Indiana senator wants automatic tax refund revised

The Indiana Senate's lead budget writer said Thursday the state needs to save more money before it begins sending taxpayers automatic refund checks.

The automatic refund is triggered when the state socks away an amount equal to at least 10 percent of its planned spending. But Senate Appropriations Committee Chairman Luke Kenley, R-Noblesville, said the state should hold more money in cash reserves before the tax refunds kick in.

The increased state savings would be used to buffer the state's school system if it faces another downturn like the Great Recession.

"I think the reserve based on our experience in the recession, when it took $3 billion to solve that problem, I think the 10 percent (state cash reserve) looks just too tight to me," he said.

The Senate Appropriations Committee took an initial crack at vetting the bill Thursday and plans to come back next week to work on it further. Lawmakers end work during their 2012 session on March 14.

"We'll work with Sen. Kenley and monitor the bill's progress," said Jane Jankowski, spokeswoman for Gov. Mitch Daniels.

Lawmakers approved Daniels' automatic tax refund during last year's session but changed the original proposal to use a portion of the cash reserve to pay down teacher pension obligations. Beginning in 2023, the state is facing payments upward of $1 billion a year to pensions guaranteed to teachers hired before 1996.

Budget cuts, improved tax collections and a $320-million error left Indiana with an estimated $1.8 billion in cash reserves. Daniels estimates each taxpayer would get an additional $50 back if the state meets its estimated reserve at the close of the current budget.

Kenley's measure would not kick in until 2014 and would change the tax refunds to go out only in years when lawmakers craft their biennial budget.