INDIANAPOLIS —
Low-income families struggling to pay their heating bills may get some relief from an unexpected source: The multi-billion-dollar settlement from banks accused of abusive mortgage practices.
Indiana state Sen. Luke Kenley, an influential Republican who sits on the State Budget Committee, wants to use a portion of those settlement dollars to set up a trust fund that would free up more money to help utility customers who can’t pay their bills.
The proposed $30 million trust fund would be used to offset the revenue the state would lose through a Democrat-backed bill that Kenley supports: Legislation that could exempt Hoosiers who qualify for a federal energy-assistance program from having to pay the 7 percent sales tax on their utility bills.
The mechanics of what Kenley wants to do are a bit complicated, but the result would be simple: An additional $4 million a year that would go back into the pot of money used to help more than 160,000 people — most of whom are elderly, disabled or have young children — stay warm in the winter.
“This will help the most vulnerable Hoosiers,” said Rep. Peggy Welch, D-Bloomington, who authored the sales-tax exemption bill that Kenley and other Republicans support.
In her original bill, Welch sought to restore the sales tax exemption for Indiana residents who qualified for the federally funded Low Income Home Energy Assistance Program. That exemption expired in 2009 and was removed from last year’s budget process because of worries about the state’s declining tax revenues.
That meant that of the $84 million in LIHEAP funds allocated to Indiana last year, 7 percent went to pay the state sales tax on the electricity and gas used by 169,000 Hoosiers who’d qualified for the LIHEAP program. It was federal dollars going into the state coffers, instead of being used to help poor people pay their utility bills, Welch said.
Welch got her bill passed in the House with support from Republicans, but with a caveat: The sales-tax exemption could only last one year.
That’s when Kenley came up with his solution: He wants to tap into Indiana’s portion of the $25 billion lawsuit settlement that states reached with the five big mortgage lenders (Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial) that had been sued over their abusive mortgage practices.
Under terms of the settlement agreement announced last week, Indiana gets $145 million. Most of it will go to help 13,000 Indiana residents whose homes were improperly foreclosed on between 2008 and 2011. But another $45 million goes directly to the state. Kenley wants $30 million of that slice of the settlement to go into a trust fund that would cover the loss of state revenues from restoring the LIHEAP sales tax exemption for the next eight to 10 years.
That’s the amendment tagged on to Welch’s bill Tuesday, during a Senate tax policy committee hearing. The amended bill passed out of the committee without opposition and is now headed to the Senate for a full vote.
Maureen Hayden covers the Statehouse for the CNHI newspapers in Indiana. She can be reached at maureen.hayden@indianamediagroup.com.
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Mortgage-fraud settlement money could benefit low-income Hoosiers
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