Legislative Update: 2.14.25

Happy Valentine’s Day! For today’s Legislative Update, we bring you the Cupid Mixtape edition.

Full disclosure: this week’s Statehouse vibe felt less like a dreamy You’ve Got Mail meet-cute and more like Fast & Furious: Tokyo Drift (yes, this is a romance—Sean and Neela were meant to be).

The week was jam-packed, with bills hustling to get through committees before the halfway mark of session next week. As a reminder, any bills not passed by their respective chamber by Thursday, Feb. 20, won’t progress into the second half of session.

But emotion is still generating some heartfelt debates—from property tax relief to school funding and Medicaid reform. Read (and listen!) below for more.

Now playing on today’s tracklist:

• Meet in the Middle: Property Taxes
• Sparks Fly (Not Taylor’s Version): School Funding
• Slow Dancing in a Burning Room: Medicaid
• On the Road Again: Road Funding, continued

Meet in the Middle

On Tuesday, Senators took a red pen to the original property tax reform bill—SB 1. The edits were an effort to find a middle ground between two competing needs: the desire to give homeowners property tax relief and the necessity of funding local government services (police, fire, roads, schools, etc.). The bill passed the Tax & Fiscal Policy Committee and will be up for a vote by the full Senate next week.

• What changed? The original bill mirrored Gov. Braun’s property tax plan, which increased homestead deductions and the expansion of caps on property tax growth. The revision includes more targeted relief for seniors, disabled veterans, and first-time homebuyers. It also rolled in provisions from other bills to reform referenda, allow property tax deferrals, and consider broader economic factors in determining annual tax levy growth.
• By the numbers: Lawmakers scaled back the cuts to local government revenues, which, under the original version of the bill, stood to lose $1.6 billion annually by 2028. Under the amended bill, that loss would be closer to $240 million annually.
• State vs. local control: The referendum part of the debate lives on, as SB 1 would require certain transparency measures for referendum ballots and would require schools to avoid (for the most part) issuing referenda in back-to-back years. This raised questions about who should decide how much residents should pay for enhanced government services. Communities like Carmel argue that residents are making the choice to pay for a higher quality of life, and that should be a local decision. (Cue up, “I can buy myself flowers…”)

Sparks Fly (Not Taylor’s Version)

Policy debates on education tend to generate more emotion than nearly any other issue. After all, they revolve around how we support our communities’ kids today and prepare them for the future. Nothing could be more important.

SB 518—which passed the Tax & Fiscal Policy Committee on Tuesday after passionate testimony from more than 50 advocates across both sides—is no exception. It gets at the heart of how Indiana allocates funds for schools and students, particularly those in urban environments.

• The deep background: Questions about the best way to educate all students—and the funding and governance structures required—are not at all new, particularly in the Indianapolis context. In the early 1970s, Unigov consolidated the Indianapolis City and County governments, taking Indianapolis into the top tier of US cities by population overnight. What Unigov did not do was consolidate school districts within Marion County—and student enrollment (particularly of white students) began to decline following the government reorganization and the US Justice Department’s desegregation order. That declining enrollment trend continued for decades, beginning to stabilize only in the mid-2000s.
• Indy’s choice landscape: In 2001, an Indiana law ushered in a new era of education policy with the goal of creating more options for parents to send their kids to school. The law enabled the creation of charter schools—public schools that are run by independent administrators and boards, with oversight from state-approved authorizers who hold them accountable for performance. Indianapolis also has a unique school-type, Innovation Network Schools, which aims for school-level autonomy but operates in partnership with Indianapolis Public Schools.
• The current reality: As more charters and innovation options have come on the scene, students have migrated to those schools. Today, 61% of children residing within IPS boundaries now attend a school not directly run by IPS, including public charters, Innovation Network Schools, and other district-managed schools—enrollment in innovation options has grown the fastest in recent years. Parents choose schools for a variety of reasons, including proximity and accessibility, smaller class sizes or school environments, or school performance.  
• High stakes: Schools need funds to operate, and our current hybrid system of district, innovation, and charter models creates challenges for all school types. In 2008, property tax caps were constitutionally mandated in Indiana, and many schools have since relied on ballot referenda to supplement their underlying property tax revenues and fund their operations and capital expenditures. IPS’s current operating referenda will expire at the end of 2026, likely triggering a need for a new proposal to voters to fund district schools.
  • SB 518 would mandate sharing property tax dollars across school types, revenue which has historically only gone to districts. Currently, district schools operate with greater per pupil funding than independent charters—a disparity that advocates call unfair. Addressing the funding disparity would allow resources to follow students so that the schools parents choose get additional resources. But district leaders and parents say that allocating the dollars in this way spreads resources too thin and will inevitably create school closures and instability for the city’s largest district. 
• What happens next: The full Senate will have the opportunity to amend the bill on the second reading, and if passed on the third reading, the bill will move to the House.
  • The Indy Chamber team continues to engage legislators and stakeholders to shape these proposals.  

It’s critical not to get so caught up in the debate that we miss the main thing—we must ensure taxpayer dollars are deployed in the most effective way to get all Indianapolis’ kids the best possible education and start in life. 

Slow Dancing in a Burning Room

Medicaid costs are projected to rise by $5 billion over the next four years in Indiana—a trend that lawmakers say is unsustainable. They are seeking to control costs and address potential fraud through SB 2, which passed the Appropriations Committee on Thursday and heads to the full Senate. It includes provisions to root out potential fraud and rein in the number of participants in the Healthy Indiana Plan (HIP), which is 90% federally funded and covers adults who may not qualify for traditional Medicaid.

• Limiting costs: As introduced, the bill would have capped the total number of HIP enrollees to 500,000 and limited individual eligibility for the program to a three-year period. The cap was adjusted in committee to give FSSA more flexibility to negotiate with the federal government, and the three-year limitation was removed. Medicaid spending has come under intense scrutiny since a 2023 forecasting error left the state with a $1 billion shortfall. Proponents say changes are necessary to control ballooning costs. But some advocates for Medicaid recipients worry that changes could leave many without healthcare coverage—a reality that would cost both individuals and the state in the long run.
• Addressing fraud: The bill requires FSSA to present a report to the state’s Budget Committee annually highlighting a five-year look-back at Medicaid use with an eye towards potential abuse. In its search, the state will seek to prohibit fraudulent practices, such as those who can afford private healthcare putting funds in a trust to access public benefits. It also enacts stricter and more frequent eligibility checks and prohibits providers from advertising Medicaid services, which opponents say will drive people instead to emergency rooms, raising healthcare costs.
• What to watch next: Gov. Braun’s proposed budget calls for fully funding existing Medicaid programs. Whether the legislature lands closer to his proposal or SB 2 will be worth watching in the second half.   

On the Road Again

The drive to find solutions to Indiana’s road funding needs continues. HB 1461 was amended on Monday in the House Roads & Transportation Committee.

• What was removed: The changes strike a provision that would enable Marion County to enact a referendum for local road funding needs. The amended bill also takes out the option for counties to impose taxes ranging between 50 cents and $1 on retail deliveries, though lawmakers foreshadowed that could come back later in session. And it removes a provision requiring companies to pay for infrastructure if they receive economic development investment.
• What stayed: There’s still a heavy focus on local control, though, with the state increasing the amount that Marion County can charge for wheel and vehicle excise taxes in an effort to get them to raise local revenue. And it still contains provisions for tolling, which the Chamber supports.

What to Watch Next Week

• Budget Up: The Indiana House Ways & Means Committee will review and amend the budget bill (HB 1001) on Monday. This bill will be the vehicle for the budget conversation going into the second half of session and will eventually be reconciled with Senate changes.
• Almost Halftime: Thursday, Feb. 20, marks the halfway point of session. Stay tuned next week for a review of more of the key bills still moving.