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(INDIANAPOLIS) — A cigarette tax hike and a funding boost for schools are part of House

Republicans’ proposed budget.

Ways and Means Chairman Tim Brown’s bill gives schools the same nearly $400 million

increase over two years as Governor Holcomb, but with less money the first year and more the

second. Indiana’s economic forecast predicts a better financial picture in the second year of the

two-year budget. And Brown says schools have received $800 million in federal aid this year

to help plug any gaps.

The Public Health Committee voted unanimously to raise the cigarette tax a dollar a pack, but tax

bills have to go through Brown’s committee before reaching the full House, and Brown says he’ll

cut that hike in half. He says it’s a necessary compromise — he notes many House members don’t

want to raise the tax at all. The bill also imposes an additional 10% sales tax on e-cigarettes. The health panel had proposed a tax rate based on the amount of e-liquid purchased, not the price.

Raising the tax to $1.50 a pack would move Indiana’s tax past Kentucky and close to Ohio. It

would move the state from the 12th-lowest tax rate to 20th-lowest. The original proposal to double

the tax would have brought Indiana even with Michigan as the 17th-highest.

Brown says the tax hike is the most effective step Indiana can take to improve public health, by

discouraging Hoosiers from smoking, especially pregnant women. He says even at the lower rate,

the tax will raise $150 million, to be earmarked for Medicaid.

The budget proposal also includes $50 million for a health grant fund for local communities,

targeting not only smoking but diabetes, cholesterol and obesity.

The plan earmarks $150 million for Holcomb’s “Regional Recovery Plan” to help cities and

counties join forces on economic development measures. Holcomb had proposed the plan in his State of the State address but left the dollar amount open. The House has already passed $150 million for summer school to help students who lost ground to the pandemic get caught up, and $30 million to help restaurants and other small businesses.

The proposal more than doubles Holcomb’s proposed spending to upgrade broadband, to $250

million. But it cuts Holcomb’s request to pay off some construction bonds early from $300

million to $110 million. And it eliminates the governor’s request to pour $400 million into unfunded teacher pension liabilities. Legislators approved a similar request last year to free up money for teacher pay, but Brown says the new proposal doesn’t do anything to reduce local school boards’ expenditures.

The House could vote on the spending plan next week. A final budget isn’t expected until the end

of the legislative session in April.