Indiana's Two-Year Budget Finalized, Includes $2.4 Billion Shortfall

The budget includes spending cuts and a tobacco tax hike.

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INDIANAPOLIS - The 2025 legislative session ended with passage of the state's next two-year budget as well as tax relief and other key priorities for Hoosiers.

The budget reduces government spending as the state faces a $2.4 billion shortfall. To help with the shortfall, Hoosiers will see a tax hike on cigarettes. Hoosier smokers can expect to pay $2 per pack in taxes on cigarettes. This is roughly double the current rate. Other tobacco products such as vapes, e-cigarettes and chewing tobacco will also be part of the tax hike. 

Public health funding was cut from $100 million last year to $40 million, a 60 percent cut. 

While private school vouchers expand to become universal in year two of the budget, traditional public schools — which serve 90% of Indiana’s children — receive a flat two percent increase. The final budget locks in 85 percent funding for virtual charter schools. 

Governor Mike Braun released the following statement: 

“We’ve accomplished a great deal this session. Despite the challenges posed by economic uncertainty, we embraced an entrepreneurial spirit, tightened the belts of state government, and passed a responsible biennial budget that will keep Indiana among the top states in the nation to raise a family and start a business. We took significant steps to make healthcare more affordable and transparent, empowered parents to take the lead in their children's education through universal school choice, and delivered meaningful property tax relief for Hoosier homeowners, farmers, and small businesses.This was just the first legislative session of my administration, and I’m proud of the progress we’ve made. I look forward to building on this momentum and continuing to work with our legislature to make Indiana a beacon of freedom and opportunity for years to come."

Democratic Senate Minority Leader Shelli Yoder (D-Bloomington) released the following statement: 

"We walked into this session with a historic opportunity — and this budget squandered it. We could’ve invested in working families. We could’ve fully funded schools. We could’ve protected public health. We could’ve provided access to child care and pre-k.  Instead, this budget turns its back on Hoosiers and hands over the reins to those who already have the most.”

To learn more about new laws, visit www.iga.in.gov.