Vote near on Indiana budget with schools boost, vaping tax


INDIANAPOLIS — Indiana public school and teachers groups are cheering the education funding increase included in the new state budget plan that’s poised for final approval from lawmakers on Thursday to complete this year’s regular legislative session.

Support comes from those groups even as the Republican-dominated Legislature is set to endorse a contentious expansion of the state’s private school voucher program by raising the income eligibility level for a family of four to about $145,000 for the coming school year.

The state budget agreement announced Tuesday will boost overall school funding by about 4.5% each of the next two years. That deal, however, leaves out a push to follow the federal government’s lead of excluding some unemployment benefits paid last year from income taxes. It also imposes a new state tax on vaping products.


The Republican budget negotiators buoyed by a forecast of better-than-anticipated state tax collections over the next two years are allocating more than double an increase to school than what had been proposed earlier this month. That step follows several years of complaints of inaction by the Legislature concerning the state’s lagging teacher pay.

The budget bill directs school districts to submit explanations to the state if they aren’t able to set a minimum teacher pay of $40,000 a year.

Terry Spradlin, executive director of the Indiana School Boards Association, said the funding increase far exceeded his expectations from late last year when he hoped to avoid any education spending reductions amid the coronavirus pandemic recession.

“We’ll give teachers a pay increase, no doubt about it, and it will be substantial and generous,” Spradlin said.

Indiana State Teachers Association President Keith Gambill said “with his budget’s investment, educators now have a light at the end of the tunnel,” Gambill said.

Those groups had opposed expanding the private school voucher program, which could add some 12,000 students, or about one-third, to a projected 48,000 over the next two years, according to a legislative report. The program’s cost could grow by about 50% to $264 million a year.

The voucher plan would raise income eligibility for a family of four from the current roughly $96,000 a year to about $145,000 starting this fall. It also would allow all those students to receive the full voucher amount, rather than the current tiered system that limits full vouchers to such families with incomes of about $48,000.

Spradlin said he was disappointed that the voucher eligibility was being expanded to such a high income level as already 61% of students receiving vouchers have never attended public schools.

“What this investment will do is likely pay for more families that are already in the private education system,” Spradlin said.


Indiana won’t conform with the federal American Rescue Plan provision excluding the first $10,200 of unemployment benefits accrued in 2020 from federal taxes for those making less than $150,000.

The Indiana House had backed excluding the same amount from state taxes, but Republican Senate Appropriations Committee Chairman Ryan Mishler said he supported continuing the state’s policy of taxing unemployment payments. Mishler said one week of the expanded $600 federal unemployment benefits early in the pandemic would more than cover the state income taxes.

A legislative report estimated that the unemployment benefits exclusion would have cost the state between $58 million and $97 million in tax collections.

Democratic Rep. Ed DeLaney of Indianapolis said taxing those payments would unnecessarily complicate income tax filings. He said he believed it was unfair to tax those benefits while the budget plan would direct $500 million in federal relief money toward the state’s unemployment insurance trust fund that would otherwise be filled by business taxes.

“We’re putting all kinds of money in all kinds of reserves, paying down debt and all this other stuff, so we’ve basically chosen the state budget over the individual family budget,” DeLaney said.


The budget agreement imposes a new tax on electronic cigarette liquids and devices, which health groups have long sought to help discourage vaping.

That tax would charge 15% on retail sales of vaping products and consumable materials and 25% on wholesalers for closed-system cartridges. A previous Senate-backed plan for lower tax levels had been lambasted by health advocates and the Indiana Chamber of Commerce as inadequate and far below the state’s cigarette tax.

Those groups expressed support for the higher tax as being in parity with cigarette taxes.

A coalition of health and business groups pushed for a $2-per-pack increase in the state’s cigarette tax, calling it a needed step toward driving down Indiana’s 21.1% smoking rate for adults, which was the fourth highest in the country for 2018, according to the federal Centers for Disease Control and Prevention. But the Senate blocked that proposal.

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