where property tax reform leads to now...

Here's my buddy Cecil Bohanon (at Ball State U.) in the Muncie StarPress on Indiana's property taxes...

I've gotten more and more involved with this issue over the last 18 months or so...

Here, Dr. Bohanon provides a nice summary of the relevant issues:

The state of Indiana faces an expected deficit for fiscal year 2009 of at least $763 million or about 6 percent of its budgeted expenditures. The cause of this shortfall is no mystery: Declining economic activity attributable to the national recession reduces revenues from sales and income taxes. The iron law of public finance implies the state must deal with this crisis by some combination of the three activities: draw down its cash balances, find other revenue sources or reduce its expenditures.

Though not as publicized many (but not all) local government entities in Indiana will also experience significant budget shortfalls in 2009. The iron law of public finance holds for these governmental units, but the source of their budget crisis is different. State-mandated property-tax caps that were a political response to skyrocketing local property taxes are the primary cause of these local financial shortfalls.

This outbreak of local budget shortfalls is not as much a product of national economic trends as it is yet another chapter in the never ending saga of the Indiana property tax. Although taxpayers find all taxes burdensome, the Indiana property tax is the object of peculiar taxpayer wrath. Over the last 35 years both despite and because of legislative tinkering Hoosiers have suffered rising, variable and uncertain property tax bills. The state imposed property tax caps finally offer property owners relative certainty in their property tax payments.

Despite its unpopularity the property tax is an ideal revenue source for local government....

The key challenge the legislature now faces is how to best continue the process of property-tax reform and simultaneously craft other changes that can make the provision of local government service more effective....The Kernan-Shepard report is a good starting point for these reforms....

The budget-making process of local units have consists of calculating the maximum allowable property-tax levies for its authorized funds. These maximum amounts are, in general, historical extrapolations of budget allocations drawn from the mists of fiscal time. This year, however, many taxing entities are bumping up against the hard constraint of the state imposed property-tax caps. Thus the crisis and the hope: Surely local tax funds can be allocated across units and functions of local government in a more understandable, accountable and rational way.

One option is to consolidate functions of local governments by reducing government units. Another option is to require taxpayer approval of tax rates. Yet another is to consolidate budget making authority in an elected executive and board. None of these reforms are panaceas or are without flaw. Yet all should be carefully but expeditiously examined in this session of the legislature while confirming a commitment to property-ax limits.