by placing them into the Indiana Constitution. The amendment has already passed the legislature once and must pass again this year in order to be submitted to the public on the November 2010 ballot.
“I think what we have is a very good solution,” said Sen. Luke Kenley, R-Noblesville. “There is no perfect solution. We will never make everyone happy.”
But he conceded that lawmakers are still struggling with how to help schools cope with the effect of the tax caps. The state is currently spending tens of millions every year to offset some of the tax cap cuts for schools because many legislators have been uncomfortable with cutting education.
Tax cap cuts for schools come in the remaining property tax levies, including transportation, capital and debt service.
Libby Cierzniak, a lobbyist for Indianapolis Public Schools, pointed out that schools are allowed to use property tax revenue from the capital levy to cover utility costs and heating.
“You can’t tell me that keeping the lights on and heating the schools are not core educational costs,” she said.
Cierzniak also said that several poorer districts in the state will see devastating cuts.
Sen. Tim Skinner, D-Terre Haute, said it is unwise to rush into amending the state constitution without first seeing the practical effects and unintended consequences.
“But here we are rushing to make a decision that has more personally to do with politics than it does policy,” Skinner said.
“We are going to suffer as a result of this. It’s wise to let this situation play out.”
