CHICAGO -- Indiana lawmakers wrapped up their 2014 legislative session Thursday after approving a handful of controversial bills, including one that could cut a key revenue source for local governments.
Gov. Mike Pence, a Republican, supports most of the bills that the GOP-controlled legislature passed in the final hours of the session.
For local governments, the most important legislation to come out of the session is Senate Bill 1. With Pence's signature expected, the bill will give local counties the ability to eliminate the personal property tax that businesses pay on new equipment.
The PPT currently generates $1 billion a year, all of which goes to local governments. Pence had pushed for total elimination of the PPT, naming it a top 2014 priority and promoting it as important to making Indiana one of the most business-friendly states in the U.S.
For some Indiana cities and towns, the tax is a chief revenue source, and local government lobbyists spent much of the session urging lawmakers to drop the bill or amend it to include replacement revenue.
The final bill backs away from complete elimination of the tax in part by giving local governments to choice, but still could still hurt many Indiana communities, said Matthew Greller, executive director of the Indiana Association of Cities and Towns,
"It's poor policy and it's poor implementation," Greller said.
The bill would allow the local units in a county to set up a council that would vote for the elimination of the PPT, giving some communities the power to push through something that may hurt other governments that rely more heavily on the tax, Greller said.
The measure provides some breathing room as it delays implementation until July 2015, and also sets up a blue-ribbon commission to study the impact of a complete elimination of the PPT. The commission is expected to report its findings by the end of the year, ahead of the 2015 implementation.
"This is far better than a complete elimination; it's a slower approach that gives us time to study it," Greller said. "I wish there wasn't such a rush to put anything into statute, but political realities had to be addressed in terms of getting things passed this session."
The association plans now to spend the summer working with the commission to show that Indiana's local government revenue has taken a series of hits over the last several years and that replacement revenue for the PPT is badly needed, Greller said.
"Now the real work begins," he said.
Lawmakers also approved a measure that provides $400 million in new revenue for highway funding, another request from Pence. The bill set aside $200 million this year and another $200 million next December, after a fresh review of the state's finances.
Lawmakers said they believe they can use the state money to bring in an additional $2.4 billion of federal funding for highway projects.
The legislature had a brief legislative session this year because lawmakers did not have to craft a new budget.