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Property Tax Caps Could Skew School Budgets

Last updated on Wednesday, February 20, 2008

(STATEHOUSE) - Schools may get 100-million dollars worth of help from the state while they adjust to proposed property tax caps.

Schools have warned a plan to cap property taxes at one-percent of your home's value would blow a hole in their budgets. The Indiana PTA Council says some schools could lose as much as 40-percent of their budgets, with 38 school systems losing a million dollars a year or more.

A senate committee has unanimously approved two years of transition grants to cushion the expected loss from the tax circuit breaker. Tax and Fiscal Policy Chairman Luke Kenley (R-Noblesville) says schools and local governments need to follow the state's example and set up rainy-day funds, rather than reaching automatically for more property tax dollars to tide them over. The patch would cover just under half the loss from the circuit breaker.

On a party-line voice vote, the committee rejected a proposal from Sen. John Broden (D-South Bend) to add another $122-million dollars to absorb the entire difference. The school grants are part of the committee's latest revision of Governor Daniels' property-tax relief plan.

The panel has restored a requirement that school construction projects costing more than seven-million dollars be approved by voters in a referendum. The committee also recommends phasing in the circuit breaker for homeowners and farms, with residential property taxes capped next year at one-and-a-half-percent of a home's value.

The one-percent cap would take effect in 2010. For farms, the cap would be 2.5% in 2009 before reaching a final level of 2%.

The full Senate could vote on the plan as early as Monday. That would leave House and Senate negotiators 18 days to agree on a final package.

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