Indiana Residential Property Tax Relief Bill Draws Opposition From Schools and Local Officials

By Casey Smith

What could be Hoosiers’ best bet at property tax relief was met with opposition Thursday from education advocates and local government officials who maintained they would take a financial hit if lawmakers approve the proposal.

The bill would temporarily provide a supplemental homestead credit and lower the 1% cap on residential property taxes.

It was filed by Rep. Jeff Thompson, R-Lizton, who chairs the House Ways and Means Committee. Thompson’s rank could help the bill get more traction in a GOP-dominated legislature that has so far expressed hesitation about addressing property tax spikes in the current session.

The bill was heard in committee Thursday but has not yet been scheduled for a vote.

“There’s been — by all estimates — a significant, unusual increase in assessed values of homestead across the state,” Thompson said Thursday during a Ways and Means committee hearing. “This is an issue that has to be addressed. I believe taxpayers expect that.”

He emphasized that his bill is not a reduction in revenue for local governments — rather, it’s a reduction in the increase they will get. Currently, local units are set to see a 10% increase in revenue. That would drop to a 6% increase if the bill passes, according to a legislative services analysis referenced by Thompson, but which has not been made available publicly.

Thompson also suggested sizable school funding increases in the upcoming state budget that would offset losses. He said it’s too early to provide details, though.

Taxable assessed values shot up 15% from 2021 to 2022 — even after tax abatements, deductions and credits — according to data from the Association of Indiana Counties (AIC). Homeowners’ bills payable this year could increase as much as 15% — more than double what previous reports estimated for the upcoming bills.

But naysayers of the bill argue that local governments — and under that umbrella, public schools — would take on the brunt of any relief given.

Between 2024 and 2027 — during which property owners would pay reduced taxes under Thompson’s bill — school corporations are estimated to lose more than $364 million in revenue. Cities, towns, counties and other units are also expected to see decreased revenues into the millions.

“Our concern is teaching and learning and that costs money,” said Gail Zeharalis, representing the Indiana State Teachers Association. “We don’t believe that your local public schools should have to pay that price while they are trying to provide a program to serve kids.”

House Speaker Todd Huston, R-Fishers, said his caucus is well aware of constituents’ concerns about upcoming property tax bills. He suggested that House lawmakers would likely support some sort of legislation this session to affect future tax bills, but he didn’t offer specifics.

Even so, it’s still not clear if the bill could prevail in the opposite chamber.

“We’re working on something to limit the amount of increase that can happen,” said Republican Senate Pro Tem Rodric Bray. “But really, our hands are tied for doing anything in this legislative session that would affect those bills that are going to come due on May 10th of this year.”

Locals worry about tax burden shift

Thompson’s legislation would temporarily reduce the homestead tax cap for taxes payable in 2024 and gradually increase the cap back to 1% in 2028.

Caps would be set at 0.9% for property taxes payable in 2024, 0.925% in 2025, 0.95% in 2026 and 0.975% in 2027.

The bill also creates a supplemental homestead credit to be applied to tax bills after all other credits are applied. The added credit for each homestead would be equal to $100 in 2024, $75 in 2025, $50 in 2026, and $25 in 2027. The credit is not allowed to exceed what a taxpayer owes, however.

The reduced property tax bills for homeowners is estimated to result in $357 million in tax relief in 2024, according to Indiana’s Legislative Services Agency. The tax savings for homesteads is then estimated to drop to $275 million in 2025, $183.4 million in 2026, and $136 million in 2027.

Denny Costerison from Association of School Business Officials said that while he understands the issue facing homeowners, he noted that property taxes provide necessary income for schools to afford expenses like utilities and school buses.

Those costs have already shot up due to inflation, he said. If Thompson’s bill passes, schools might be forced to reallocate money for education into operating funds.

“Many districts can use that education money for teacher salary increases — we all support wanting to do more of that,” Costerison said.

Terry Spradlin, executive director of the Indiana School Boards Association, said the group representing  290 school corporations across the state also opposes the bill. Spradlin said he’s especially concerned about how Thompson’s legislation — combined with other bills floating through the General Assembly — will impact school revenues.

“There’s a confluence of issues that are constraining local resources for us, so that is of significant concern for the future of our ability to provide quality schools,” Spradlin said.

Muncie Mayor Dan Ridenour additionally testified against the bill, noting that a majority of Hoosier cities are struggling to grow.

Ridenour said he is trying to run his city “properly,” with 65% of the general fund revenue coming from property taxes. All expenses in the city have “skyrocketed,” however.

“I was disappointed to see that there was no way that the cities and the local governments and schools were being assisted (by the state) to help get through this,” he said.

Ryan Hoff from the Association of Indiana Counties said assessment increases are an anomaly and that Thompson’s bill offers “a temporary fix for what appears to be a temporary situation.”

But Hoff said the association still opposes the bill because it would cost counties $172 million. Thompson’s proposal additionally fails to “specifically target those paying higher taxes,” Hoff said.

“We have to ask whether or not the mechanisms of the bill really get to the taxpayers who are seeing dramatic increases in property tax assessments,” Hoff continued.

Thompson reassures schools

Thompson noted repeatedly that any relief offered by his legislation wouldn’t be reflected on tax bills until next year.

When asked what tools locals have to lower tax bills without the state getting involved, Thompson said they don’t have to go to the max levy allowed, or they could use local income tax dollars.

Rep. Ed Delaney, D-Indianapolis, questioned if Thompson would be receptive to the state paying for the supplemental homestead credit.

Thompson responded that he would rather focus on a substantial increase for K-12 schools, adding that schools will be “quite well pleased” with the increase they will see in the upcoming state budget.

House lawmakers won’t reveal their budget plans until later this month, however. In the meantime, Thompson said he’s committed to making further changes to his bill.

“Once we see that, you’ll see a bigger picture,” Thompson said. “(Schools) are going to gain in some other ways … and I’m good with that.”

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