Senate’s $32.1B budget eschews cigarette tax hike

An Indiana Senate panel on Thursday advanced a two-year, $32.1 billion state budget plan with significant differences in funding for roads, entrepreneurship and education from the House’s already approved budget plan.

For instance, the House budget raises the cigarette tax by $1 per pack and shifts the sales tax charged on gasoline purchases to pay for roads. The Senate plan does neither of those things, with the Senate’s top budget official saying he wants to keep the cigarette tax increase in his toolbox in case of future spending needs.

Senate Appropriations Chairman Luke Kenley, R-Noblesville, said the budget for fiscal years 2018 and 2019 unanimously approved Thursday by the Senate Appropriations Committee “maintains strong reserves” and “puts education first.”

The House budget, which was passed in late February, comes to $31.7 billion. The GOP-controlled Senate is expected to pass its budget in coming days. This will set up negotiations between the Legislature’s top budget writers before the Indiana General Assembly adjourns at the end of April.

Kenley said he looked forward to hashing out the differences with his counterpart in the House: Ways and Means Committee Chairman Tim Brown, R-Crawfordsville.

Under the House plan, raising the cigarette tax would help pay for Medicaid spending and smoking-cessation programs. Kenley said he wanted to put a cigarette tax hike on hold due to uncertainty over how the federal government will address health care in coming years. Changes to the federal approach could “create a big hole” in the state budget, he said.

“I think at that time, a cigarette tax increase would be a logical thing to look at,” Kenley said. “If you don’t need a tax, don’t enact it."

The Alliance for a Healthy Indiana, a coalition of health and business groups that has advocated for a cigarette tax increase, panned that portion of the Senate plan.

“We believe that the Senate budget missed a real opportunity to address this costly health problem in our state,” said Chairman Bryan Mills in a media release. “It has been proven that raising the cigarette tax is the single most important step in preventing youth from ever starting to smoke and the greatest motivator to get adults to quit.”

The House plan also wants to use about half of the $500 million so-called “Next Generation Trust Fund,” generated from proceeds of the lease of the Indiana Toll Road, to invest in Indiana companies. The allocation is a nod to the wishes of Gov. Eric Holcomb.

But the Senate plan proposes to the leave the fund alone and not spend from it. Kenley said he didn’t want to make risky investments that could cause the balance of the fund to “slip through our fingers."

The House budget doubles the state’s preschool pilot program funding from $10 million to $20 million per year but calls for a modest K-12 education spending increase of $273 million over the biennium. The Senate, meanwhile, is taking a more cautious approach on preschool by funding the program at $14 million per year, but calls to increase spending on K-12 education by $358 million over two years.

“I don’t think Indiana is so far behind [on preschool] that we have the crisis that some people say we’re having,” Kenley said.

Sen. Karen Tallian, D-Portage, praised several aspects of the budget plan, saying, “We like a lot of the things that are in here." However, she said the state should spend more on K-12 education, higher education and preschool.  

Here are other highlights from the Senate plan:

Higher education: The Senate wants to increase total university operating funds by $76 million over two years—compared to the House plan for increases of $23 million over two years—and authorizes $404 million in university capital projects over that time frame. The projects are largely the same, except the Senate plan funds an Ivy Tech campus in Muncie that the House plan doesn’t. It also uses bonds to pay for more of the projects than the House plan.

Direct flights: The Senate budget proposes to spend $2 million per year on supporting direct international flights out of Indiana’s airports. That was part of Gov. Eric Holcomb’s legislative wish list, but it was not included in the House plan.

School vouchers: The Senate plan would include a separate line item for the Indiana Choice Scholarship Program, which Kenley said was about increasing transparency of the program.

School poverty and ELL: The Senate bill increases by $40 million per year so-called “complexity” or funding for poor students. It also increases funding for English Language Learners by $4.5 million in 2018 and $7 million in 2019, with more funds going to schools with high percentages of ELL students.

Teacher performance grants: The House budget wants to eliminate so-called teacher performance grants. But the Senate brings them back with a new name, calling them Teacher Appreciation Grants, and $40 million in funding. This would provide cash stipends to effective and highly effective teachers in every school corporation.

Regional Cities: The Senate calls to spend $1 million per year for planning for the Regional Cities program.

Police: The Senate plan provides funding to increase Indiana State Police pay by 24 percent over two years. The House plan called to increase salaries by 12 percent over two years.

Veterans: The Senate plan increases funding for Veterans Problem Solving Courts by $1 million, and allocates new money to the Indiana Department of Veterans Affairs to hire more service officers, assist homeless veterans and create a hyperbaric oxygen treatment pilot program. The House plan takes a different approach, increasing the military retirement and survivor’s benefits deduction from $5,000 per year to $16,000 per year by 2019.

Department of Revenue: The House plan provides $33 million over two years to “begin the modernization of DOR’s revenue collection system.” The Senate does not include this appropriation.

Child and adult services: Both the House and Senate call to raise funding for the Department of Child Services by $50 million per year, and adult protective services funding would rise by $3 million per year.

Opioid epidemic: Both the House and Senate call to spend $5 million over the biennium for the governor’s task force on drug enforcement, treatment and prevention.