Matt Greller, CEO, Aim
In the run-up to the 2025 legislative session, lawmakers and the governor made a clear promise to deliver property tax relief for Hoosiers. Local leaders understand that commitment and are eager to provide efficiencies and relief where it makes sense. At the same time, many cities and towns around the state are now beginning to see the other side of the ledger come into focus.
As local governments move through their first full budget cycles under Senate Enrolled Act 1, a clear trend is emerging: the law significantly restricts long-term revenue growth at the very moment cities and towns are confronting rapidly rising costs. When revenue growth is compressed and fiscal uncertainty increases, the outcome is predictable — major cuts to local services.
Because employees account for the largest share of municipal budgets, hiring freezes and the anticipated elimination of positions have been the most common responses so far. But personnel decisions are only part of the story. New public safety buildings and equipment are being shelved, neighborhood sidewalk programs are being canceled, community amenities that were expected to open in 2026 are now on hold, and some communities can no longer afford to match Community Crossings grants needed to upgrade failing infrastructure.
If SEA 1 is not adjusted, what does the next decade look like on the ground?
It looks like delayed or canceled police and fire stations, and departments that can’t field enough personnel to meet call volumes. It looks like increased response times when seconds matter.
It looks like streets and roads going longer between repaving, and recent projects deteriorating faster because basic maintenance has been pushed off.
It looks like shuttered pools, reduced hours at parks and community centers, fewer programs for kids and seniors, and less support—both financial and in-kind—for the parades, festivals, and local events that define small-town Indiana and city neighborhoods alike.
Impacts coming
None of this happens all at once. It happens quietly over time: a delayed hire here, a project that gets “pushed to next year,” a park program that doesn’t return. By the time the impact is obvious, turning around will be far more expensive.
These fiscal pressures are not confined to a single city or one part of Indiana. Under SEA 1, local leaders are wrestling with:
- A lack of reliable state revenue projections for 2026, 2027, and 2028 income tax revenues, which makes responsible long-range budgeting far more difficult.
- A new annual adoption process for the income tax that introduces instability, particularly for communities under 3,500 residents that must petition their counties each year for distributions.
- Technical complications with debt coverage and TIF neutralization that put infrastructure and economic development projects at risk.
To be clear, local leaders are not opposed to tax reform. They are asking for balance. Communities across the state are already stretched thin as they work to meet residents’ expectations and maintain the amenities that attract new residents and businesses. Any tax reform must be crafted in a way that supports — rather than undermines — the fiscal health of municipalities. If state and local leaders approach the 2026 session with that shared understanding, it can be productive for everyone.
Modifications, not repeal
That is exactly the spirit in which Aim, Accelerate Indiana Municipalities, is engaging on SEA 1.
We are not asking lawmakers to repeal the law or abandon their policy goals. We are asking for targeted amendments that maintain the promise of tax relief while making SEA 1 workable for the cities and towns that must live under it.
In November, Aim is convening regional roundtables — including in Mishawaka and nine other communities — to hear in detail how SEA 1 is affecting local budgets and services on the ground. Based on what we are already hearing from our members, Aim has prepared a package of technical fixes to SEA 1: improvements to the annual adoption and distribution process; clearer and more dependable revenue projections; adjustments to rate splits so municipalities are not structurally disadvantaged; greater fiscal certainty for small communities; and corrections to debt-coverage and TIF provisions so local infrastructure and economic development tools continue to function as intended.
At the same time, we took seriously the message from lawmakers in 2025 that local government must continue to modernize and pursue efficiencies. Alongside our SEA 1 proposals, Aim is advancing a series of modernization and efficiency ideas to help local governments operate at an even more effective level. A key priority is updating the state’s government modernization statute to make it easier and more flexible for units to restructure, share services, and collaborate where it benefits taxpayers. We are also exploring streamlined service-delivery approaches and better use of technology and data so communities can stretch every dollar as far as possible.
The message is simple: the General Assembly sets the fiscal framework, and local leaders want to be partners in making that framework work. Aim is coming to the table with solutions on both sides of the equation — responsible, targeted fixes to SEA 1 and serious ideas to modernize and improve local government.
If we work together in 2026, Indiana can honor its commitment to taxpayers while still ensuring that cities and towns have the tools they need to provide core services and build the quality places where Hoosiers want to live and raise their families.
SOURCE: Indiana Capital Chronicle