Budget includes tax cut, more school, road funds

Gov. Mike Pence and Indiana's Republican legislative leaders have reached a budget deal that increases spending on roads and schools while giving the governor a piece of the income tax cut he has arduously sought this session.

House and Senate leaders unveiled a budget plan Thursday that cuts the personal income tax 5 percent over the next four years and eliminates the inheritance tax. It spends roughly $330 million more on education over the next two years, increasing 2 percent in the first year of the budget and 1 percent in the second. It also increases spending on state and local roads by $400 million and invests another $400 million for major highway expansions over the biennium.

House Speaker Brian Bosma, R-Indianapolis, said his priorities had always been that the state's budget be strong enough to avoid big spending cuts or the need for tax increases in the future.

"We believe this blend is the right blend, it's at the right amount, it's at the right time to be sustainable for the future," Bosma said.

After months of taking a hard-line stance seeking a 10 percent tax cut, the budget deal marks a stark compromise for Pence and his supporters. The new plan gives him half the cut he was seeking and takes twice as long to take effect, but is also supplemented with other tax cuts he had not sought.

But Pence, Bosma and Senate President Pro Tem David Long, R-Fort Wayne, quickly rallied around their compromise plan Thursday.

"The combination of a 5 percent individual income tax cut, inheritance tax repeal and additional tax relief for businesses is the right tax relief at the right time and will give a much needed boost to working families, small businesses and family farms," Pence said in a statement.

Democrats have criticized the overall push from Republicans to cut more taxes while not restoring all of the education spending cut in previous budgets. But Republicans greatly outnumber Democrats in both the House and Senate.

The tax cut package includes $150 million for the elimination of the inheritance tax and more than $250 million annually once the income tax cut is complete in 2017, a package Republicans called the largest the state has ever seen. House Democratic spokesman John Schorg quickly pointed out that a string of cuts in 1997, 1999, 2002, 2007 and 2008 were all approved when Democrats led the House.

The budget also spends $128 million to pay off state debt incurred building the State Museum and the Forensics and Health Sciences Lab. It includes $206 million to pay for university projects with cash instead of bonds and spends roughly $100 million on job-training plans pushed by the governor and lawmakers.

It also includes more than $12 million to pay off loans incurred by charter schools that were deemed "failing" by the state, but leaves the question of whether their loans will be absolved with the Pence administration.

The budget compromise represents the biggest breakthrough for lawmakers as they work through the final hours of their 2013 session. Other issues still being worked out Thursday afternoon included proposals to expand vouchers, review the state's inclusion in national Common Core standards, mandate a regulatory review of the $2.8 billion Rockport coal gasification plant and possibly expand gambling.

As minority Democrats began objecting to compromise measures, Republican leaders pulled them from conference committees and replaced them with Republicans. The procedural moves, which guarantee legislative leaders win support they need, are common and were previously done by Democrats when they controlled the House.

Lawmakers are hoping to finish their 2013 session Friday.