Legislative Update: 4.25.25

The 2025 legislative session ended a smidge ahead of schedule, with work wrapping up during the early hours of Friday, April 25 (for those who read their email promptly: today). This capped a dynamic four months that started with a boatload of bills; included many substantive debates over issues like taxation, education, and health policy; and concluded with major budget negotiations – and programmatic cuts – to resolve a $2.4 million shortfall in projected revenue over the next biennium. We’re summarizing it for you in three parts.

Warning: Today’s missive is long, but we’ve aimed to make things as skim-worthy as possible with lots of bullets and headlines.  

The Big Wins: Indy Chamber Legislative Priorities

Road Funding Changes Offer New Revenue and Benefit Central Indiana 

• What Happened: Faced with declining gas taxes and changing vehicle technology, Indiana must shore up additional funding to support state and local infrastructure. To help address this, lawmakers passed HB 1461 (Road Funding), which enables the state to request a waiver from the federal government to toll interstate highways; allocates $50 million from a state fund to Marion County beginning in 2027 if locals can match the funds; and for communities that have a wheel tax, distributes additional state dollars to them based on total lane mileage, which factors in the number of lanes and not just the length of a road. 
• What It Means: Central Indiana and other growing parts of the state will benefit from these changes, which start to allocate funds based on where traffic is the heaviest and, therefore, maintenance needs are the greatest. And tolling would be a game-changer to ensure our state has the resources (now recoupable from out-of-state drivers) to remain the Crossroads of America, which is critical for business.  
• What Comes Next: We’re continuing to partner with Mayor Joe Hogsett’s administration and the Indianapolis City-County Council to identify additional funding to match the $50 million from the state that kicks in starting in 2027. And just a heads up that another provision in the bill increases the speed limit to 65 miles per hour on I-465.  

Indiana Raises Tobacco Taxes for the First Time Since 2007 

• What Happened: In a major win for Hoosier health and economic momentum, state lawmakers supported a $2 per pack increase to Indiana’s cigarette tax and proportional increases for other forms of tobacco in HB 1001 (State Budget). This was among the Indy Chamber’s top legislative priorities, and we’re immensely grateful to all of you who reached out to your lawmakers in support.  
• What It Means: The tobacco tax increases are projected to generate nearly $810 million in new revenue over the next biennium. Evidence also shows that raising the cigarette tax by $2 per pack has a meaningful impact on reducing smoking rates, with an estimated 45,000 adults projected to quit and 17,800 young people deterred from taking up smoking. The long-term economic impacts are important, too, as Medicaid expenditures are rising, and reducing smoking has a positive impact on slimming these costs.  
• What Comes Next: The new tax goes into effect with the new fiscal year, which starts July 1, 2025.  

New Measures Will Help Align Education and Training with Industry Needs 

• What Happened: Indiana faces a workforce shortage, with over 160,000 unfilled jobs, and we’re not adding enough workers to the mix to fill the gap in coming decades. Two new laws will help align higher education and career training with the needs of industry so that we prepare more graduates with the skills needed for high-demand fields – with a focus on bolstering efforts to build a world-class professional apprenticeship system in Indiana. 
  • SB 365 (Education Matters) requires the Indiana Department of Education and Indiana Commission for Higher Education to track career and technical (CTE) program completion and how many students remain in their fields of concentration after graduation. The bill also creates a statewide career coaching initiative and grant fund to give students support in identifying their career paths of interest.  
  • SB 448 (Higher Education and Workforce Development Matters) requires Secretary of Education Dr. Katie Jenner to prepare a framework for earning “stackable credentials,” such as industry certifications, training programs, and postsecondary degrees that ladder up to mean strong competency for jobs in high-demand industries. It also requires the Management Performance Hub to annually report data related to credential supply and demand.  
• What It Means: These changes build upon years of effort to increase college enrollment in Indiana while also creating pathways for career preparation and training beyond four-year degrees. SB 448, in particular, will support efforts to build a statewide apprenticeship program in Indiana, with a focus on preparing talent with the skills employers in high-demand fields require, starting in high school. 
• What Comes Next: Secretary Jenner’s framework must be completed by Nov. 1, 2025. 

Alliance Will Foster Collaboration and Resource-Sharing Among Schools

• What Happened: With HB 1515 (Education and Higher Education Matters), the legislature created the Indianapolis Local Education Alliance, an advisory body of Indianapolis leaders tasked with developing collaborative solutions within Indianapolis Public Schools’ (IPS) district boundaries. Indianapolis has myriad public school options for families, including public charter schools, which are run by nonprofits; district-run schools; and a hybrid approach called Innovation Network Schools, which have nonprofit operators but operate within IPS. Today, about 60% of parents send students to either public charter or Innovation Network Schools, and there’s a need for a more cohesive system, especially when it comes to governance and sharing resources for school operations. The ILEA will be charged with creating cohesion by making recommendations on facilities and transportation, identifying collaborative governance structures, and aligning on future referendum proposals, among other topics.  
• What It Means: The recommendations of the board will not be binding, but they could include any structural changes required “for a collaborative system of schools that can serve all students within the geographic boundaries of the school city fairly.”  
• What Comes Next: Appointments to the nine-member Alliance will be made before the group’s first meeting on July 1, 2025. Mayor Joe Hogsett will chair the board and has four appointments, including one representing the business community. The Indy Chamber has raised its hand to be part of the Alliance and hope we can represent your interests in this consequential work. As an advocacy organization representing the needs of Central Indiana’s business community – and a partner with IPS for the last two decades – we care deeply about advancing conversations around education quality and maximizing school resources in our community. Notably, our 2018 audit of IPS resources provided us with a strong grounding in IPS operations and resources, and we have been highly engaged since then on matters such as referendums and tax-sharing.  

State Stands Up New Office for Entrepreneurs and Small Business 

• What Happened: Small businesses are the lifeblood of Indiana’s economy, and nationally, young companies create the most net new jobs. Aligned with Gov. Mike Braun’s enhanced focus on “main street businesses,” the legislature created an office dedicated to supporting small businesses and entrepreneurs in Indiana in SB 516 (Economic Development). 
  What It Means: In a 2022 voter survey, small business advocacy organization Right to Start showed that while 43% of voters have considered starting a small business, only 21% have tried, signaling how daunting the task can feel. Dedicated support for this endeavor will be a win for Indiana’s business community. We hope the state also stays focused on supporting companies into the growth stage through other policy efforts.  

Other Big Issues

Lawmakers Pass Lean Budget under Tight Revenue Forecast 

• What Happened: HB 1001 (State Budget) made it across the finish line in the wee hours of Friday, April 25. After a $2.4 billion shortfall was identified in the state’s April revenue forecast, legislative and fiscal leaders had to make tough decisions about funding other programs in the $46.2 billion allocation over two years. Nearly half (47%) of the state’s general fund is spent on K-12 education and nearly a quarter (22%), the fastest-growing portion, is dedicated to Medicaid. 

• Here’s a line-by-line look at some of the key items we were watching – and where they landed in the final budget: 
  • ⬇️ Public Health Funding: Initially funded at $200 million in the House and Senate passed version of the budget, funding for the Health First Indiana program for improving public health outcomes was reduced to $80 million over the biennium.  
  • ⬇️ Career Scholarship Accounts (CSAs): The $30 million allocated toward Career Scholarship Accounts was reduced to $10 million in the final version of the budget. CSAs provide high school students (grades 10-12) with $5,000 annually in career-based scholarship funding for work-based learning opportunities, such as apprenticeships, internships, and more. 
  • ↔️ Residential Infrastructure Revolving Loan Fund (RIF): Funding remains at $50M over the biennium for RIF. The fund provides low-interest loans to Indiana counties, cities, and towns to finance infrastructure projects that support residential housing development. Additional guardrails for the program can be found in HB 1005 (Housing and Building Matters). 
  • ⬇️ Hoosier Workforce Investment Tax Credit: Previous iterations of the budget included a tax credit meant to incentivize employers to upskill their existing workforce; however, funding for this program was not included in the final version of the budget.  
  • ↔️ Workforce Innovation: Lawmakers allocated $36 million toward workforce innovation, which can be used for employer training grants, workforce-ready grants, and workforce innovation programs, including the reemployment skills training pilot program.  
  • ↔️ Statewide Sports and Tourism Bid Fund: The Indiana Sports Corp. uses the bid fund to attract major events to the state. The budget allocates $10 million to the fund.  
  • ⬇️ Child Care: The final budget provides $147 million of hold-harmless funding for families currently receiving childcare through the Child Care Development Fund (CCDF). It cuts CCDF, On My Way Pre-K, the school-aged care grant, and Visually Impaired Preschool Services by roughly 5%. 
  • ⬆️ Universal Vouchers: Beginning July 2026, there will be no income restrictions on Hoosiers eligible to access universal vouchers to pay for private K-12 education through Indiana’s Choice Scholarship Program. 

Lawmakers Pass Tax Reform Package

• What Happened: SB 1 (Local Government Finance) will usher in changes to Indiana’s taxation system, with reforms in three big buckets: 
  • Residential Property Tax Reductions: The bill provides homeowners with relief by phasing up the homestead deduction from the current 60% of a home’s assessed value (or $48,000, whichever is lower) to 66.7% of a home’s assessed value by 2031. It also provides all homeowners with a $300 tax credit, with additional credits for seniors, disabled homeowners, and disabled veterans. 
  • Business Personal Property Tax Reductions: SB 1 also gives businesses a new tax break by raising the ceiling on the value of business personal property that can receive deductions, from the current $80,000 to $2 million in 2026. It also eliminates the 30% depreciation floor, which says that for tax purposes, business property cannot be valued at less than 30% of its original value. The depreciation floor lift only applies to new property and will be phased in over time.  
  • Important Note: One of the final bills passed this session – HB 1427 (Department of Local Government Finance) – makes adjustments to some of the business personal property tax language passed in SB 1, including removing the BPPT changes for 2025 since property tax bills have already been sent out.  
  • Local Income Tax Changes: The bill provides local governments with greater ability to generate additional revenue. Cities and towns can adopt their own local income tax rates, and the cap for local income taxes at the county level will be raised from 2.5% to 2.9%.
• What It Means: Businesses benefit from this bill through changes to the business personal property tax provisions. While it also provides relief to homeowners, by giving local governments the ability to raise local income tax rates, individuals could see taxes shifted elsewhere to help offset the loss to local governments.  
• What Comes Next: These changes will go into effect July 1, impacting 2026 tax bills.  

A Big List

Education & Workforce

• Several bills made it across the finish line, impacting education and workforce this legislative session. Below are some of the key bills to review:  
  • Deregulation: HB 1002 (Various Education Matters) is a House Republican priority bill intended to “deregulate” education. The 139-page bill strikes several optional provisions and mandates from existing code.  
  • Child Care: There were multiple bills aimed at increasing childcare options in Indiana, including HB 1248 (Child Care and Development Fund), HB 1253 (Child Care), SB 463 (Child Care Matters).  
  • Partisan School Boards: SB 287 (School Board Matters) is the bill that adds partisanship to school board races by requiring a candidate to choose a political party affiliation, declare as an independent, or identify as non-partisan on the ballot. The concurrence just passed the Senate with a vote of 26-24. 
  • DEI: There were some tweaks made to SB 289 (Unlawful Discrimination) during conference committee, but ultimately the bill that passed centers around diversity, equity, and inclusion practices of state government and public education. It was heavily amended to shift the focus from whether DEI offices could exist to what practices entities could engage in. 
• To view additional legislation impacting education and workforce, click here. 

Healthcare

• Addressing the cost of healthcare remained a top priority for House and Senate leadership, but how to do that was hotly debated this legislative session. These are some of the bills that passed impacting the health care space:
  • Both HB 1003 (Health Matters) and HB 1004 (Health Care Matters) were priority bills for the House Republican caucus. HB 1003 includes several provisions intended to improve transparency in pricing, including language impacting prior authorization, while HB 1004 threatens a hospital’s non-profit status if their costs are higher than a statewide average.
  • Meanwhile SB 2 (Medicaid Matters) was a priority bill for the Senate Republican caucus and targets Medicaid fraud through a variety of measures.  
  • As introduced, SB 140 (Pharmacy Benefits) would have prevented vertical integration between PBMs and health insurers in Indiana. The bill was heavily amended in the House.  
  • SB 480 (Prior Authorization) mirrors the prior authorization language found in HB 1003 and prohibits private insurance companies from requiring prior authorization for the first 12 physical therapy or chiropractic visits for new injuries or “episodes of care.”
• To view additional legislation impacting healthcare, click here. 

Local Government & Fiscal Policy 

• How local governments are funded took center stage this session. While SB 1 has the biggest fiscal impact, there’s language in a variety of bills that could impact overall fiscal policy. Below are two key bills to review: 
  • HB 1427 (Department of Local Government Finance) starts as the Department of Local Government Finance agency bill every session but gets heavily amended throughout session. It now includes cleanup for SB 1, impacting Business Personal Property Tax, agricultural property taxes, and reduces franchise fees (a source of revenue for local units maintaining rights of way). It also includes language that allows hotels and motels in an economic enhancement district (EED) to collect a special benefits assessment of $1 per night from each person renting lodging to go toward the special benefits assessment.  
  • SB 5 (State Fiscal and Contracting Matters) creates a process for budget committee review when a state agency is awarded federal funds that may require a state match or additional staff. It’s also meant to increase transparency and accountability for state contracts. 
• To view additional legislation impacting local government and fiscal policy, click here. 

Transportation, Infrastructure, and Environment 

• HB 1461 was the main transportation and infrastructure bill passed during the 2025 legislative session, but there were a number of bills impacting transportation and infrastructure this session.  
  • HB 1198 (Local Public Works Projects) allows a local unit to complete a public works project without awarding an outside contract if the cost of the project is less than $375,000 (increased from $250,000 in current law). Moving forward, this amount will be adjusted annually based on inflation.  
  • Increasing housing stock continues to be a goal for members of the General Assembly. HB 1005 (Housing and Building Matters) makes changes to the Residential Infrastructure Revolving Loan Fund. 
• To view additional legislation impacting transportation, infrastructure, and environment policy, click here.