INDIANAPOLIS | House Republicans may be forced to cast an uncomfortable vote this month, rejecting Republican Gov. Mike Pence's proposed income tax cut en route to approving their two-year budget plan that increases state spending.
House Democratic Leader Scott Pelath, D-Michigan City, said Friday he will insist the House take an up-or-down vote on the governor's plan to reduce the individual income tax rate to 3.06 percent from 3.4 percent, a 10 percent cut.
"We have not heard a lot of bold ideas, either from the governor's office or from the two (Republican) supermajorities. This is the one bold idea that's been brought forward; I think to ignore it is a mistake," Pelath said.
The House Republican budget unveiled Friday by Ways and Means Committee Chairman Tim Brown, R-Crawfordsville, does not include Pence's tax cut and spends enough of the state's budget reserve that the automatic taxpayer refund, which this year will return $111 to every income tax filer, will not be triggered in either 2014 or 2015.
The proposed budget is balanced with current revenues paying for current expenses and makes what Brown called "strategic investments" in education, roads and other state services using $572 million from Indiana's $2 billion reserve.
Under the two-year budget plan, funding for elementary and high schools would increase $344 million, or 3.3 percent, compared to the current budget, with full-day kindergarten programs continuing to be fully funded. A proposed preschool program for 1,000 4-year-olds would receive $7 million.
Colleges and universities would get all the dollars recommended by the Commission for Higher Education, and long-delayed campus building projects would go forward. More than $45 million would be allocated to workforce training programs and services intended to match unemployed Hoosiers with needed skills training.
The budget calls for a $250 million annual increase for road and bridge construction using ongoing revenues, instead of surplus funds as Pence proposed. The road money would be almost evenly split between the state and local governments.
The increase is paid for by dedicating to roads 20 percent of state sales tax revenue from gasoline purchases, approximately $110 million a year, as well as spending 100 percent of gas tax revenue on roads.
Currently $140 million in annual gas tax receipts is spent by the Indiana State Police, the Bureau of Motor Vehicles and the Department of Natural Resources. Those agencies will be supported by the general fund, Brown said.
The Republican budget includes $40 million in new spending to hire more family case managers at the Department of Child Services. It also provides $250,000 for a feasibility study on the need for a trauma and teaching hospital in Northwest Indiana.
Brown said he's isn't officially ruling out Pence's tax cut, but House Republicans have communicated to the governor there are other priorities they believe will do more to satisfy urgent unmet needs and boost the state's economy.
"It's an open, very honest discussion," Brown said. "We will continue to work together."
Pence said in a statement Friday he was "disappointed" in the House Republican budget proposal.
"Despite having the largest budget surplus in history, this House budget increases spending without giving hardworking Hoosiers one cent of new tax relief," Pence said. "As our administration's budget clearly showed, we can afford to do both."
The first-year governor said he will "continue to fight to pass a balanced budget that meets our needs, funds our roads and schools, strengthens our reserves and lets hardworking Hoosiers keep more of what they earn."
If Pelath successfully forces a House vote on Pence's tax cut and enough Republicans break with their leadership and vote to include Pence's $750 million revenue reduction in the GOP spending plan, House Bill 1001 could go to the Senate containing a budget deficit.