The Conference Committee on Senate Bill 1 and House Bill 1001 met at 4:30 this afternoon to make public the details to reduce the business property tax. Hopes that it would all go to a study committee to delay any damage to local government and school revenues were not fulfilled. Local school revenues are likely to take a hit based on two local options made available to each county, effective two years from now for property taxes payable in 2017.
The “Replace Don’t Erase” Coalition worked hard to eliminate the local option provisions to keep counties from pressuring each other to cut taxes, thus cutting school, library and local government revenue. The RDE efforts mitigated the potential damage, but the final deal now has two types of local options. If school and local government revenues are to be left intact, county officials will have to reject both local options, an outcome that seems unlikely.
Provisions of SB 1/ HB 1001
The provisions of the bill were presented by Senator Hershman, Senate Republican Conferee, with the support of Representative Turner, the House Republican Conferee. Senator Tallian, the Senate Democrat Conferee, brought an alternative plan which deleted the corporate tax reduction and the local option for reducing property tax on new equipment, an alternative which had the support of Representative Porter, the House Democrat Conferee. The alternative plan was not accepted.
Here are the main provisions unveiled today:
- Corporate tax rate reduction to 4.9% over 6 years.
- Financial Institutions Tax (FIT) rate reduction to 4.9% over 6 years.
- Local option small business personal property tax exemption.
If the local COIT board approves, this would allow small businesses to exempt personal property with an acquisition cost less than $20,000. LSA estimates that if every county did this, $7.6 million would be shifted to other taxpayers and $6.6 million would be lost to local budgets due to circuit breakers. Of this $6.6 million, $2.0 million would be lost to schools.
When the Senate proposed this plan, it was a statewide plan with a fixed statewide cost that theoretically might have been replaced with state dollars. The new proposal today is to make this a local option with no prospect of state replacement dollars.
- Local option for the elimination of property tax on new business personal property.
The Impact on School RevenueIf the local COIT board approves, new business equipment would be exempted from the business property tax. Eventually as all equipment is replaced, the property tax on equipment will slowly disappear and local school and government revenue will fall.
There is no good news here for public school revenue, except perhaps that it might have been worse. From the start of this debate, reducing the business property tax was going to damage public school property tax revenue. The only question was whether it would be a huge hit or a small hit. Intense lobbying has reduced the size of the problem, but there is still a problem if school officials don’t convince county officials of the wisdom of rejecting the local options, an unlikely prospect.
Governor Pence wanted to help businesses, and he didn’t mind doing that at the expense of revenues for schools, libraries and local government. He worked hard to make this happen in a sometimes reluctant legislature. Now that they have followed his lead, at least $2 million per year in school property tax revenue is at risk, just at the time when the great competition between public and private schools for the hearts and minds of parents is revving up, a competition created by the voucher program passed by the General Assembly in 2011 and expanded with Governor Pence’s strong support in 2013.
There is something wrong when Indiana’s grand experiment in a competitive marketplace is set up and then public schools are threatened with a new cut in their funding. It doesn’t look like fair competition to me. It looks to me like public school revenue support is being undermined in a creative new way every year, and the favoritism shown by the Governor for private schools in the competition and his willingness to let public school funding erode remain obvious.
This proposal today had the air of finality. It seems clear that it will go through as presented.
Let your legislators know that they are to be thanked for mitigating the original plan which threatened even deeper cuts to school budgets. You might also let them know you are disappointed that $2 million in public school revenues have been put at risk through these local option proposals.
In addition, you might ponder these things in your heart as you consider the elections coming up in May and in November. Some have taken comfort in the fact that implementation is two years away and this might be changed in the new budget in the next General Assembly after the next election.
As of late Tuesday evening, there is no further information on the status of the preschool bill.
Thanks for your active support of public education!
ICPE has worked since 2011 to promote public education in the Statehouse and oppose the privatization of schools. The 2014 session of the General Assembly is now past the half way mark in its deliberations. We need your membership to help support our hard working lobbyist Joel Hand. Many have renewed their memberships already, and we thank you! If you have not done so since July 1, the start of our new membership year, we urge you to renew by going to our website.
Although ICPE entered this session of the General Assembly in better financial shape than in any previous session, we still need additional support to fund the commitments our board has made for our lobbying efforts. We are counting on your financial help during the session.
We have raised the needed money in past sessions, and we must do so again. We need additional members and additional donations. We need your help and the help of your colleagues who support public education! Please pass the word!
Go to www.icpe2011.com for membership and renewal information and for full information on ICPE efforts on behalf of public education. Thanks!
Some readers have asked about my background in Indiana public schools. Thanks for asking! Here is a brief bio:
I am a lifelong Hoosier and began teaching in 1969. I served as a social studies teacher, curriculum developer, state research and evaluation consultant, state social studies consultant, district social studies supervisor, assistant principal, principal, educational association staff member, and adjunct university professor. I worked for Garrett-Keyser-Butler Schools, the Indiana University Social Studies Development Center, the Indiana Department of Education, the Indianapolis Public Schools, IUPUI, and the Indiana Urban Schools Association, from which I retired as Associate Director in 2009. I hold three degrees: B.A. in Ed., Ball State University, 1969; M.S. in Ed., Indiana University, 1972; and Ed.D., Indiana University, 1977, along with a Teacher’s Life License and a Superintendent’s License, 1998.