The Indiana County Squeeze

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Two offices to watch this year

One sets the value your bill starts from. The other holds the income-tax lever meant to replace the money the county is losing. The rate itself comes from several local bodies — schools, the city, the township, the county — but these two offices are where this year's changes concentrate, and both are in play right now, on the ballot or writing the rules.

The assessor

Sets the dollar value on your property, the starting point for your whole bill. It's a heavier job this year, with the statewide repricing and the appeals that follow. Only 7 of the 92 assessor races are contested this November — in most counties, the office stays with whoever holds it.

The county council

The council elected this November will set the local income-tax rates in 2028 that are meant to replace the property-tax money counties are now losing. That is the biggest money decision these councils will make.

To see where these offices fit, look at how a tax bill is actually built. It only takes four steps.

01 · THE BASICS

How your property tax bill is built

Every bill is made the same way. The assessor sets a value, the state lets you subtract some deductions, your local governments set a tax rate, and the rate is applied to what's left.

02 · THE CAP

The cap, and why the county is the one that loses

Indiana's constitution sets a ceiling on every property tax bill. For a home, the ceiling is 1% of the home's value — the value the assessor set, before any deductions. For farms and rentals it's 2%, and for business property it's 3%. Voters added this in 2008–2010 to keep bills from climbing without limit.

Here's the part that trips everyone up. When the math from step one comes out higher than the ceiling, the difference does not get paid by anyone. It is erased from the bill. The homeowner is protected. But the city, school, township, and county that were counting on that money simply never receive it, and the state does not pay them back.

Add up every erased dollar across the state and you get the number driving this whole story. In a single year, the money county units lost to the cap jumped from $154.6 million to $210.8 million — a 36% increase.

03 · WHY IT'S BUILT THIS WAY

A tax revolt, locked into the constitution

The cap is unusual, so it's worth knowing where it came from. In 2007 and 2008, assessed values jumped and property tax bills spiked, and Hoosiers were furious. One state senator called the property tax "the most unfair and unpopular tax in America." Governor Mitch Daniels made the 1/2/3% caps the centerpiece of his answer, and the Republican-led legislature wrote them into law in 2008. Two years later, voters locked them into the state constitution by a 72% vote — the amendment carried by Sens. Luke Kenley, Patricia Miller, and Brandt Hershman. It was sold, start to finish, as relief for homeowners and taxpayers.

The design was fought over from the start. The tiering — homes protected most, business least — drew objections from the Indiana Chamber, which pointed out that a $200,000 home could end up paying less tax than a $100,000 business, and from the Farm Bureau, which opposed splitting rates by property type. Schools, counties, and the PTA warned it would starve local services. It passed anyway because it was popular. The one cushion built in, letting the hardest-hit counties leave their debt payments out of the cap, expired at the end of 2019. Counties absorb the full cap now.

SEA 1 was the same fight, fresh

If the 1/2/3% caps are Daniels' legacy, SEA 1 is the one tied to Governor Braun — it was the promise he ran on, and it carries his signature. But the bill itself was the legislature's work. Sen. Travis Holdman wrote it, and Senate leader Rod Bray and House Speaker Todd Huston drove it through. Braun's fight was that it didn't go far enough: he had promised to roll bills back toward 2021 levels, thought the Senate's version was too weak, and threatened to veto his own party's bill to force more relief, not less. SEA 1 also carries the most weight right now. The caps set the ceiling fifteen years ago; SEA 1 is what shrank the taxable base, froze how fast levies can grow, and turned a slow, familiar drain into this year's pressure.

His original 2025 plan would have capped how much a bill could grow each year at 3% (2% for seniors and families), raised deductions, and delivered a promised 21% cut worth more than $1 billion in the first year. His own Senate pulled most of it out. Sen. Travis Holdman, the bill's author, rewrote it because the full plan would have blown a hole in local budgets, and what came back was smaller and slower: the deduction phase-out, a freeze on how fast levies can grow (0% in 2026, then 1% and 2%), a 10% homeowner credit capped at $300, a first-time homebuyer credit, and a county deferral option.

Then it went to the House, and the fight got sharper. Rep. Jeff Thompson wanted to strip the bill and give homeowners more by raising taxes on other classes of property to pay for it. Braun thought the Senate version was too weak and threatened to veto his own party's bill, noting out loud that lawmakers could override him with a simple majority. Testimony ran past 10 p.m. The schools pleaded for care — Christopher Lagoni of the small and rural schools association asked lawmakers to "use a scalpel instead of a cleaver." A Parke County commissioner, Jim Meece, said his county had already maxed out its excise, EMS, and wheel taxes and had "no fluff left to cut." The bill passed the Senate 27–22, after midnight, and Braun signed it the same day.

Here is what all of that produced. The relief to any single homeowner is small — Rep. Ed DeLaney put the average saving at about $48 — while the bill's own fiscal notes show roughly $744 million cut from public schools. And the "relief" leans on the very thing it was meant to reduce: cities can now levy a local income tax of up to 1.2%, so a homeowner earning over $30,000 in those places can end up paying more overall. Tiny relief for the individual, a large hole for the local institution. That gap is the compromise, and it is why the same law can feel like almost nothing to a taxpayer and like a crisis to a county.

And this shape is close to unique

Most states that limit property taxes limit how fast an assessment can grow — California's Proposition 13 holds it to 2% a year, and Michigan, Massachusetts, and New York use similar growth limits. Indiana is one of the few that caps the bill itself at a share of current market value and makes local governments eat the difference. That specific design is why the pressure here is so direct, and why Indiana is a sharp early look at a squeeze that assessment spikes are now creating all over the country.

04 · THE TWO THINGS THAT CHANGED

Why so many bills are hitting the cap now

First: the state raised the values

Assessors price a building by what it would cost to rebuild it today, using cost tables the state publishes, then nudge that toward what similar properties are actually selling for. Three separate state moves pushed those numbers up at nearly the same time. The first hit the 2025 assessment: for a decade the state had been discounting its own cost tables, holding building values at 70% of the table price, and for 2025 it lifted that discount to full — so costs that had been marked down for ten years snapped back to par overnight. Base rebuild costs jumped hard, 30 to 50% on many commercial buildings. The second hit 2026: the underlying tables themselves, years out of date, were replaced with new ones built to match how far labor and materials had actually run up since the pandemic. The third is trending, which happens every year — assessors move values toward recent local sale prices, and where housing markets ran hot after 2020, that lifted homes on its own. Stack the three together and statewide assessed value rose about 12% in a single year: commercial up 16%, industrial up 16%, homes up 10%. None of it was a tax anyone voted on. It was the value side of the bill catching up all at once.

When the value the cap is measured against goes up, more bills reach the ceiling. The increase landed unevenly. A home's rebuild price is still adjusted toward real local sale prices, so its jump is softened. A farm building has no sales to compare against, and a state rule bars adjusting farm buildings toward the market, so the full increase passes straight through.

Second: a new law shrank the deductions

In 2025 the legislature passed Senate Enrolled Act 1. It left the 1/2/3% caps alone. What it changed was the deductions — the amounts you subtract before the rate is applied. The standard homestead deduction, a flat $48,000 today, shrinks each year toward zero by 2030. A percentage-based deduction grows to partly offset it, and businesses with under $2 million of equipment became exempt.

Trading a flat deduction for a percentage one helps higher-value homes and raises the taxable share of lower-value ones. The owner of an expensive house generally sees a cut. The owner of a modest home can see a double-digit increase. A farmer with buildings is hit hardest of all, because barns sit in the 3% class and get no new deduction at all.

05 · THE TRAP

Values go up, but the money counties can tax goes down

This is the piece that sounds backwards, so it's worth slowing down on. There are two different "values." Gross value is the headline number on your assessment notice. Net value is what's left after deductions, and it's the only number a county can actually tax.

Because the state raised gross values and the new law shrank deductions at the same time, the two numbers split apart. Across the state, gross value rose 10% or more in 56 counties. But net value — the taxable part — grew a median of just 5%, and in eleven counties it fell. Warren County is the clearest example: its gross value rose 29.4% while its net value slipped 0.3%.

When the taxable base grows slower than the amount a county is allowed to collect, the tax rate has to rise to raise the same money — and a higher rate pushes still more bills above the cap, which erases still more revenue. That loop is what county councils are now trying to get ahead of.

06 · THE ASSESSOR'S BIND

What an assessor can actually do, and what's crushing them

The assessor is the one official who can't play the funding game the council plays. An assessor does not set tax rates or shift money between funds. The job is narrow and hard: put an accurate, defensible value on every parcel, using cost tables the state hands down. To be clear about who does what — the state writes those tables, and the assessor applies them to each property, adjusting homes toward local sale prices. So when values jumped, it was a state decision the assessor had to carry out, and then defend at the counter. The assessor's "right move," then, is a different kind of thing: accuracy, defending the number, and keeping up with the workload.

What's putting pressure on them

The state raised the values, and the public blames the assessor, who didn't choose it. The two table resets sent a wave of angry owners to the counter, and the appeals that follow are heavy by law: when an assessment rises more than 5% in a year, the assessor carries the burden of proof, not the owner. Every large increase becomes a case the office has to defend with real sales evidence. Timing makes it worse — pending appeals stay in the value used to set 2027 rates, so any reductions land after budgets are already built. And offices are doing this short-staffed, in the middle of the 2026–2030 reassessment cycle. Lake's assessor said the office is "already understaffed"; Switzerland's said the county lacks the "resources, manpower or finances" to build its own tables.

What the right move looks like

The best assessors do three things. They trend to real sales — adjusting the state's table price toward what homes in the area actually sold for, which is exactly why homes rose less than barns. Rubber-stamping the table instead produces over-assessments, an appeal flood, and refunds later. They document the number up front, building the comparable-sales case before the appeals arrive, because the burden is on them. And they explain it in public before the anger builds. Tipton invited every county official and 2026 candidate to a parcel-level briefing by its consultant. Clear explanation lowers both the appeal count and the political heat.

07 · WHAT WORKS

The smart plays, explained

Facing the same squeeze, counties reach for the same handful of moves, and a few run them better than the rest. None of these are obvious, and most counties don't invent them. They come from two places: nearly every county hires a financial adviser — Baker Tilly alone advises 34 of the 92 — who models what the cap and SEA 1 will do to that specific county and recommends the fix, and counties copy each other, so a move that works in one shows up in its neighbors within months. The ones who did well usually ran that model early, in 2024 or 2025, instead of waiting for the first short budget. Every county works the same four levers — the property-tax levy, the local income tax, its cash reserves, and the timing of its debt. Here is how the best of them used each, and why it worked.

Led by: Hendricks · Bartholomew · Whitley

Why it works: property-tax revenue is now unpredictable — a county can lose millions to the cap in a year it never planned for. A written floor under each fund's cash forces saving in the good years, so a bad year means dipping into the cushion instead of cutting services or borrowing at a worse rate. Hendricks adopted one and pushed its general-fund cash to 338 days, close to a full year of operating money in the bank. Whitley and Bartholomew each built reserves above $6 million. When the cut landed, they had room to move; counties living hand-to-mouth, like Knox, were taking emergency loans from their own Rainy Day funds.

Led by: Howard (with Kokomo)

Why it works: the local income tax a county collects is split with its cities by a formula tied to their property-tax levies, so a city normally takes a big share. A jail, though, serves the whole county, city residents included. Howard County got Kokomo to voluntarily give up its income-tax share for two years, sending the entire jail tax to the county — so the county funded the jail with a 0.4% income tax instead of the roughly 1.2% it would have needed alone. Same building, a third of the tax. It only works with real political cooperation, which is why it's the only signed county–city deal in the state, out of 35 that are talking.

Led by: Marshall · Randolph

Why it works: when a county finishes paying off a bond, the property-tax rate that was covering that debt is set to expire. Marshall County had a jail-bond rate about to drop off and, instead of letting it lapse, redirected the same rate to jail operations by a 7–0 vote, inside the narrow legal window to do it. The taxpayer sees no increase — they were already paying that rate — and the county keeps about $7.1 million a year it would otherwise have lost. Randolph played the clock the other way, issuing its jail and morgue bonds before the new rules took effect to lock in cheaper borrowing. Both moves live or die on timing: a window that's open briefly, then closes.

Used by: Floyd · Dubois · 11 others

Why it works, and where it stops: the squeeze is on the property-tax levy specifically, and the levy has a growth cap. Local income tax does not. So a county can take costs it used to pay from its property-tax-funded general fund — jail medical, dispatch, EMS, employee health insurance — and pay them from income-tax funds instead, lowering what it needs from the capped levy. Dubois moved $4.2 million of health insurance this way "to meet the levy limit"; Floyd shifted jail and public-safety costs into a public-safety income tax. Thirteen counties did some version of it. But it has a floor: the money still comes from taxpayers, through a different tax, and once you've moved everything you can, there's nothing left to shift. It also makes the general fund look nearly empty — the trap in the next line.

08 · WHO'S IN TROUBLE

The counties genuinely under pressure

No county has missed payroll or defaulted. But a screen of the numbers against councils' own records finds 13 counties straining both ways, and the squeeze concentrates in mid-size counties — big enough to run jails and carry debt, without a large commercial base to spread the loss. The sharpest cases, and why:

The worst cap loss in the state — 25.3% of its levy, $8.5M gone — on top of $91.8M of debt. Its council president told departments "just don't do it" about routine spending increases.

The largest dollar loss anywhere: about $46M by 2028. A council president there called it "a financial crisis with Senate Bill 1." The county held its budget flat and cut vacant jobs.

Loses $12.2M by 2028 and $17.6M to the caps in 2026. It gave no general raises for 2026.

Cut about $2M from 2026 with a $100M jail coming due, and debated a Rainy Day draw after the auditor warned that fund partly backs the jail bond.

These four didn't miss for lack of effort — they got locked in before the rules changed. Each had committed to a jail years earlier, when revenue looked steady, and a jail bond is a fixed payment that doesn't shrink when the caps take a bite, so it eats the shrinking base first and leaves little to restructure. And a jail is no escape from the cap. The only taxes the ceiling can't reach are the ones voters approve at referendum; a normal jail bond, financed the quiet way through a building corporation, sits inside the cap like everything else. So the payment survives and the services around it — the sheriff, the courts, the general fund — absorb the loss. It is the opposite of a way out. And the base shrinks fastest exactly here. These are older industrial counties — Muncie, Anderson, Gary, South Bend — full of lower-value homes already sitting at the 1% and 2% caps, so when values rose the circuit breaker erased the increase instead of letting the county collect it, while a thinned-out commercial base left no one to spread the loss onto. The counties that got ahead of this moved in 2024 and early 2025, before SEA 1 froze how fast levies can grow — refinancing debt, locking in rates, raising the local income tax while the base was still whole. By the time these four saw the full 2026 numbers, that window had closed and the freeze was on, so they couldn't grow their way back out.

The common thread: these are counties where values rose, the taxable base didn't keep up, and a big obligation — almost always a jail — is landing at the same time.

09 · THE VERDICT

Was this misjudged fiscal policy?

It's fair to ask plainly. Was this misjudged fiscal policy, or a deliberate trade doing exactly what it was meant to? The answer depends on what you think the point was, so the fairest thing is to put the real cost on the table and let both cases stand.

First, what that $744 million actually means

"Cut from schools" is slippery, so here is the plain version. Indiana funds schools two ways. The state pays for classroom instruction — teachers, the day-to-day of educating a child — out of the state budget, and SEA 1 does not touch that. Local property tax pays for the other half: the buildings, the buses, the maintenance, the operations fund. SEA 1 reduces the property tax flowing into that local half by about $744 million over three years, compared with what schools would have collected under the old rules. The money is not taken and handed to someone else. It is simply not collected — the homeowner and the business keep it. For a school that means fewer dollars for buildings and buses, which it has to absorb, defer, or try to win back at the ballot. That last option is why a record number of Indiana districts put a property-tax operating referendum on this November's ballot.

Who comes out ahead

The clearest winner is business. The bill exempts business equipment up to $2 million, returning roughly $1.2 billion to companies over the plan — the single largest piece of it, and it favors firms with a lot of equipment. Higher-value homeowners get a real cut, and farmland and rental owners get new deductions. The ones paying for it are schools, through their operations fund; mid-size counties, through the caps; and, more quietly, lower-value homeowners and farmers with buildings, whose bills can rise. In plain terms, it shifts the tax burden off of business and off of expensive homes and onto local institutions and the people at the bottom of the housing market.

Both the caps and SEA 1 were sold as relief for homeowners, so it's worth saying plainly that the single largest dollar winner was business. That isn't a partisan point. A Republican supermajority wrote the law, a Republican governor pushed it, and the sharpest fight was inside the GOP — the governor against his own Senate — while Democrats mostly argued it didn't do enough for renters. It reads as a tax-policy trade, not a left-right one.

The case against it

This case is about proportion and process, not motive. The relief to any one homeowner is small next to the institutional cost, and part of the "relief" turns back into a tax: cities and towns can replace lost revenue with a local income tax of up to 1.2%, and some, like Vanderburgh County, are already planning to — so a homeowner there earning over $30,000 can end up paying more overall. It also moved fast, through two redrafts and an after-midnight Senate vote, over the repeated warnings of the officials who actually run and fund these services: school superintendents, county commissioners, and county auditors. Governor Braun thought the Senate's weaker version missed the mark and threatened to veto his own party's bill. A Republican senator, Spencer Deery, voted no because the state's revenue forecast wasn't finished and he worried that uncertainty could deepen the damage to schools.

The case for it

This case runs along familiar lines. Indiana has worked for two decades to hold property taxes down and keep local spending growth in check, and SEA 1 continues that on purpose. Supporters argue that predictability for taxpayers is worth real money, that a slower-growing local government is a healthier one, and that the counties handling the change well — Hendricks, Pike, Marshall — show the system rewards planning. By that standard it isn't a failure at all. It is the policy working as intended, and the strain is local government catching up to a discipline the state meant to impose.

The test ahead

Which case is right isn't settled, and it will be decided by what happens next rather than by who warned whom. The markers are close. The first repriced bills arrive in 2027, councils set the new income-tax rates in 2028, and the relief credit some counties lean on ends in 2029. If counties adjust, reserves hold, and schools win enough referendums to keep operating, this reads as a hard but manageable reset — the kind Indiana has asked local government to make before. If mid-size counties and their schools can't close the gap, it reads as a cost the state passed down faster than the people absorbing it could plan for. The honest answer today is that it is a real, deliberate trade — lighter taxes now for tighter local budgets later — and whether the trade was worth it is a 2027-to-2029 question, not a 2026 one.

10 · THE GAME PLAN

What to actually do about it

Being squeezed is a management problem, and the counties that get ahead of it come through fine. What separates them is timing and candor — modeling the hit before it lands, choosing on purpose, and being straight with the public about the numbers. Below is the playbook the strongest counties ran, then what it means for a household depending on what it owns.

For the county's offices — the next 24 months

• Model the county's own numbers now, not the state's averages. Every county's net assessed value, cap loss, and three-year gap are different. The counties making calm choices — Pike, Morgan, Hendricks — ran that model in 2024 and 2025. The ones cutting mid-year are the ones that waited for the first short budget to find out.
• Set a written reserve rule and hold to it. A cash floor under each fund — many target around 180 days of operating cash — turns a bad revenue year into a draw on the cushion instead of a mid-year cut or short-term borrowing. The spread shows in the records: Hendricks built its general fund to roughly a year of cash, while thinner counties like Knox have had to lean on their own Rainy Day funds. Reserves don't close the gap; they buy the time to close it on the county's terms.
• Make the levy decision on purpose. When net value is flat or falling, a county has three honest options — hold the levy and absorb it, cut, or let the rate rise. The healthy ones pick one openly and say why, in a public meeting, before the math decides by default.
• Open the city cost-sharing talks early. The income tax a county levies is split with its cities by formula, so a facility that serves everyone — usually a jail — can be funded lopsidedly for a few years. The share-back works best where one city holds most of the county's population and income-tax split: Howard and Kokomo signed the only such deal in the state, and the same structure fits pairs like Delaware–Muncie, Madison–Anderson, Vigo–Terre Haute, and Vanderburgh–Evansville. Thirty-five counties are talking; one has closed. The lever rewards whoever starts first.
• Inventory the one-time windows, with their closing dates. Two are worth checking now: an expiring bond rate the county can redirect instead of letting it lapse, the way Marshall kept about $7.1 million a year, and a bond it can still issue under the old rules before they tighten, the way Randolph locked in cheaper borrowing. Both are narrow legal windows that close quietly.
• Fund the assessor's office. The county's entire levy is spread across one number — the total net assessed value of the county — and the assessor produces it. The office doesn't re-price every parcel by hand each year: Indiana runs an annual adjustment toward recent sales and a four-year cycle in which about a quarter of parcels are physically reviewed, all on cost tables the state sets. What the office controls is the accuracy of that base and its ability to defend it. An understaffed office produces a weak roll, invites a wave of appeals, and every appeal it loses shrinks the base after the budget is already set — forcing a rate increase or a shortfall a year later. Paying for the staff and data to keep the roll accurate protects the number the whole budget divides across.
• Be clear about where the money actually sits. A county that has moved costs into income-tax funds should say so to its board, its rating agency, and its residents, so a thin general fund isn't read as a broke county. Thirteen counties have shifted costs this way, and most hold far more cash across all funds than the general fund alone shows.

If you live there — what to watch, by what you own

Two things on this year's ballot decide more than they'll get credit for. The first is the assessor, where a county has a contested race, because that office sets the value under every bill. The second is the school referendum — a record number of districts, 38 and counting, are asking voters this November.

The choice is concrete. A school's operations money — buses, utilities, building maintenance, support staff — comes from local property tax, and SEA 1 cuts into it. The caps erase any property tax a school tries to collect above the ceiling, with one exception the law carves out: a levy the voters approve directly, at a referendum. So a referendum is the only tool a district has to replace what it lost. A yes vote continues or adds that tax, and the school keeps the funding it has now. A no vote leaves the gap, and the district closes it the ways it can — putting off roof and bus repairs, running larger classes, and cutting what isn't legally required first: electives, arts and music, athletics, and some bus routes.