Mar 12, 2024 - News

Indiana Statehouse: A packed agenda takes shape for 2025 budget year

Photo illustration of Indiana state capitol building, with radiating lines.

Illustration: Allie Carl/Axios

The 2024 legislative session is over. So, naturally, it's time to look ahead to next year.

Why it matters: The Indiana General Assembly has already set up what one Statehouse leader called a "monumental" agenda for next year's budget-writing session.

The big picture: Indiana's Legislature writes a state budget every two years.

  • Non-budget years, like this one, have shorter sessions to tackle only urgent issues and make policy tweaks that won't have a fiscal impact.
  • Budget years are when lawmakers typically pursue larger, substantive issues because those generally involve funding.

Reality check: Recent short sessions have seen lawmakers address major policy issues, such as transgender children's participation in school sports and right-to-work laws.

  • Ahead of this year's session, Statehouse leaders said they wanted to return to the original intent and deal only with fine-tuning existing policy, but they still waded into issues like antisemitism, literacy and child labor regulations.

Between the lines: Lawmakers still left plenty on the table for next year, raising questions about whether they're creating too heavy of a lift during a year that will also see a new governor take office and new members join the General Assembly.

Issues on next year's agenda include:

  • An overhaul of the state's road funding formula
  • A massive rethinking of education spending
  • Changes to the state's tax system
  • Budgeting for ballooning Medicaid costs, which could derail other spending priorities

What they're saying: "It was a short session, so we were looking to be a little lower impact," Senate President Pro Tempore Rodric Bray (R-Martinsville) said. "And so we probably did punt a few things to 2025 and I think you're gonna see that be pretty monumental."

What's happening: The State and Local Tax Review Task Force has been looking at, among other things, how to eliminate the state income tax — which brings in roughly $8 billion annually, nearly one-third of the state budget.

  • Leaders have also been promising a comprehensive discussion of the state's maligned road funding formula — something Indianapolis officials have been wanting for years — driven by the work of another legislative task force.

Plus: A push to expand school choice is expected.

  • Sen. Ryan Mishler (R-Mishawaka) filed a bill this year to change Indiana's private school voucher system into a grant program that would remove all income caps on school choice participation and create new avenues for parents to access some of the public dollars typically spent on their child's education.
  • Mishler didn't move the bill forward this year. Instead, he said the goal was to start the conversation ahead of the 2025 session.

What's next: The tax and road funding task forces are expected to deliver policy recommendations to lawmakers later this year.

Yes, but: All of these proposals may be at the mercy of the state's Medicaid expenses, which are the fastest-growing part of the budget.

  • The state is already dipping into reserves to cover a $1 billion shortfall in Medicaid spending estimates.
  • Costs are expected to continue growing, eating into other funding priorities and likely forcing some difficult conversations for state leaders.
  • An oversight committee delivered a report at the end of last year to inform next year's budget discussion but it made no recommendations.

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