The circuit breaker is a simple rule governing Indiana property taxes, that threatens to complicate, if not cripple the likes of school corporations, cities, and towns in St. Joseph County.
The circuit breaker simply caps property taxes at two percent of assessed valuation.
That means if you own a home assessed at $100,000, you would pay no more than $2,000 in taxes.
But the cap promises to strip $52 million from the tax revenues that governmental units in St. Joseph County now rely on.
Last year, the Indiana House of Representatives passed the circuit breaker by a vote of 98-to-1.
That one and only “no” vote was cast by Representative Chet Dobis of Merrillville.
“As we discovered I was right,” said Dobis, “I was a lot more right than I thought I was on that day, but as a result, I did cast the right vote, and now we're back revisiting the mistake we made.”
Other lawmakers admit there was a lack of the type of information they needed, to fully appreciate what they were doing.
“Well I think it was passed, with the idea that we would come back and get better data,” said Senator Joseph Zakas of Granger.
But according to Representative Ryan Dvorak, the circuit breaker is a, “Good example of when the original intent of the bill gets mangled in the legislative process.”
Dvorak says the circuit breaker was born out of a concern for the homeowner, but things changed at the last minute. “Where the problem comes in, is when the bill was amended to also apply to businesses,” he said.
For instance, the cost of the cap when applied to homeowners in St. Joseph County is $17.2 million.
The cost of the circuit breaker when applied to commercial and industrial property is $52.3 million.
When the cap is applied to homeowners, the South Bend Schools lose $3.6 million.
When the cap is applied to commercial and industrial property, the South Bend School system loses $12.1 million.
“Corporations get tremendous windfall with that two percent cap,” says House Speaker B. Patrick Bauer of South Bend. “This is about huge cuts for large corporations.”
On one hand, lawmakers could simply undo much of what they did last year.
According to Representative Jackie Walorski, “What’s probably going to happen by the end of this session is that circuit breaker, the two percent cap, will probably be removed from corps and businesses, and left on for residential properties, so we don't tax people right out of places like St. Joseph County.”
But it remains to be seen how much sympathy St. Joseph County will get in a statehouse where some feel the problem is not the circuit breaker, but the handful of counties that can’t seem to live with it.
“In my county, for instance,” explains Representative Jeff Espich of Uniondale, “Even fully implementing the circuit breaker will not require the cutting of one dollar from local budgets.”
According to Espich, “Those counties screaming the loudest, where local government are saying we can't live within the circuit breaker, are those that tend to be high spenders, plain and simple.”
The process of solving the circuit breaker is off to a rough start in the legislature, where a bill designed to address the situation failed to pass on the House floor.