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Lost Tax Revenue Keep Local Indiana Budgets Tight

An Indiana University think tank is predicting the fiscal troubles of Hoosier cities will not go away for another two or three years.

The state has encouraged counties to pass local income taxes to make up the dollars lost to property tax circuit breakers. Matt Nagle with the Public Policy Institute says income-tax collections run two years behind. One year’s assessments are collected the next year and distributed to local governments the year after that. That means cities already reeling from the circuit breakers are counting on money already lost to the recession.

Nagle says five Indiana counties have not lost any money to the tax caps, but 12 counties are facing losses of 10 percent or more, led by a 22 percent hit in Madison County.

“There’s going to have to be belt-tightening in all sectors of the economy, and especially in government,” Nagle said. “So I think it’s just incumbent upon local leaders and state leaders just to be aware of the deck that they’ve been dealt and to find those creative ways to continue to provide services.”

The circuit breakers have cut Marion County tax collections seven percent. State spending is already set for the next two years. But Nagle says the next governor will have decisions to make on road funding, as the 10-year financing boom created by the toll road lease comes to an end.

The institute has formed panels on taxes, energy, education and workforce development to offer candidates a menu of affordable options next spring.

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