AFP touts Pence tax cut proposal in TV spot

A conservative group is launching television and radio advertisements aimed at pressuring reticent Indiana Republican legislative leaders into writing Gov. Mike Pence’s proposed income tax cut into the state’s next two-year budget.

The Indiana chapter of Americans for Prosperity, a tea party-fueled organization funded by the Koch brothers, will launch a “six-figure” advertising buy in Indiana and accompany it with emails, phone calls and door-to-door efforts.

Its goal is the same as Pence’s: To lower Indiana’s individual income tax rate from 3.4 percent to 3.06 percent, a move that would save taxpayers – and lower state revenue – by about $520 million annually.

The group’s new campaign will send a message to Republicans who dominate both chambers of the Indiana General Assembly after winning supermajorities in November’s election, said Tim Phillips, Americans for Prosperity’s national president.

“This is meant to encourage them – to show them that there are folks that have their back,” Phillips said.

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

Legislative leaders have balked at the tax cut because they prefer to boost education and transportation funding. The House did not include it in the budget the chamber passed, and key senators have said they are hesitant, as well.

Senate Appropriations Committee Chairman Luke Kenley, the Noblesville Republican who is his chamber’s top budget-writer, said Indiana is already in the process of stepping down the state’s corporate income tax and phasing out its inheritance tax.

Pence’s proposed income tax cut “sort of cuts across our present plan, and I think the trick is going to be, how do we meld these plans together and still fund the things that we think are priorities?” Kenley said.

“Obviously we want to fund schools, we want to fund roads, we want to fund higher education, and even a conservative Republican would say these are the kind of investments in the future that you have to make. So we have to reach that right balance.”

Both Kenley and House Speaker Brian Bosma, R-Indianapolis, said Thursday that a key moment will come on April 17, when an updated forecast of how many tax dollars Indiana will take in over the next two years is released.

That forecast will trigger an intense period as the legislature speeds toward the April 29 end of its 2013 session. Lawmakers say the rosier Indiana’s revenue picture looks, the more likely Pence is to get the top item on his first-year legislative agenda.

The Americans for Prosperity ad is a one-minute spot styled after one that former Gov. Mitch Daniels once ran.

It starts with powerful music and green-and-white headlines that tout the state’s economy and its surplus. Then, it abruptly switches to foreboding music and red-and-white headlines that point to House Republicans’ decision to exclude Pence’s tax cut from their budget.

Bosma said Thursday that lawmakers have cut 10 different taxes over the last decade, and are sending $360 million back to Hoosier income tax filers as credits during this year’s tax-filing season.

The House Republican budget sped up the pace at which Indiana would phase out its inheritance tax. Under current law, that tax would be gone by 2022. The House’s budget would eliminate it by 2018.

“There’s going to be a tax cut by the time we’re out of here, I’m confident about that,” Bosma said. “The question is which tax, how much, and when. My pledge is, we’re going to do the right tax in the right way in the right time.”

Pence’s budget proposal included a 1 percent bump in education funding during its first year, and more to divvy up through performance-based measure in his spending plan’s second year.

House Republicans, meanwhile, boosted education funding by 2 percent in their budget’s first year and another 1 percent in its second year. Bosma said they aimed to raise K-12 education funding to its 2009 levels, prior to a cut Daniels ordered as the state grappled with the economic downturn.

After setting aside 12.5 percent of what the state spends in a year in reserves, Pence’s budget also would have sent half the remaining surplus – if revenues meet projections, that’d be about $347 million after closing out the current budget period and next one in two years – for transportation.

House Republicans, though, said municipal officials are desperate for more guaranteed transportation dollars. Their budget included $250 million per year in extra transportation funding, and that money would not be subject to economic upticks or downturns.

“You can’t be the ‘Crossroads of America,’” Bosma said, “if you have a crumbling infrastructure.”

House sends $30 billion budget to Senate

A new state budget that omits Gov. Mike Pence’s proposed income tax cut in order to boost education and transportation funding won the Indiana House’s approval late Monday.

The two-year, $30 billion spending plan advanced on a 68-28 vote, with Republicans supporting it and Democrats opposing, after a marathon day of debating bills ahead of the House’s midnight deadline to send bills across the hallway to the Senate.

It boosts overall K-12 education spending by 2 percent in its first year and another 1 percent in its second year, puts more aside for a tuition reserve fund, and pumps an extra $250 million per year in gas and sales tax revenue for state and local transportation funding.

“It’s balanced. It spends less than we bring in, so there’s a structural surplus,” said the House’s chief budget writer, Ways and Means Committee Chairman Tim Brown, R-Crawfordsville.

“It has a long-term commitment to education,” he said. “We’re starting to build back some of those tuition reserves so that for the next economic cycle, we’ll be prepared.”

Rep. Greg Porter of Indianapolis, the top Democrat on the House Ways and Means Committee, complained that the budget did not include enough for education, teacher training and public health.

“We hurt our people here in Indiana,” Porter said. “This is not a jobs bill. This does not help the middle class.”

The House Republican budget does not include the top priority on Pence’s first-year legislative agenda – a reduction in Indiana’s individual income tax rate from 3.4 percent to 3.06 percent, which would reduce state tax collections by about $520 million annually.

That, Pence has said, left him “very disappointed.” He said he’d continue lobbying lawmakers – and when those lawmakers get an updated forecast of the state’s revenues over the coming two years in April, that’s expected to be the make-or-break point for Pence’s tax cut.

The spending plan was the first drafted by Brown, who took the helm of the budget-writing committee this year. It’ll now move into the hands of his counterpart, Senate Appropriations Committee Chairman Luke Kenley, R-Noblesville.

The bill pumps 20 percent of the sales tax revenue collected on gasoline purchases into transportation and also uses more of Indiana’s 18-cents-a-gallon gas tax for that purpose, addressing a need a group of mayors raised this year.

“It will offer sustainable funding within the structural surplus for roads and bridges – jobs now,” Brown said.

That’s a departure from Pence’s budget, which included extra funding for transportation only by including a trigger that would send part of the state’s surplus into an infrastructure fund – a move he estimated would amount to $347 million once the current budget is closed out and his two-year budget proposal is also closed out.

Under the House budget, the Evansville Vanderburgh School Corp., which received $142 million this year, would get an extra $2.1 million in the budget’s first year, and then $1.5 million on top of that in the second year.

The Warrick County School Corp., meanwhile, would get a 2.6 percent bump in the first year, from $57.5 million to $59 million, and then another 1.3 percent increase in the budget’s second year, to $59.8 million.

Gibson County schools would all see slightly smaller annual funding increases, while Posey County schools’ funding would flat-line in the spending plan’s first year and then drop slightly in its second year.

Those amounts are impossible to compare to Pence’s budget, since governors typically leave it to lawmakers to write school funding formulas. Still, Pence would have them divide up $63 million less in overall annual funding.

House GOP budget advances without Pence tax cut

Gov. Mike Pence’s proposal to lower Indiana’s income tax rate didn’t get a vote Tuesday – but a new state budget that drops that tax cut in favor of extra funding for schools and roads did.

A state Senate panel debated two tax cut measures: One that would carry out the new Republican governor’s plan to lower the individual income tax from 3.4 percent to 3.06 percent over two years, and one that would drop the rate to 3 percent over four years.

There was no vote, though, and several of the committee’s members said they will proceed with caution – only giving the tax cut serious consideration if a new revenue forecast predicts an unexpected economic uptick before the April 29 deadline for lawmakers to approve a new budget and adjourn for the year.

“This is not a conclusion of the discussion,” said Senate Tax and Fiscal Policy Committee Chairman Brandt Hershman, R-Buck Creek. “There’s an opportunity to continue this discussion as the revenue picture becomes clear to us.”

The budget-writing House Ways and Means Committee, meanwhile, approved House Republicans’ two-year, $30 billion spending plan. It increases education funding by 2 percent in its first year and 1 percent in its second year and tucks in an extra $250 million per year to beef up state and local transportation funding.

Its omission of Pence’s tax cut – a decision in which the governor said he was “very disappointed” – sets the stage for an intraparty battle that is testing whether Pence has the political capital necessary to achieve the top goal on his first-year legislative agenda.

Advocates of the tax cut included Sen. Mike Delph, the Carmel Republican who is carrying the governor’s proposal.

He told the committee that as the federal payroll tax increases by 2 percent this year, lowering Hoosiers’ income taxes by 0.34 percent would help offset the new burden – and keep $520 million in taxpayers’ pockets each year.

“It would have a cascading, dynamic flow, and it would inject a half a billion dollars into the Indiana economy,” Delph said.

Key legislative leaders, including Senate Appropriations Committee Chairman Luke Kenley, R-Noblesville, said they view the issue in a broader context.

Indiana is already phasing out its inheritance tax – a move that will be completed by 2022, but that lawmakers say they might consider speeding up.

“It just seems like we ought to finish that job,” Kenley said.

Sen. Lindel Hume, D-Princeton, also said the state also owes pension money to teachers who entered the profession before 1996 – and is requiring businesses to pay higher taxes to repay more than $2 billion borrowed during the recession to bolster Indiana’s unemployment insurance fund.

He said income taxes are a “regressive tax” because poor Hoosiers have to spend more of the money they earn, while wealthier Indiana residents can save more. Instead, he said, the state should consider cutting its sales tax – or should keep its taxes at their current levels.

“We have things that government really needs to do. Education is a terribly important part of government, and roads – the infrastructure of this state – are very important not only to our people but also very important to businesses that look at locating in Indiana,” Hume said. “Some of those things are more important than taxes.”

Pence has pitched the income tax cut as one that would help the 92 percent of Indiana businesses that file as individuals.

Business groups that are traditionally powerful Republican allies, though, offered lukewarm support for the tax cut.

Indiana Manufacturers Association lobbyist Tim Rushenberg said the proposal has his orgnaization’s “guarded support. Indiana Chamber of Commerce lobbyist Bill Waltz said the group “cannot not” support a tax cut, but that education and roads are vital to Indiana’s economy as well.

Other groups, including the Indiana Family Institute and Americans for Prosperity, said they support the tax cut.

“We support lowering the tax burden on Hoosier families and small businesses, and that includes lowering the individual income tax rate here in Indiana,” said Eric Miller, the head of Advance America. “It’s a good thing to let Hoosier families and small businesses keep more of their hard-earned money.”

Hershman said he won’t schedule a vote on the tax cut proposals that were the subject of his Tuesday committee hearing. The budget, meanwhile, moves to the full House floor for a vote in the coming days.

Ways and Means budget vote on Tuesday

The Indiana House Ways and Means Committee will vote on Republicans’ two-year, $30 billion budget on Tuesday, the committee’s chairman, GOP Rep. Tim Brown of Crawfordsville, said Monday morning.

He presented the budget to the committee Monday. It includes K-12 education spending increases of 2 percent in its first year and 1 percent in its second year — plus an extra $250 million annually for transportation.

The budget proposal speeds up the phase-out of Indiana’s inheritance tax, eliminating it by 2018 rather than 2022. But it does not include Gov. Mike Pence’s proposal to lower Indiana’s income tax rate from 3.4 percent to 3.06 percent.

Battle brewing over Pence’s tax cut proposal

Gov. Mike Pence is at odds with Indiana House Republican leaders who opted not to include the top item on his first-year legislative agenda in their new state budget proposal.

The governor said Friday he is “very disappointed” that the two-year, $30 billion spending plan drops his plan to lower the individual income tax from 3.4 percent to 3.06 percent in favor of extra cash for schools and roads.

“By leaving income tax relief out this early in the process, this House budget proposal does not contain the kind of balanced approach that will create jobs and opportunities for Hoosiers. With so many hurting in this economy, Hoosiers deserve better,” Pence said.

House Ways and Means Chairman Tim Brown, R-Crawfordsville, unveiled the GOP’s budget proposal in a briefing with reporters Friday morning.

His plan would boost funding for K-12 public education – an area that accounts for more than half of Indiana’s spending – by 2 percent in its first year and another 1 percent in its second year, lifting the statewide total from $6.5 billion annually now to $6.7 billion.

It would also send more of Indiana’s 18-cents-a-gallon gasoline tax revenue to the Indiana Department of Transportation and into municipal infrastructure budgets, rather than diverting some of that money to pay for state police and license branches.

The biggest debate moving forward, though, will be over Pence’s tax cut – one that would save average single Hoosiers around $100 per year, and would cost the state more than $500 million per year.

The intraparty tension has built in recent months as legislative leaders have resisted the new governor’s top legislative goal.

They’ve said they prefer to address some issues that lingered prior to Pence taking office – including raising education funding up to its levels prior to the 2010 cuts that the economic downturn led former Gov. Mitch Daniels to make, and speeding up the phase-out of Indiana’s inheritance tax.

House Minority Leader Scott Pelath, D-Michigan City, said Friday that Democrats will try to force an up-or-down vote on Pence’s income tax cut.

“We have not heard a lot of bold ideas either from the governor’s office or from the two supermajorities. This is the one bold idea that’s been brought forth. I think to ignore it is a mistake,” Pelath said of Pence’s plan.

“He has had an idea. He campaigned on it, he got elected on it, the people of Indiana have spoken – and we need to give that consideration.”

Pence moves forward with Daniels’ pay raises

Gov. Mike Pence is following through with the pay raises his predecessor promised to about 90 percent of Indiana’s state employees.

The new Republican governor announced Tuesday that a total of $38 million in raises – a 3.1 percent increase on average for the 26,000 workers who qualify will show up on this week’s pay checks.

“The state of Indiana has one of the most talented, skilled and effective workforces in the nation,” Pence said in a statement. “It’s important to reward those who do a top-level job to help make Indiana a better place to live.”

The raises are based on employees’ performance. About one out of every 20 workers earned “outstanding” evaluations and will receive 8 percent raises. The one in 10 whose reviews said they “exceed expectations” got 5 percent pay bumps. And the 75 percent of state workers who met expectations received an extra 3 percent.

The remaining 10 percent who fell short of expectations did not receive raises.

Daniels announced the pay increases in December, as he prepared to leave office, in a letter to all of Indiana’s workers.

“This continues our practice of rewarding our employees doing the best job serving our taxpayers, a one of a kind performance based system for state governments across the country,” he said then.

The pay-for-performance system was instituted by Daniels in 2006.

The raises for 2013 are slightly higher than what Daniels had authorized a year ago – 6 percent for outstanding workers, 4 percent for those who exceeded expectations and 2 percent for those who met expectations.

The year before that, he had handed out raises that averaged 1.3 percent, and in 2009 and 2010, he opted to keep workers’ salaries flat as the state weathered the economic downturn.

Hospital group’s study touts benefits of Medicaid expansion

Individuals would see their insurance premiums drop and Indiana would gain thousands of health industry jobs if the state expands its Medicaid program, according to a new report.

It comes as lawmakers prepare for key House and Senate committee hearings on Wednesday where they’ll debate whether Indiana should add 400,000 Hoosiers to its Medicaid rolls through the federal health care law.

Doing so would mean between $2.4 billion and $3.4 billion in economic activity between 2014 and 2020 – enough to create about 30,000 jobs – according to the report released Monday. It was commissioned by the Indiana Hospital Association and conducted by the University of Nebraska Medical Center for Health.

“Expanding coverage in Indiana would benefit all Hoosiers,” said Doug Leonard, the hospital association’s president. “This report demonstrates the positive impact that extending coverage would bring to our state’s economy and the overall health of our communities.”

Gov. Mike Pence and members of Indiana’s Republican-dominated General Assembly say they aren’t so sure. They say even though the federal government would cover 90 percent of the tab, they fret about a Medicaid expansion’s impact on the state budget.

“No matter what you think the cost is, it’s clear that eventually there’s going to be significantly more state dollars that are going to go into this program,” said Sen. Luke Kenley, the Noblesville Republican who is among the budget’s leading architects.

“We would like to have some control over the expenditure of our own state dollars to try to develop a good medical plant that will get to the right people and provide the right services at the right cost.”

Proposals up for debate Wednesday in the House and Senate public health committees’ hearings would have Indiana pursue such an expansion by using the state’s health savings account-based program could be its vehicle.

They say the Healthy Indiana Plan, which requires small individual contributions and includes a lifetime coverage cap, would give them a greater measure of control.

“It gives the patients not only a sense of responsibility in terms of making these decisions, but it gives them a little bit of control in making these decisions,” Kenley said.

The Indiana Hospital Association’s report said that if Indiana expands its Medicaid program, individuals would see their premiums drop by $236 per year and families would save $677 annually.

It said the state and local governments would get an extra $108 million in tax revenue as a result of coverage being provided to those who currently receive care in emergency rooms and then can’t foot the bills.

And it suggested slight reductions in the number of Hoosiers who die because they don’t have insurance – there were 499 such deaths in 2010 – and bankruptcies.

The report’s results are a dramatic departure from those offered by Milliman Inc., the actuary for the Indiana Family and Social Services Administration.

That firm has warned that Indiana would suffer a blow of more than $2 billion to its budget between now and 2020 if the state expands its Medicaid program to cover those who earn up to 133 percent of the federal poverty line – or around $31,000 for a family of four.

The Indiana Hospital Association’s report suggests the extra tax revenues and the overall health care cost reductions would help the state absorb the expansion into its budget, but it doesn’t tackle long-term costs after 2020.

The House’s leading budget-writer, Republican Ways and Means Committee Chairman Tim Brown of Crawfordsville, said he’ll wait to see what the public health committees in both chambers do before making decisions on whether to include a Medicaid expansion in the state’s next spending plan.

He said the impact of an expansion would be “widely varied,” but would be a significant boon to hospitals that currently treat high numbers of uninsured Hoosiers.

“That’s what hospitals are looking at – can they decrease some of those write-off expenses where people are uninsured,” he said, “and that will make a difference in terms of their health and viability.”

‘Woodwork effect’ mostly due to children

Indiana officials expect to spend an extra $170 million over the next two years on Medicaid benefits due to the federal health care law, with most of that money going toward coverage for children.

The 90,000 or so new enrollees are part of a “woodwork effect” projected by Milliman Inc., the actuary for the Indiana Family and Social Services Administration.

The term describes Hoosiers who already meet the state’s Medicaid eligibility requirements but – for a number of reasons – are not currently enrolled in the fully government-funded health insurance program.

The the U.S. Supreme Court ruled that states can skip a portion of the health care law intended to require a Medicaid expansion to cover those earning up to 138 percent of the federal poverty line – or around 400,000 more Hoosiers. But new sign-ups resulting from the “woodwork effect” can’t be avoided.

“We anticipate the majority of this population to be children rather than some of the other individuals,” Milliman’s Robert Damler told the Indiana House Ways and Means Committee on Tuesday.

“Where we anticipate a lot of this enrollment to occur is when children are brought to an emergency room or a hospital setting – some sort of institutional setting,” he said.

Coverage for these additional Medicaid recipients, according to Milliman’s projections, will cost $47.4 million during the 2014 fiscal year and another $94.1 million during the 2015 fiscal year. The state will also face $30.7 million in extra administrative costs during that period.

It would cost Indiana roughly the same amount in Medicaid coverage and administrative costs – another $173 million or so – over that two-year period to pursue the expansion that President Barack Obama envisioned being mandatory before the U.S. Supreme Court ruled that states could opt out.

The state’s total spending on Medicaid is expected to land at about $1.65 billion during fiscal year 2013 – the current period, which runs from July 1, 2012 through June 30, 2013. That amount is projected to increase to $1.9 billion during fiscal 2014 and $2.1 billion the following year.

Gov. Mike Pence proposed a budget that fully funds those projected needs, and fiscal leaders in the Republican-dominated General Assembly say they plan to do so.

The most important debate is over whether they’ll also expand Medicaid eligibility, leaning heavily on federal cash included to fund such an expansion in Obama’s health care law.

Pence’s budget did not include an expanded Medicaid program, but he said he’ll leave that decision to lawmakers. However, Pence did say he wants to use the health savings account-based Healthy Indiana Plan as a vehicle for any expansion, if the U.S. Department of Health and Human Services will let the state.

Pence’s potential income tax cut buster: Transportation

Gov. Mike Pence’s budget – the major focus of his State of the State address Tuesday night – would pump state dollars into transportation and infrastructure only after Indiana’s surplus tops 12.5 percent of what it spends in a year.

Pence’s budget team estimates that would be worth $347 million over the next two years, but state legislative leaders said they’re more likely to deal with transportation funding in the actual budget, rather than through a trigger mechanism using the surplus.

Pence’s proposal “gives me a bit of pause,” said House Speaker Brian Bosma, R-Indianapolis. “Many of us that have been through this for a while see that we have larger needs than just to rely on a surplus. … Personally, I hesitate to just rely on expected reserves on that because it relies on economic growth.”

Senate President Pro Tem David Long, R-Fort Wayne, said he is similarly wary about Pence’s transportation funding plan.

“We need to find a permanent, sustainable course,” Long said. “I’d like to see a more permanent source for that funding if we can find it.”

Bosma added: “You can’t declare yourself the Crossroads of America without investing in transportation and infrastructure.”

Pence is pushing hard for a 10 percent cut in Indiana’s individual income tax rate. While lawmakers have said they desire to fund education at a higher level than the governor is proposing, transportation funding could be its most significant obstacle.

Bosma: Pence tax cut ‘may be difficult’

Indiana House Speaker Brian Bosma, R-Indianapolis, said his chamber’s budget proposal is likely to spend more on K-12 education, higher education and transportation than the two-year, $29 billion spending plan offered by Gov. Mike Pence does.

As a result, Bosma said, Pence’s proposed individual income tax cut — a reduction in the state’s rate from 3.4 percent to 3.06 percent — might not happen.

“It may be difficult to invest in all the critical needs we have before us and accept the governor’s tax cut proposal,” Bosma said Thursday.

He said the House’s budget will include $7 million a year for a two-year pilot pre-school program that would fund vouchers for about 1,000 low-income children. He said that budget will move closer to the Commission for Higher Education’s recommendations on higher education, and will treat K-12 education as the state’s top priority.

And, Bosma said, the House budget will include more transportation funding.

“That is where the tax cut difficulty comes,” he said. “If you’re going to make these investments, we have funds available to do it on an ongoing basis, and you have to weigh that against not only the sustainability but the effectiveness of a small income tax cut – a small income tax cut per person that has a big impact, of course, on the state budget.”