Indiana lawmakers may have to boost taxes for roads funding

INDIANAPOLIS (AP) - Republicans who control Indiana's Statehouse say fiscal restraint will be in order when they write the state's two-year budget in the coming months.

But as GOP leaders preach frugality ahead of the annual legislative session which kicks off Tuesday, they are also planning for a big increase in infrastructure spending - and want to raise taxes to pay for it.

"We don't have enough revenue to even sustain our maintenance program," said state Sen. Luke Kenley, the Senate's chief budget writer. Last year the Noblesville Republican opposed a similar tax increase; now he says lawmakers need to "face up to the fact" that more money is needed.

That means residents could find themselves paying more for cigarettes, gasoline or vehicle registration in order to build out and repair the state's roads, highways and bridges. It also creates an awkward situation for roughly two dozen Republicans who signed a pledge to conservative activist Grover Norquist, promising never to raise taxes.

Indiana is sitting on about $2 billion in reserves. Revenues are projected to grow 2 percent over the next two years, which could bring in an estimated $1 billion in new money.

Still, GOP leaders say they are cautious after the state collected about $300 million less than expected during the current budget cycle. They don't want to tap the surplus, warning that a recession could be around the corner.

GOP leaders have indicated so far that passing a budget and a road funding plan will be the main priorities. A 2015 report found the state needs to at least double infrastructure spending. Lawmakers directed some new money to projects last year, but estimate they need at least $1 billion per year going forward.

What remains to be seen is how much appetite there will be for other large-scale undertakings, or what will be included in Governor-elect Eric Holcomb's agenda. The Republican has offered little beyond campaign slogans, but says he will present his plan to take Indiana to "the next level" on Jan. 5.

"It's going to be lean times no matter what," said Republican House Speaker Brian Bosma. He added that popular ideas such as expanding a state run preschool pilot program for poor kids are "not easy to achieve, given the tight circumstances."

Holcomb voiced support for increased roads funding, but hasn't said if he'll back a tax increase. He has also called for expanding the state's pre-school program beyond the five counties it currently serves, but says it should focus on poor children.

Democrats, who are in the minority, have pushed for universal state preschool program, which Republicans believe would be too costly. Democrats have played coy about whether they will support a GOP roads plan.

They opposed a plan passed by House Republicans last year because it would increase the state's 18-cents a gallon gas tax by several pennies and increase by $1 the price of a pack of cigarettes. They argued a tax hike was not justifiable when the state had $2 billion in reserve, but the plan was doomed anyway because Senate Republicans and Gov. Mike Pence, now the Republican vice president-elect, didn't want an election year tax hike.

House Minority Leader Scott Pelath, D-Michigan City, still questions if a tax hike is "the best, or the only avenue, for raising revenues."

Sen. Karen Tallian, D-Portage, said the revenue pinch was a problem of Republicans' own creation after cutting or capping corporate and personal taxes in recent years.

Another question that hangs over the session is what role conservative social issues may play. Many social conservatives say they have been emboldened by the election of President-elect Donald Trump and see now as the time to push for big changes.

Already state Rep. Curt Nisly, R-Goshen, has said he will sponsor a bill that would ban abortion in the state, despite a longstanding U.S. Supreme Court ruling allowing it. Supporters are pushing the bill which they hope could lead to a court case that could eventually overturn the Roe v. Wade Supreme Court decision.

Gun rights advocates say they are similarly optimistic about their chances following Trump's election.

Republican state Rep. Jim Lucas, of Seymour, plans to file the bill that would get rid of a state law requiring a license to carry handguns.