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State lawmakers go back to work Monday, hoping to give Indiana residents more and earlier educational opportunities, and additional money in their pockets from an income tax break.
However, Hoosiers potentially could face higher taxes for road work unless lawmakers provide a funding solution, or residents could pay in a different way to get potholes fixed.
State lawmakers interviewed by The Republic expect the General Assembly will tackle those key issues this year once the session starts Monday. Several area representatives and the chairman of the Senate Appropriations Committee said they will focus on education, jobs and other issues such as how to bring in more money for road funding as gas-tax revenue dwindles.
State legislators will be responsible for passing a two-year budget estimated at $28 billion to $29 billion. That blueprint will outline how much will be spent for Indiana workers’ salaries and state programs, such as interstate highway road work and job training at Ivy Tech Community College.
State Rep. Milo Smith, R-Columbus, said the budget will be the most important issue facing Hoosier lawmakers in the next four months.
“We have to live within our means,” he said.
Education programs are a big-ticket item in the budget, Smith said, and educational programs will be in the spotlight with a new governor, Republican Mike Pence of Columbus, and a new state superintendent of public instruction, Democrat Glenda Ritz.
Pence and Ritz have expressed differing views about education. Ritz pledged during her campaign to change programs started by Tony Bennett, the Republican incumbent she defeated in the general election. But Ritz will be working with Republicans who control both the House and Senate, as well as a new GOP governor.
“We need to do what’s best for all students in the state of Indiana because of how it will be perceived if we don’t,” Smith said.
Funding pre-kindergarten education is an issue that has been raised. And some lawmakers have discussed the possibility of lengthening the school year, currently 180 days, and lengthening the school day, Smith said. More school days means more funding for schools, he added.
The budget and some critical funding questions may not be resolved until April, when new financial projections will be released showing how much revenue the state can expect, said state Rep. Eric Koch, R-Bedford, who previously served Bartholomew County.
Because of redistricting, Republican Jim Lucas of Seymour now is one of the three state representatives serving Bartholomew County instead of Koch. The other lawmakers who continue to represent Bartholomew County are Smith and Sean Eberhart of Shelbyville.
A key funding question they and other state lawmakers are expected to face is how to pay for road repairs at both the state and local levels. Lawmakers will have to decide whether to collect new taxes for road projects, increase the gas tax or instead use some of the state’s projected surplus. They also will have to figure out whether the state can afford an expansion of the Medicaid rolls under the new federal health care law, or a 10 percent income tax cut proposed by Pence.
Smith said he’s not sure the time is right to pursue Pence’s income tax cut because the state is in the process of phasing out the inheritance tax during the next 10 years, and lawmakers must have a firm grasp of what will replace that lost revenue.
“I would think we need at least a couple of years ... before we look at decreasing any more taxes,” Smith said.
A 10 percent income tax cut is a novel idea, Smith added, but such a cut now could mean cuts to areas such as education.
“Schools need money to operate,” Smith said.
Lawmakers also have to fund other needs, such as an expansion of vocational education, said state Sen. Luke Kenley, R-Noblesville, who chairs the appropriations committee. Kenley would like to see 60 percent of young people earn advanced degrees, and in many cases that would involve technical or vocational degrees from Ivy Tech or other community colleges.
State government could offer more grants and scholarships for adults pursuing vocational degrees, Kenley said. But, that would require allocating additional funds.
Offering more vocational training promotes economic development and could bring more jobs, state Sen. Greg Walker, R-Columbus, said. Companies will come to Indiana if it has a qualified workforce that is trained and prepared for the jobs in demand, he said.
Lawmakers will weigh proposals about how to pay for more school safety officers in the wake of the Dec. 14 Connecticut elementary school shooting, and for ways to control prison spending by getting non-violent offenders sentenced to more probation and less prison time.
Smith suggested lawmakers think carefully and act cautiously about school safety. Suggestions about arming teachers with guns in school concern him.
“I think we need to take a deep breath and listen to everyone and not make rash decisions, and hopefully everyone will come up with ideas that will make everyone safer,” he said.
Kenley said lawmakers’ top priorities would include road funding, figuring out how to deal with the added cost of the federal health care law, and education — particularly expanding vocational education for adults.
Walker said new Medicaid eligibility rules that could increase enrollment could coincide with reductions in reimbursements for services. Walker said the state might be facing $1 billion in new obligations during the next four years.
One of the most pressing issues is how to generate more money for road repairs, Kenley said. Major Moves money from the lease of the Indiana Toll Road has mostly been spent, and the state still must figure out how to fund the completion of the Interstate 69 project, Walker said.
Another problem facing both state and local government is that most of the funding for road work comes from fuel taxes, and that revenue stream is dwindling, Kenley said. Drivers aren’t paying as much in gas taxes because of the growing popularity of more fuel-efficient, hybrid and electric vehicles, and that means less money for road work, he said.
People are buying more fuel-efficient cars, and new federal regulations also require that all vehicles, including pickup trucks and sport utility vehicles, get more miles to the gallon.
“We could do fewer road projects,” Kenley said. “But we’d all be driving on gravel roads.”
Walker noted that 85 percent of all new trash trucks sold use natural gas or methane, because of an abundant supply in the U.S. and because excise taxes do not apply, as they do with gasoline.
Uncertainty about how the state will pay for road repairs and the federally mandated expansion of health care raise questions about whether the state can afford Pence’s proposed tax cut, Kenley said. Medicaid costs, for example, could jump by a projected $3.5 billion by 2015, and the state doesn’t know how much its share will be in the long term, he said.
The state must balance its budgets and spend no more than it takes in, Kenley said.
“We’ve cut taxes a lot, two times in the last four years,” he said. “We cut property taxes six years ago. We cut corporate incomes taxes and the inheritance tax. I don’t know if we can do another, but the answer will lie with how good the economy is and how much revenue we can expect,” he said.
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