Perhaps the issue that has flown the lowest beneath the political radar in Indiana this year is the effect the "circuit-breaker" tax caps have had on local government – particularly on cities other than Indianapolis.
Since the circuit-breaker law began busting the general fund budgets of cities and towns in 2010 to the tune of $156 million, the annual impact has spiraled by 57 percent over six years to $272 million. Meanwhile, inflation from 2010 to 2015 rose 9.2 percent while funding dropped precipitously.
In more real terms, cities like mine, Logansport, lost 26 percent of their budget this year, and we will lose 30 percent in 2017. We are not alone in feeling and dealing with the effect of a crippling legacy of the circuit-breaker. Muncie lost 45 percent of its general fund last year. Goshen and Terre Haute face similar fates. So do many others.
An Indiana Fiscal Policy Institute study of 18 cities other than Indianapolis, including all those with a population of more than 50,000, found that the circuit-breakers’ impact is uneven across the state. It cuts across regional and political lines. In comparison with the state’s school funding formula, an attempt to equalize funding fairly for each child in this state, the circuit-breakers have become an unfunded mandate on local government that is very unequal.
While circuit-breakers have been a win for those concerned about how much property taxes had been escalating, the other shoe dropping in this fiscal policy debate is that cities, counties and schools are doing without, scaling back budgets by almost a decade. That means there may be fewer police on the streets and deputies on the roads of a state where heroin and meth use is among the highest in the nation. It means there may be fewer firefighters and teachers and less money to commit local funds to state and federal grants. It means there may be less money for programs such as blight elimination in older neighborhoods, and planning and zoning initiatives to redevelop older cities. In sum, it means that in the shell game we’re playing with the property tax money we collect, other local taxes will probably have to be raised to compensate for the loss in property tax funding. If we don’t address the unfairness of this issue in the state, we face the kind of funding shortfall at the local level that the state’s infrastructure is already facing because adequate funding is not available.
The compounded impact of going years without intended general fund dollars will put most Indiana communities further behind at a time when we need to be competitive not only with other communities in this country, but around the world.
Indiana leaders from courthouses and statehouses to Congress fought for years in the 20th century to end the "donor state" status of Indiana’s gas tax to the rest of the nation. We fought and won that battle because it was the right thing to do, and we must fight this fairness battle too for the same reason.