Senate budget leader: Schools, roads need boost

Indiana lawmakers have been aggressive in cutting taxes in recent years, the state Senate's top budget writer said Thursday as his committee started reviewing a spending plan that leaves out Republican Gov. Mike Pence's proposed 10-percent income tax cut.

The Senate Appropriations Committee began its review of the House-approved spending plan on the same day a tea party group announced a television ad campaign in support of Pence's proposal.

The two-year budget developed by House Republicans would spend $200 million more for education and $500 million more for road projects than proposed by Pence, in part by leaving out the nearly $800 million in tax cuts over that time.

Appropriations Committee Chairman Luke Kenley, R-Noblesville, said he largely agreed with the spending priorities in the House plan, although he expected the Senate would be looking closely at the projected 17-percent increase in Medicaid costs the state faces even without any expansion of the health care program for the poor.

"Will that be so much that it's going to threaten our ability to give education increases in the future?" Kenley said. "I think that's the biggest question in the budget."

The conservative advocacy group Americans for Prosperity held a news conference outside the governor's office announcing its campaign aimed at promoting Pence's proposal to cut the income tax rate from 3.4 percent to 3.06 percent. Leaders of the group, founded by billionaire brothers Charles and David Koch, declined to say how much it would spend on the advertising.

Tim Phillips, the group's national president, urged the large Republican majorities in both the House and Senate to follow Pence's lead.

"I think a lot of Indiana families, and I think the nation is watching, really, to see what they're going to do with this power," Phillips said. "Are they going to float along with the comfortable status quo or is it going to be a genuinely bold attempt to get this economy moving again?"

Kenley pointed to the Legislature's 2011 decision to cut the corporate income tax rate incrementally from 8.5 percent to 6.5 percent and its approval last year of a 10-year phase out of the state inheritance tax.

"I do think that Indiana has already set a very aggressive standard" for tax cuts, Kenley said.

The Senate committee is expected to hold several budget hearings before advancing a proposal to the full Senate in about a month. House and Senate negotiators will need to reach a final agreement ahead of the late April deadline for ending the legislative session.

The committee's top Democrat said she was generally pleased with the House GOP budget plan, although she believes more should be done to restore the $300 million in cuts to K-12 funding that then-Gov. Mitch Daniels made during the recession.

Sen. Karen Tallian, D-Portage, said she didn't think the state was flush enough to afford a tax cut as large as Pence is seeking.

"We're still on the edge," Tallian said. "We need to make sure that we've shored up what we have and what we've cut rather than just start giving it back and say 'Oh, we didn't need that.'"

Kenley said Pence's tax cut proposal would remain in consideration as budget deliberations continues.

"Obviously we want to fund schools, we want to fund roads, we want to fund higher education," he said. "Even a conservative Republican will say these are the kind of investments in the future that you have to make. So we gotta reach that right balance."