INDIANAPOLIS | State lawmakers worked late Saturday to reach consensus on property tax relief and a new two-year state budget, and they now face a midnight deadline to steer the plans through the House and Senate.

Property taxes, which could soar up to 24 percent for the average homeowner this year, are the key thread binding lawmakers in the Democratic-led House and Republican-dominated Senate on the budget and an accompanying plan to allow slot machines at downstate horse racing tracks.

Lawmakers have stuck with plans to charge the tracks a combined $500 million in licensing fees, which would provide most of the cash needed to provide property tax relief this year and next. A new wrinkle emerged Saturday, with Democrats insisting the assistance come in the form of partial refund checks homeowners would receive around the first of the year.

"We're making sure the taxpayer really realizes they have received some sort of rebate on taxes," said Rep. Bob Kuzman, D-Crown Point.

Democrats argue past relief efforts have gone unnoticed by the public. But House Republicans see no point in making homeowners pay summer and fall tax bills in full only to later receive a gift courtesy of the General Assembly.

"It's a silly idea to take people's money and send 'em part of it back," said House Minority Leader Brian Bosma, R-Indianapolis.

Negotiators agreed to spend $300 million on the rebates this year, which they say should cut the average increase in tax bills to no more than 10 percent. Lawmakers plan to allocate another $250 million next year, but it would come as a direct homestead credit, rather than a rebate.

House Republicans insist on spending another $50 million on tax relief this year, and the unmet demand makes passage of the state budget tenuous in the House, where Democrats hold a bare-minimum 51-49 majority.

Republicans also complain that the proposed $26 billion spending plan doesn't provide enough funding for the expansion of charter schools. Several Democrats, including Rep. Vernon Smith, D-Gary, argue just the opposite.

Gary Community School Corp. is among nine districts statewide that would see a drop in state support under the new budget. Gary schools still faces a $11 million cut in general funding, but negotiators boosted spending on free textbooks and student remediation, moves that send Gary schools an additional $2.5 million a year.

"It's not as bad as it could have been, but it's not what we need," Smith said.

WHAT HAPPENED: A pair of southern Indiana horse tracks still would pay a combined $500 million for the right to install slot machines, but negotiators dropped a plan to charge riverboats that want to expand, including Horseshoe Casino in Hammond, more than $25 million in fees.

The slots money will be poured into property tax relief, but homeowners will have to pay summer and fall tax bills in full and receive partial refunds months later. Lawmakers say they want to make sure the public knows who got them the relief, though the notices won't mention the necessary expansion of gambling, or past General Assembly actions that contributed to the 24 percent property tax spike expected to hit homeowners.

WHAT'S NEXT: Lawmakers face a midnight adjournment deadline to pass the property tax plan, slots bill and a $26 billion budget through both the House and Senate. They also plan to vote on a proposal to boost health care by raising the cigarette tax 44 cents, to 99.5 cents a pack.

Details of the proposed two-year, $26 billion state budget

-- Schools statewide see an average funding boost of 3.6 percent a year

-- Gary schools still expected to lose $11 million, but blow softened by $2.5 million more a year in textbook, summer school funds

-- Full-day kindergarten will not become a mandatory program, but state will provide $92 million in grants to interested districts

-- Northwest Indiana Law Enforcement Academy gets $150,000 a year in state funding, but not at expense of Lake County tourism agency

-- $550 million in tax relief to homeowners -- $300 million this year, $250 million in 2008 -- dependent on bid for slot machines at horse tracks