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Senate nixes cigarette tax increase, provides money for mental health in proposed budget

Indianapolis Star - 4/8/2021

Senate Republicans dedicated more money for mental health resources and students living in poverty in their version of the 2-year $35.8 billion budget Thursday.

Unlike the House proposal, the Senate's version does not include a cigarette tax increase.

It still does include money for police training to replace dollars that usually comes from the purchase of lifetime handgun carry permits. Senate president Pro Tempore Rodric Bray had promised to make the permit free when he killed a bill to completely nix any permit requirement.

More: Indiana Senate leaders kill 'constitutional carry' bill despite wide GOP caucus support

On the mental health side, the Senate is dedicating $50 million for the Health Issues and Challenges Grant Program and $100 million to the Family and Social Services Administration to address mental health issues.

Cigarette tax

Bray said the Senate was not interested in the cigarette tax, partially because it is a regressive tax, meaning it impacts lower-income households at a disproportionate rate. He also argued it was not large enough to truly impact smoking rates in Indiana.

"We want to be cognizant to that," Bray said. "If we go with a tax like that, and we very well may do that someday, then we want to make sure that it's going to really move the needle on some of the health parameters that we really need to move as far as health of Hoosiers go."

The House's version of the budget had called for a 50.5 cent cigarette tax increase, which would bring the total tax to $1.50, and establishes a new 10% retail tax on electronic cigarettes. Crawfordsville Republican Rep. Tim Brown, the House's top budget writer, said the cigarette tax increase would bring Indiana about $150 million in extra revenue, which would go toward Medicaid.

That was a smaller tax than what health advocates had hoped for.

The Senate's version does still implement a tax on e-liquids.

Budget includes $408M in new dollars for K-12 schools

The Senate's budget sets aside 12.4% of the budget for reserves in 2022 and 11.1% in 2023, similar to what the House Republican budget had set aside.

Differences between the two chambers will have to be worked out before lawmakers adjourn later this month.

The Senate budget proposal includes $408 million new dollars for K-12 schools through tuition support, slightly more than the House’s proposal for $378 million and Gov. Eric Holcomb’s proposed increase of $377 million.

Average tuition support will increase by just 1.2% in the first year, as the state works through a tight budget year as the state recovers from the COVID-19 pandemic, and an additional 4.2% in the second year. That includes an increase in both foundation funding — the dollar amount that schools get for each enrolled student — and the complexity funding, which is additional dollars that schools receive for students coming from low-income families.

The foundation funding will increase by 1% in the first year of the budget and by 1.5% in the second year. The Senate is also proposing an increase in special education funding, by 5% in the first year and 10% in the second year.

Senate to expand school choice

The Senate did include an expansion of the state’s robust private school choice programs — including the new Education Scholarship Accounts. However, it's a substantial cut from the program the House had proposed to fund.

Those accounts will be brand new for Indiana, allowing parents who opt in to the program to receive state tuition support dollars to pay for educational expenses such as private school tuition and uniforms. The money would go to families, in lieu of the public school their student would have otherwise attended.

The Senate’s proposal is smaller than the one in the House, allowing fewer families to participate in the first year of the program. Only students with disabilities would be eligible at this time. The House also wanted to include children receiving foster care services and children of active duty members of the armed services or national guard, unlike the Senate.

The Senate’s version is estimated to cost $3 million, while the House’s would have cost $20 million.

While the House proposed a massive expansion of the existing Choice Scholarship program, commonly referred to as private school vouchers, the Senate was more conservative. It added children in foster care to the list of those currently eligible, like the House, but didn’t raise the income eligibility limit as high as the House. It does eliminate tiers of funding, like the House proposed, but not until the second year of the budget.

Debate over charter school grant funding

The latest proposal also increases the charter school grant, but doesn’t go as far as the House did in that effort. The current grant is $750 per enrolled student. The Senate proposes raising that to $1,000 per student.

The Senate budget nixes a House proposal to drop funding for certain Career and Technical Education courses and does not fund virtual charter schools at the same level of basic tuition support funding as brick-and-mortar schools. Students who receive more than half of their instruction virtually will continue to be funded at 85% of in-person students, regardless of which type of school is delivering their instruction.

This story will be updated.

Call IndyStar reporter Kaitlin Lange at 317-432-9270. Follow her on Twitter: @kaitlin_lange.

This article originally appeared on Indianapolis Star: Senate nixes cigarette tax increase, provides money for mental health in proposed budget


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