Republican leaders plan to make up a $2 billion budget revenue shortfall by raising the cigarette tax, cutting public health and higher education funding, and spending down budget reserves.
Legislative leaders unveiled some details of the final budget bill Wednesday.
GOP budget writers said they started closing the revenue shortfall by making cuts and then turned to a $2 per pack cigarette tax increase, along with a proportional increase in the tax on other tobacco products such as cigars and vaping, to finish closing the gap. The money from that increase is earmarked for Indiana's Medicaid programs.
Senate President Pro Tem Rodric Bray (R-Martinsville) said that tax hike will also help people stop smoking — or prevent them from starting in the first place.
“I think that’s going to have a huge benefit for Medicaid costs going forward,” Bray said.
But Rep. Greg Porter (D-Indianapolis) said cutting local public health funding down to $40 million a year — from $150 million this year — is very disappointing.
“Is that making Indiana healthy again?” Porter said. “I think it’s making us extremely vulnerable when it comes to health care.”
K-12 education will receive 2 percent per year funding increases in the final budget, just as it did in both the House and Senate versions of HB 1001.
Republicans will get their private school voucher expansion, eliminating the income limits on the program. But that won’t happen until the second year of the new budget — and the funding for that will be in addition to the 2 percent overall funding increase for K-12 schools.
Sen. Andrea Hunley (D-Indianapolis) said now is not the time for that expansion.
“We’ve got a lot to make sense of in terms of making sure that we’re taking care of our working class families and not our wealthiest Hoosiers,” Hunley said.
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Higher education institutions will receive a 5 percent cut to their primary funding, along with a 5 percent cut to the dollars they use to maintain buildings.
House Speaker Todd Huston (R-Fishers) said scheduled reductions in the state’s individual income tax will not be paused.
“That was a commitment we wanted to make to Hoosiers that we would find those savings and make sure that we protect the income tax cuts,” Huston said.
Another source of savings is a significant budget cut for the Indiana Economic Development Corporation. Porter applauded that move, saying the agency has long needed greater oversight.
“There was not transparency,” Porter said. “They were not truthful; they were hiding. And now it’s all coming to roost.”
Republican leaders also emphasized that the budget will give Gov. Mike Braun flexibility to streamline state government.
“They’re giving me the tools to do exactly what I campaigned on — and that’s try to run our state government more efficiently,” Braun said.
As they had in all previous versions of the budget bill, most state agencies will receive a 5 percent budget cut. The Family and Social Services Administration, Department of Child Services and Department of Correction will not receive cuts.
Brandon is our Statehouse bureau chief. Contact him at bsmith@ipbs.org or follow him on Twitter at @brandonjsmith5 .
