Indiana Governor Gains Full Control Over University of Indiana Trustees with Passage of Budget

Gov. Mike Braun will have sole power to hire and fire Indiana University Board of Trustees under a budget bill approved in early morning hours of Friday. The IU Alumni Association previously chose three of the nine university trustees, but the budget bill includes a provision to have all trustees appointed by the governor and allows the governor to remove any elected by the alumni association.

The changes were added during the conference committee stage. No legislation to change the appointment of the IU Board of Trustees or add new reporting requirements was ever filed, nor was any amendment offered for floor debate. Democrats blasted the provision as a power grab.

"The changes were made to ensure IU is using taxpayer money in the most efficient manner possible," Rep. Jeff Thompson, chair of the House Ways and Means Committee, said.

The bill does not make similar requirements for Purdue University.

Additionally, lawmakers agreed to impose an excise tax on any nonprofit hospital that charges facility fees of more than 265% of the Medicare reimbursement rate. The tax would begin at 33% next year, rising to 100% beginning in 2028. If a hospital's total fees exceed 300%, it would lose nonprofit status.

Braun and Republican legislative leaders have said Indiana was well-positioned to meet the revenue shortfall. State budget analysts have said they expect reduced corporate income tax revenue due to economic turmoil caused by President Donald Trump's tariffs.

The House approved the budget bill with a vote of 66-27, while the Senate voted 39-11.

Raising the cigarette tax: The biggest change is the doubling of Indiana's cigarette tax, something lawmakers have been debating for years. All the extra money raised will go to Medicaid, which is fast-growing in the state budget. The tax on a pack of cigarettes and other tobacco products will rise from about 99.5 cents to $2, a sum lawmakers expect will bring in roughly $380 million-400 million over the biennium.

Tax increase on other tobacco and smoking products: Alternative nicotine products will be taxed at 50 cents per ounce, up from 40 cents. Closed system cartridges will be taxed at 30% of the wholesale price, up from 15% currently. This is only for systems where the cartridge can be separated from the vape system as a whole.

Moist snuff goes up to 50 cents per ounce, up from 40 cents. Tobacco products other than moist snuff go up to 30% of wholesale price, up from 24%. Cigars also go up to 30% of wholesale price, up from 24%. Maximum tax on cigars is tripled from $1 to $3.

K-12 budget growth: K-12 funding will grow by 2% each of the next two fiscal years. Additional money was put in the second fiscal year to cover a program to expand vouchers for school choice.

Higher education: A 5% cut to higher ed's general operating budget, along with a 5% cut to the repair and rehabilitation budget that covers building expenses.

Public health: The expanded public health services that lawmakers approved in the 2023 session will receive $40 million in each of the next two budget years rather than $100 million each fiscal year. Those services already were set to lose money compared to the 2025 budget year, when they received $150 million.

Indiana Economic Development Corp.: The agency took a 25%-30% cut, which was more than other state agencies. The IEDC has been under fire recently for its transparency in spending.

K-12 education will still receive a 2% increase in funding in each of the next two years, as lawmakers had planned before the new revenue forecast was released. Medicaid services also are left untouched, as are the Department of Child Services, the Department of Correction and the pre-1996 teacher retirement fund.

School vouchers? Lawmakers will proceed with implementing universal school choice vouchers beginning with the 2026-2027 school year.