House Republicans propose school choice expansion, quicker tax cuts in budget

State Rep. Jeff Thompson, R-Lizton, speaks to journalists after unveiling the initial House Republican budget on Friday, Feb. 17, 2023 at the Indiana Statehouse. (Credit: Ryan Martin)

Update, April 20, 2023: Senate Republicans released their proposed budget plan on April 13. Read about that proposal here.

The Gist

Indiana House Republicans released their vision for the two-year, $43.3 billion state budget Friday, prioritizing plans to significantly expand the state’s school voucher program and speed up tax cuts for Hoosiers.

Notably, the plan significantly scaled back plans for public health funding, proposed in Gov. Eric Holcomb’s version of the budget. It does keep intact some of Holcomb’s other priorities, such as ensuring students don’t have to pay for textbooks. 

House Republicans hold a supermajority in the chamber, which means they don’t need Democratic support to pass the budget. House Democrats declined to comment on the proposed budget Friday. (Update: Democrats later proposed two amendments that would have provided additional property tax relief, increased public health funding and expanded pre-K, among other measures. Neither of the amendments was successful.)

Here’s how the House budget plan differs from Holcomb’s proposal, and how it’ll impact you. 

A massive expansion of school choice

House Republicans say they want to spend an additional $2 billion on K-12 education over the next two years. But, that won’t all go toward public education. The state would nearly double what it spends on school vouchers, expanding eligibility for the school choice program to 400% of the income required to qualify for free or reduced-price lunches. 

Currently, families making up to 300% of the amount required to qualify for free or reduced-price lunches can obtain a school choice voucher. Under the House Republican budget plan, if your family of four makes about $220,000 per year or less, you would qualify for a voucher. 

Per usual, a majority of the House budget would go toward K-12 and higher education. 

The expansion could meet resistance in the Senate. Sen. Ryan Mishler,  the Senate’s chief budget architect, shared an open letter on Facebook criticizing a lack of accountability for schools that participate in the state’s voucher program, after multiple incidents at one school. 

Less money than expected for public health

The House Republican budget appropriates $225 million over the next two years to improve public health in Indiana, a significant decrease from the $347 million Holcomb asked for in his budget. That’s money that will largely go toward local health departments.

State Rep. Jeff Thompson, the House’s chief budget writer, was asked by journalists Friday why the chamber doesn’t want to match the governor’s request. 

“It’s a huge increase on what we’ve done for public health,” said Thompson, R-Lizton.

Before the pandemic, Indiana spent only $55 per capita on public health funding, compared to the U.S. average of $91, according to a report from the Governor’s Public Health Commission. 

That leads to disparities in what some local health departments offer to their residents. For example, some counties don’t provide HIV testing or tobacco cessation programs. 

Local health departments will have to opt in to receive the money, in an effort to ease concerns about giving up control to the Indiana Department of Health after some conservatives questioned the department’s handling of COVID-19. 

Still, a portion of county leaders remained opposed to the idea of increased funding altogether when the concept was discussed in committee earlier this legislative session, due to fears of strings being attached to the money. 

Questions about mental health funding

House Republicans did not prioritize the Holcomb administration’s goal to expand a three-part system to respond to Hoosiers enduring a mental health crisis.

That system — designed as a 988 hotline to call, mobile crisis teams to respond and then stabilization centers as alternatives to emergency rooms or jails — has remained a priority of Holcomb and Senate Republicans. The costs to fully fund the system would amount to $130.6 million each year, according to state estimates

Asked whether the budget contains funding for the system, Thompson did not provide a specific answer.

“I think those will definitely be a consideration as we move forward,” Thompson said. 

Indiana for years has lagged behind much of the country in addressing suicide, and substance use disorder is driving an alarming number of drug overdose deaths. The state ranked 41st in treatment by the nonprofit Mental Health America, and researchers have said untreated mental health accounts for $4.2 billion in costs to the state — per year.

In the Senate, Republicans released their first bill — Senate Bill 1 — in part to symbolize their commitment to addressing many of those concerns. The bill, carried by Sen. Michael Crider, R-Greenfield, and endorsed by Lt. Gov. Suzanne Crouch, received unanimous approval in the chamber. Notably, many who testified in support cited the three-part system as the reason why they supported the bill. 

Senators will be given an opportunity to shape the budget in the coming weeks. 

Asked Thursday whether he hoped to see the full $130.6 million in the next budget, Senate President Pro Tempore Rodric Bray, R-Martinsville, said he anticipated a more incremental approach. 

“It’s a really big number,” Bray said. “We need to kind of step into this in a way that we can handle the responsibility that we’re trying to take on and so I don’t know if you’ll see us get to that number or not. We’ll just try and move that direction in a bold way.”

The House budget does, however, set aside $10 million in grants that can be awarded to counties that will provide mental health services for incarcerated Hoosiers. 

That’s been a priority of House Republicans. House Bill 1006 by Rep. Gregory Steuerwald, R-Avon, for example, seeks to alleviate Indiana’s overcrowded jails by creating a formal process for judges to refer a defendant to a mental health provider as a condition of release prior to a trial or plea agreement.

The additional $10 million in the budget isn’t directly tied to HB 1006 but it could help counties provide the necessary treatment. 

“There’s some issues there with inmates and how we get them in the right spot to get the right treatment,” Thompson said. “And in some cases the local jail is not the best spot.” 

Tax cuts 

All Hoosiers could save money under the House’s budget plan. 

Last legislative session, lawmakers enacted a series of tax cuts that would take effect every year through 2029. The House Republicans’ plan now, though, is to speed up that timeline and remove some guardrails that prevented the tax cuts from going into effect unless state revenue growth reached 2%. 

Right now, the individual income tax rate is 3.15%, which represents $1,575 per year for someone with a salary of $50,000. 

House Republicans propose cutting that rate to 3% in January 2024 and 2.9% in January 2026, rather than phasing in the cuts until 2029. If the House’s plan is implemented, someone making $50,000 per year would save an additional $325 over five years. 

Altogether the cuts would generate $470 million in total savings to Hoosiers over the next two years and a cut of $1.6 billion through 2030. 

Why get rid of the guardrails in the initial tax cut plan passed last year? Thompson said the state is in a “good spot” to go ahead and accelerate the cuts. 

“We believe that Hoosier taxpayers would be in the best place to have those additional dollars,” Thompson said, “and they can spend those most wisely and improve their situation in their given lives.”

The Senate was largely opposed to tax cuts last year, agreeing to it in part because of the guardrails put in place. That means it may be a hard sell for House Republicans again this year. 

What else is in the House’s plan

There is some property tax relief in the House budget plan, but it wouldn’t impact the bills Hoosiers receive this spring. Lawmakers have proposed temporarily lowering the property tax caps in future years, among other proposals to provide relief.

The House plan would also double the dependent child tax exemption for parents. 

Like Holcomb, the House wants to appropriate $500 million to continue offering regional economic development grants under the Regional Economic Acceleration and Development Initiative (READI) program, increase Indiana Economic Development Corporation dollars and increase state police starting pay to $70,000 per year. 

What’s next for the budget

The House Ways and Means Committee will amend its budget proposal into House Bill 1001 on Monday (House Republicans published a version online Friday). The committee will also consider amendments from Democrats before voting the bill to the floor. 

Once it passes the full chamber, it’ll advance to the Senate where Republican leaders will propose their own spending plan. Once differences between the two versions are ironed out, it’ll go to Holcomb who is all but guaranteed to sign it. 

“This is the first take at a budget and the Senate may have some different ideas and we’ll see what they say,” Thompson said. “It’s a work in progress, no doubt, but we believe this is the right spot to be at today.”

Contact Kaitlin Lange on Twitter @kaitlin_lange or email her at [email protected]

Contact Ryan Martin on Twitter, LinkedIn, Facebook, or at [email protected].

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Header image: State Rep. Jeff Thompson, R-Lizton, speaks to journalists after unveiling the initial House Republican budget on Friday, Feb. 17, 2023, at the Indiana Statehouse. (Credit: Ryan Martin)