INDIANAPOLIS (WISH) — Battle lines were already forming Thursday over key policy differences as lawmakers wrapped up the first week of the 2025 legislative session.

Senate Republicans have introduced Gov.-elect Mike Braun’s property tax plan as Senate Bill 1, indicating first priority. They said the ascent of that issue to the top of the campaign for governor indicates how serious the growth in property taxes has become.

“We’re trying to respond to those concerns that folks have because we do know there are people who are being priced out of their homes because they cannot afford the property taxes that are due,” Sen. Travis Holdman, R-Markle, said.

So far, Braun’s tax plan involves limiting year-over-year tax growth to 2% for seniors, families with children under age 18 and low-income homeowners and 3% for everyone else. His plan also would expand the homestead deduction. Homeowners with an assessed value over $125,000 could deduct 60% of their home’s assessed value from their tax bill. Homeowners with an assessed value below $125,000 could take that deduction plus the standard deduction of $48,000. In addition, local property taxes enacted by referendum would be limited to 3% growth.

Democrats already call the legislation as a threat to the local property taxes on which schools and emergency services rely. They said if the property tax changes go through, the state should make up the difference using its own revenues rather than forcing localities to increase their local income tax rates. Sen. Fady Qaddoura, D-Indianapolis, said lawmakers could cut numerous programs unrelated to education, public safety or Medicaid to recover the costs. He said he personally would favor reducing the Indiana Economic Development Corporation’s budget, among other things.

“We are expected to pass a biennium budget that exceeds $40 billion,” Qaddoura said. “So, the question is not whether or not the state of Indiana can afford to fully fund Medicaid or fully fund education. The reason that we rely on property taxes at the local level is due to the failure of the state of Indiana to fully fund public education.”

Holdman said the property tax legislation is subject to change as it works its way through the legislature. He acknowledged the proposal would shift the tax burden back toward income taxes but added lawmakers are trying to be responsive to constituents’ concerns.

Lawmakers also expect a fight over Medicaid funding. State budget writers say Indiana’s Medicaid expenses are growing roughly 2 to 3 times faster than revenue. Sen. Ryan Mishler, R-Mishawaka, calls that trend unsustainable. He will sponsor legislation this year to, among other things, limit eligibility for the Healthy Indiana Plan to adults who make too much money to qualify for Medicaid but can’t afford their own health insurance. He said his legislation also will include work requirements, a limit to the number of people who can be on HIP at any one time and a limit to how many months one can spend on the program.

“For the last budget, we had an increase of $2.3 billion,” Mishler said. “Six months later, we find out we have an additional billion. So, that’s $3.3 billion over the last two years of Medicaid growth, and it’s just not sustainable without taking away from services and education.”

Democrats plan to move in the opposite direction. On Friday, Senate Minority Leader Shelli Yoder, D-Bloomington, said her party will push to expand Medicaid to cover doula services for pregnant women. They also plan to expand mental health care coverage. Yoder said cutting Medicaid services would only force more people to visit emergency rooms for health care.

“We will be right back where we started. We’ve spent the last several sessions trying to address bringing down health care costs and underfunding Medicaid will drive them back up,” Yoder said.

All of those priorities ultimately depend on the budget lawmakers approve this year. Gov.-elect Mike Braun has yet to release his budget recommendations, an action that will officially kick off the session’s budget negotiations.