2016-02-02 / Front Page

Key Committee Passes Bill Returning $550,000,000 To Local Communities

Staff Report

The Indiana House Ways and Means Committee voted unanimously Wednesday in support of State Representative Todd Huston’s (R-Fishers) bill returning $550 million to local governments.

“We understand that local governments face unique challenges in funding much-needed services, particularly in maintaining and improving local roads and bridges. House Bill 1110 would immediately infuse $440 million into local government budgets, with an estimated $110 million to follow over the next four years,” Huston said. “This proposal provides for a disbursement free of restrictions to the counties and municipalities where the funds originated.”

State Representative Tim Brown (R-Crawfordsville), chair of the House Ways and Means Committee and co-author of the bill, said the funds were collected from Local Option Income Tax (LOIT) revenue and held in reserve by the state in trust accounts for each county.

“Under House Bill 1110, local governments can use these funds for any purpose in which the community originally collected the tax,” Brown said. “Since these revenues were raised by local units, we believe our local leaders are best equipped to decide how to invest their money.”

State Representative Milo Smith (R-Columbus), co-author of the measure, said the bill makes a onetime payment and does not raise taxes or create new debt since the funds already exist in trust accounts.

“Undoubtedly, local governments face unique challenges in being able to provide for the health, welfare and safety of its citizens,” Smith said. “They are the ones who best understand what their communities need and this measure would help them meet their challenges.”

State Representative Donna Schaibley (R-Carmel) also co-authored the proposal. She said returning the majority of these reserves to local communities would help keep Indiana headed in the right direction.

“This bill creates a unique opportunity for locals to receive the majority of their Local Option Income Tax reserves held by the state,” Schaibley said. “This is part of an overall effort to provide locals with more flexibility while also giving them options to meet their road and bridge funding needs.”

Owen County Councilman Anton Karl Neff provided a local perspective on HB 1110, telling the Spencer Evening World, “This is welcome news for Owen County. Simply put, the state has an income tax trust account for each county. The trust account acts as a buffer between state collections and county distributions in times of economic volatility. Each year, counties are given a certified distribution amount, which we can count on receiving monthly. We can then budget with certainty. It is a gross estimate though, since final net income tax collections will not be known until the following year. In case actual tax revenues are less than estimates, a county’s monthly distribution is not reduced, rather the shortfall is covered by the trust fund balance. In case actual revenues are more than estimates, the trust fund balance accumulates. If/ when the balance reaches a certain level, an excess distribution can be made. That balance requirement is fairly high now, but House Bill 1110 would lower that requirement, thus triggering a partial release of the balance.”

HB 1110 will now be considered by all members of the House of Representatives.

“While this House Bill 1110 may not have restrictions for the use of the resulting excess balance distribution, Senate Bill 67 does,” Neff added. “Senate Bill 67 includes a similar proposal, but it requires that at least 75 percent of the excess distribution be earmarked for use on roads. As these two bills progress further through this legislative session, the exact details of how much money we will see and what conditions (if any) exist for use of that money, will become more known.”

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