House Republican plan would speed up Indiana tax cuts, boost vouchers

Indiana taxpayers would more than double their spending on the state’s “school choice” voucher program under the latest budget proposal released Friday by House Republicans.

The GOP plan also limits its commitment—to $225 million—for public-private partnerships meant to increase public health services across the state. That’s only two-thirds of Gov. Eric Holcomb’s ask for the statewide program, and less than half what the Governor’s Public Health Commission originally suggested.

And the proposal would speed up income tax cuts for Hoosier taxpayers.

Expanded eligibility for the Choice Scholarship program—which allows families to receive vouchers to attend private schools—would raise the income ceiling to 400% of the amount required for a student to qualify for the federal free or reduced price lunch program, equal to about $220,000.

Currently, vouchers are limited to families that make less than 300% of the federal poverty level, meaning a family of four can make up to $154,000 annually.

After the expansion, the program would cost the state an estimated $500 million in fiscal year 2024, and another $600 million in the following fiscal year. The current state budget appropriates $240 million annually for the Choice Scholarships.

The new voucher dollars account for roughly a third of the $2 billion in new, additional state funds that House Republicans want to earmark for K-12 education over the biennium.

Rep. Jeff Thompson, R-Lizton, who chairs the House Ways and Means Committee, said the decision comes as a way to increase “options” for Hoosier parents.

“We want those parents to have the best choice they can have with regard to where their children should go — and all parents should have that,” Thompson said Friday. “In this case, we’re just very optimistic about what it’s going to do for families and finding the best spot for their children.”

Additional state spending on K-12 education would increase grants for low-income and English-learner students, as well as those with special needs.

The House’s proposal is the first draft of a two-year state budget that must still be approved by the Senate and the governor. Lawmakers on the House Ways and Means Committee are scheduled to amend and discuss the plan Monday morning.

A final version of the budget is expected by the end of April.

What K-12 schools could expect

K-12 education accounts for almost half the proposed two-year, $43.3 billion state budget.

Under the House GOP budget, Indiana schools could see increases to foundation grants—the basic grant for every student—of 4% in fiscal year 2024 and 0.7% in the following year.

That’s less of an increase than was adopted two years ago for the current state budget. In 2021, the base funding for schools increased by 5.1% for fiscal year 2022 and 4% in the current fiscal year.

Supplemental “complexity” funding schools receive for low-income and at-risk students is also set to increase under the House Republican plan—up 4.4% in fiscal year 2024 and 1% in fiscal year 2025.

Special education grants would additionally increase by 5% in the 2024 fiscal year, and 5% again the next year.

Education advocates emphasized last fall that chunks of their complexity grants are being used to cover education costs for other students in need, especially English language learners and those receiving special education.

School officials also maintain that Indiana’s process for calculating complexity status doesn’t account for some qualifying students. But Thompson said the House budget doesn’t seek to tweak the index used to determine which students are counted for additional funding.

The House Republican plan also includes a Holcomb request to eliminate student textbook fees.

The move would cost the state approximately $160 million per year—but only $121 million would be new money. Indiana already budgets $39 million per year for textbook reimbursement for the 440,000 Hoosier students who qualify for free or reduced lunches.

The school spending plan lacks any mandated increases for teacher pay, however. Instead, Thompson echoed Holcomb and other GOP leaders who maintain that salary raises “should be left up to local school boards.”

Voucher schools receive state funding, too, but are not required to operate within the same parameters as local public schools. For instance, they don’t have elected school boards and don’t have to justify their spending. Critics have long maintained that such schools lack transparency and accountability to the public.

The latest pushback came from a top GOP senator who called for voucher school reforms—not expansion—in the current legislative session.

Indiana has about 87,000 private school students, according to the Indiana Department of Education. About 44,000 of those use the state’s Choice Scholarship program—which allows families to receive vouchers to attend private schools. But under the House GOP plan, the remaining 43,000 would be eligible for the grant, which would average around $7,500 statewide.

“Ninety percent of our students still go to traditional public schools, and that’s fine,” Thompson said Friday. “It says most parents believe that’s the best for their children. But those that don’t — let them have that decision for what they believe is the best.”

Public health spending doesn’t match Holcomb asks

Holcomb wanted to see $120 million in fiscal year 2024 and another $227 million in fiscal year 2025 to increase public health services across the state.

Thompson said that while the House spending plan falls short, the $225 million currently earmarked for public health overhaul still represents a “huge increase” from the $7 million a year that the state currently gives to county health departments, which are primarily funded by local taxes.

Other leading line items in the House budget include:

• $1.25 billion in fiscal year 2023 to finish four ongoing capital projects across the state
• $500 million for Regional Economic Acceleration & Development Initiative, or READI, grants in fiscal year 2023
• $500 million to create a “deal closing fund” for the Indiana Economic Development Corp.
• $75 million over the biennium for a residential housing infrastructure assistance revolving fund
• $10 million for regional mental health facility grants to support mental health services for incarcerated individuals
• University operating fund increases of 4% in fiscal year 2024 and 2% in fiscal year 2025
• An increase to boost Indiana State Trooper starting salaries to $70,000 per year
• Funding increases for Medicaid assistance and Department of Child Services providers

“Although it’s been reduced some … we know that if we form the right partnerships with those local health providers, it’s probably the way to go,” Thompson said. “This is the first take at a budget, and the senate may have some different ideas and we’ll see what they … but we believe this is the right spot to be at today.”

Under Holcomb’s proposed model, each of Indiana’s 92 counties would have the option to participate in the statewide program.

A funding formula based on a per-capita system and social vulnerability index has already been crafted to determine how much each county is eligible to receive. Counties would have a local share of 25% to participate, according to the House Republican plan. That’s a 5% increase in local participation, compared to Holcomb’s proposal.

Faster tax cuts on the horizon?

The budget proposal further calls for more rapid individual income tax rate cuts that were first approved last year.

The current income tax rate of 3.15% would drop to 3% next year and 2.9% in 2026. The cut would come three years earlier than currently scheduled.

Additionally, the House GOP budget seeks to fund Thompson’s property tax relief plan. The proposal—still a work in progress—is outlined in House Bill 1499.

As it stands now, the bill would provide multiple remedies to temporarily drop tax bills, including through a short-term property tax cap and an increase in state income tax deductions. It would also curb how much local units can raise their tax levies.

Republican leadership in the Senate have expressed more hesitancy about enacting any tax changes in the current session, but Thompson said he thinks state tax collection data shows “we’re in a good spot to make those decreases permanent.”

“We believe that Hoosier taxpayers would be the best place to have those additional dollars and they can spend those most wisely and improve their situation and their given lives,” Thompson said. “I think we’ll have some great discussions (with the Senate) on what’s best.”

Democrats to propose their own budget

House Democrats have already filed their own budget ideas that instead center around spending cuts on READI grants—and tax increase for sports betting and cigarettes—as a means to bolster school funding. Substantial boosts for guidance counselors is a large part of the plan.

Rep. Ed DeLaney, D-Indianapolis, said his proposal, specifically, seeks “to change the conversation” around the budget in the Republican-dominated General Assembly.

“What are we doing with these schools? Are we funding them fully for special ed? Are we funding the counselors? The school part—that’s half the budget And then other than that, how are we organizing our investments?,” DeLaney told the Indiana Capital Chronicle on Friday. “Our responsibility is at a higher level. We should be doing things like rail or more state parks or lowering tuition. Those are the investments we can make. The cities cannot.”

Discussions about DeLaney’s amendment are expected in the Ways and Means Committee on Monday.

The Indiana Capital Chronicle is an independent, not-for-profit news organization that covers state government, policy and elections.