INDIANAPOLIS (AP) -- The Democrat-led House and GOP-controlled Senate have approved separate property tax relief and restructuring plans that each contain key pieces of Gov. Mitch Daniels' proposal on the overhaul.
Now the real negotiating begins, as a conference committee of Democrats and Republicans from each chamber try to hammer out a final plan before the legislative session ends March 14. Lawmakers are under public pressure to enact property tax relief after some homeowners struggled with skyrocketing bills last year.
But schools and local governments have lobbied extensively against parts of the plans -- primarily caps on property tax bills that they say could lead to large reductions in their budgets and force them to cut services such as public safety.
Many details could change as lawmakers seek a compromise, but here is a look at some of the highlights of both plans as they passed the House and Senate:
If fully implemented in 2010, the House plan is projected to cut homeowners' property tax bills by about 29 percent on average statewide from what they were last year. The Senate plan is estimated to cut bills by about 27 percent over last year.
LIMITS ON TAX BILLS
The House plan caps homeowners' property tax bills at 1 percent of their homes' assessed values beginning in 2009, with limits of 2 percent for rental property and 3 percent for businesses. The Senate version phases in those caps by 2010, but new bonding debt for major local projects would not count against the caps.
CONSTITUTIONAL CAPS IN SEPARATE LEGISLATION
The Senate passed a resolution that would begin the process of amending the tax-bill caps into the state constitution. New debt for projects approved in referendums would not count against the caps. The House has modified that so caps on homeowners' bills are based on household income instead of assessed value. Existing debt -- about 30 percent of the property tax levy -- would not count against the caps. The House is expected to pass that version of the resolution on Thursday.
Both plans increase the state sales tax from 6 percent to 7 percent to help pay for property tax relief.
The House plan adds $700 million in projected revenue from the tax increase this year to $250 million already allocated for additional homestead credits, for a total of about $950 million in homeowner tax relief in 2008. The Senate plan would add $600 million in tax increase revenue to the $250 million to provide $850 million in relief this year.
The House plan has the state paying the remaining 15 percent of local school operating costs, and K-12 transportation costs and child welfare expenses. The Senate plan has the state take over remaining school operating costs and child welfare expenses. The state would also assume $90 million per year that local governments owe for pre-1977 pension plans for police and firefighters, and about $130 million a year in school pension debt.
The House version limits total local spending growth in each county, but allows levies to go past the limits if approved in a referendum. The Senate plan limits the amount local governments could spend in property tax revenue, but not other sources of money such as local income taxes.
The Senate plan subjects major local government and school construction projects to referendums. The House plan is similar, but exempts school construction projects related to learning. Stadiums and other sports facilities, however, would still have to go through the referendum process.
The House plan eliminates township assessors, transferring their duties to oversight of one county official. The Senate plan would allow local referendums so people could choose whether assessments are done at the township or county level.
The House plan doubles the income tax deduction for renters from $2,500 to $5,000. The Senate plan increases that deduction to $3,000.