UPDATE: House leader says tax, preschool deals near

Republican leaders working on a series of last-minute compromises on top-tier issues of business tax cuts, an early childhood education program and spending for roads announced Tuesday they were close to final agreements.

"I say agreement in principle because we still have to look at language," House Speaker Brian Bosma, R-Indianapolis, said. "The leaders, including our fiscal leaders, have agreed in principle on these issues and we're putting language together to make sure we're on the same page with some of the details."

Plans that would cut business taxes, establish a preschool program for low-income children and spend up to $400 million on new road construction were close to winning final approval, with lawmakers preparing to wrap up work on their 2014 session Thursday.

House and Senate Republicans announced a compromise Tuesday on a series of business tax cuts. The compromise package further cuts the state's corporate and financial institution taxes gradually through 2023. It also would allow counties to eliminate the business personal property tax, which is levied on business equipment, in two ways: by letting counties eliminate the tax on small businesses and by allowing counties to exempt new business equipment and companies that relocate to Indiana.

The cuts amount to more than what Senate or House Republicans had initially proposed but are still significantly less than what GOP Gov. Mike Pence sought at the start of the session, when he called for the complete elimination of the tax.

The plan quickly drew concerns from lobbyists for Indiana's local governments, which have sought to have the state replace any money lost because of the tax cut. But the prospect that the cuts would not take effect until July 1, 2015, after the General Assembly holds another session and draws up a new budget, left them hopeful.

"I think the most important thing to realize is that there's no single dollar of immediate lost revenue to local governments. That's first and foremost to us," said Matt Greller, executive director for the Indiana Association of Cities and Towns.

Budget concerns have increasingly weighed on the state's fiscal leaders as tax collections have flagged, even as the national economy crawls out of the recession.

The state has come up $90 million short on expected tax collections so far this year, and the expectation itself was lowered in December when budget forecasters discovered the state was on track to collect $300 million less through 2015. The dour news in December in spurred Pence to cut agency budgets and put the state plane up for sale, as part of an effort to maintain the state's continuing budget surplus.

Those fiscal concerns have weighed on lawmakers looking at new spending requests from Pence. The governor's call to pay for low-income children to attend preschool won broad bipartisan support in the House earlier this year but ran aground in the Senate.

Senate President Pro Tem David Long, R-Fort Wayne, suggested Pence may have to rely on money he saved through the December budget cuts — also called reversions — if he wants to pay for a preschool voucher program this year. But he declined to release further details.

"What we've got proposed out there is far less expensive for the state and far more reasonable and affordable than the pilot program that was originally proposed," Long said. "But we're still not there."

Lawmakers have until Friday to complete work on their 2014 session, but were planning to leave town Thursday, before they lose their hotel rooms to the many basketball fans flooding Indianapolis for this weekend's Big  Ten Conference tournament.

Pence spokeswoman Kara Brooks emailed a statement saying the governor was happy with how negotiations are coming.

"Governor Pence is encouraged by his discussions with leadership and looks forward to continuing to work with members of the General Assembly to advance the shared agenda for good jobs and roads, great schools and strong communities during the remainder of this session," the statement said.Indiana Speaker of the House Brian Bosma said the governor and legislative leaders have reached broad agreement on some of the biggest legislative items being considered this session.