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Dems Say Prop Tax Caps a Choice Between Conscience and Reelection

Some Democratic lawmakers see a vote on property tax caps as a gamble between following their conscience or continuing their political career.

peggy welch

Photo: WFIU

State Representative Peggy Welch on the floor of the Indiana House of Representatives

The issue which will dominate discussion during the 2010 legislative session is property taxes – specifically whether to amend their rates into Indiana’s constitution.  It’s an issue broadly popular with Republican legislators who favor smaller government and lower taxes.  But some Democratic lawmakers see the issue as a debate where their vote is a gamble between following their conscience or continuing their political career.

State Representative Peggy Welch (D-Bloomington) is so popular that in the last two elections, she’s run unopposed, even though she says she’s a Democrat in a district which is 60% Republican.  In the last election in which she did have a challenger – in 2002 – she collected almost twice as many votes as her opponent.  So you might assume Welch is in an electorally safe district and could afford to champion a movement opposing constitutional property tax caps, which she voted against two years ago and which she acknowledges are draining the budgets of cities and schools statewide.  But Welch said she’s worried about the consequences of even a low-key vote against the measure.

“The reality if this does come to the floor and you vote against it, there’s the direct mail piece that goes to your home and says ‘X legislator voted against lowering your property taxes – is this someone you can really trust?’,” she said.  “And I can tell you that’s exactly what’ll happen.”

Welch said she’s not sure if she’ll vote against the caps a second time, but she assumes she’ll get the chance in this session, unlike 2009’s.  Last year, House Speaker Pat Bauer (D-South Bend) said he would not bring the issue to a vote, in order to allow more time to study the effects of lower property tax revenue and higher sales taxes on the state.  One of the effects has been that the state has brought in less income than it projected every month for more than a year.

“Maybe the property taxes should not be capped in cases of emergency, when other dollars are not coming into the coffers.  And certainly they’re not right now,” said Rep. Sheila Klinker (D-Lafayette), a former educator. Klinker said she worries what will become of education dollars if the caps are added to the constitution.

“The bottom line is: If you put the caps in the constitution, you will probably be discussing other methodologies of funding education.  Because, as Dr. John Huie has said many times to me – and he was the budget director for Governor [Otis] Bowen for four years, and Governor [Robert] Orr – and he said ‘Just remember Sheila, property taxes are the most reliable and predictable methodology of funding education at all levels.”

But that argument falls on deaf ears when it reaches Marion Republican Eric Turner, who points out the state has taken over school general fund budgets and thus is already moving toward using fewer property tax dollars to fund education.  Turner said a bigger concern is creating more efficiency at the local level, and says he’s heard no dissent from his constituents.

“Absolutely not.  The public believes that all levels of government, including locals and state and federal can operate with less dollars.  Local units of government have to look at themselves and determine if all the things that they’ve been doing in the past are needed into the future,” he said.

Turner suggests saving money by consolidating city and county services, like fire and police, and insists that a time of economic uncertainty is the perfect time to be looking for more efficiencies and smaller government.

Welch said she feels the issue puts her and other lawmakers in a difficult spot – forced to predict what will become of city services, but also forced to vote for their reduction.

“I mean, sometimes you almost want to say ‘Fine, let’s do it the way you want to do it.’  And then  you’re going to come back and blame me, though, in three or four years when you wanted to go to the library on Thursdays, but the library is closed.”

But the issue comes back to 2010’s elections, Klinker said.

“In some situations you have primary contenders and so I really think that the property tax cap issue will be a political issue.”

In the end, those who vote *for* property tax caps have a valuable chip to lay down next November. Those who speak out against them do so at the peril of their office.


Stan Jastrzebski

WFIU/WTIU News Senior Editor Stan Jastrzebski spent time as a reporter with WGN Radio in Chicago and as an editor at Network Indiana, an Indianapolis news service. Stan is the winner of awards from the Associated Press, the RTDNA, the Indiana Broadcasters Association and the Society of Professional Journalists. He hosts WFIU's Ask the Mayor and anchors WTIU's InFocus.

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  • theller

    Stan – your radio report went beyond the text included here. Indeed, it was you (?) who at the end, posed a very loaded question with a “when the state is losing money hand over fist” flourish. Boy, did that ever color your report!

    I was struck by how uninformed in public finance your piece revealed you to be. (Pardon me, I've worked in the field for some decades.)

    Did you ever think that the recession might be playing some role in the current *state* revenue difficulties — i.e. that property tax reform at the local level is largely irrelevant to “losing money hand over fist”? You didn't contemplate this possibility, which made it easy for you (and the biddy Sheila Klinker who lives in the far distant past) to plant some VERY incorrect ideas in the minds of your listeners.

    Sales tax receipts are HIGHLY sensitive to people's consumption. And that's what the state legislature has relied upon as a replacement for ever-escalating property taxes.

    In case you haven't noticed, consumer spending in the US and in Indiana has been in contractionary mode since September 2008, the precise period you said coincided with property tax changes and pressures on local government spending, including schools. (The downturn in consumption has been due in some part to much higher levels of unemployment — something else your report didn't even hint at. Why not?)

    So, too, are you unaware of the tax abatement and the oft-accompanying Tax Increment Financing districts that siphon property taxes away from local government general funds and the variety of programs (police, fire, etc.) upon which they rely. I've read that 75% of the buildings (or the entire tax base?) in Indianapolis' Center Township are in TIFs, which divert tax money from general government budgets.

    I really wish you could bone-up on these issues before you produce more poorly-informed reports. You're not doing your listeners any favors. You might think you are, but you're not.

  • theller

    Stan – your radio report went beyond the text included here. Indeed, it was you (?) who at the end, posed a very loaded question with a “when the state is losing money hand over fist” flourish. Boy, did that ever color your report!

    I was struck by how uninformed in public finance your piece revealed you to be. (Pardon me, I've worked in the field for some decades.)

    Did you ever think that the recession might be playing some role in the current *state* revenue difficulties — i.e. that property tax reform at the local level is largely irrelevant to “losing money hand over fist”? You didn't contemplate this possibility, which made it easy for you (and the biddy Sheila Klinker who lives in the far distant past) to plant some VERY incorrect ideas in the minds of your listeners.

    Sales tax receipts are HIGHLY sensitive to people's consumption. And that's what the state legislature has relied upon as a replacement for ever-escalating property taxes.

    In case you haven't noticed, consumer spending in the US and in Indiana has been in contractionary mode since September 2008, the precise period you said coincided with property tax changes and pressures on local government spending, including schools. (The downturn in consumption has been due in some part to much higher levels of unemployment — something else your report didn't even hint at. Why not?)

    So, too, are you unaware of the tax abatement and the oft-accompanying Tax Increment Financing districts that siphon property taxes away from local government general funds and the variety of programs (police, fire, etc.) upon which they rely. I've read that 75% of the buildings (or the entire tax base?) in Indianapolis' Center Township are in TIFs, which divert tax money from general government budgets.

    I really wish you could bone-up on these issues before you produce more poorly-informed reports. You're not doing your listeners any favors. You might think you are, but you're not.

  • Stan Jastrzebski

    First, thanks very much for your comment — we appreciate all the feedback that we get on the site and wish we’d get even more!

    Next, let me clarify a couple things which I did not have time for in the report:

    As for the “hand over fist” comment, that should not be seen as a reflection of my beliefs, it’s a reflection of what we hear every week on “Ask the Mayor” from the mayors of Columbus, Terre Haute, Bloomington and Kokomo, as well as a reflection of what Rep. Klinker had told me in our conversation up to that point (we’d been speaking for about 30 minutes by that point). Notice also that Rep. Klinker says “yes” several times as I go through the argument she’s made to me in half an hour — I wanted to make sure I’d gotten her argument right, and I think I did.

    Your point about the recession is well-taken, and it certainly plays into the state’s financial woes. But we now know the nation was already into a recession or on the verge of it (perhaps not identified by economic analysts publicly at that point, since the very term is one based on lagging indicators) when HB 1001 was passed. As Rep. Klinker says in the story, she’s heard from a former State Budget Director that property taxes are a “reliable source” of funding. Sales taxes, as you correctly point out, are very much tied to disposable income and discretionary spending. So, allow me to pose a question: If you see the economy is in trouble (and Mitch Daniels is a former OMB head himself and certainly knows his way around economic indicators), then why allow a reliable source of funding to be curtailed and replaced by one which is even more dependent on the whims of the market?

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