Bill Summary – FastDemocracy

LEGISLATIVE SERVICES AGENCY
                OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
                                     200 W. Washington St., Suite 301
                                          Indianapolis, IN 46204
                                              (317) 233-0696
                                                 iga.in.gov
                                FISCAL IMPACT STATEMENT
LS 6505                                                            NOTE PREPARED: Jan 25, 2021
BILL NUMBER: SB 106                                                BILL AMENDED: Jan 25, 2021
SUBJECT: Minimum Wage.
FIRST AUTHOR: Sen. Mrvan                                           BILL STATUS: CR Adopted - 1st House
FIRST SPONSOR:
FUNDS AFFECTED: X GENERAL                                          IMPACT: State & Local
                X DEDICATED
                X FEDERAL
Summary of Legislation: The bill increases the minimum wage paid to certain employees in Indiana as
follows: (1) after June 30, 2022, from $7.25 an hour to $10 an hour, (2) after June 30, 2023, from $10 an hour
to $13 an hour, and (3) after June 30, 2024, from $13 an hour to $15 an hour. It provides that after June 30,
2025, and each subsequent June 30, the hourly minimum wage increases at the same percentage as any
increase in the Consumer Price Index (CPI) for the preceding calendar year. The bill also makes technical
corrections and corresponding changes.
Effective Date: July 1, 2021.
Explanation of State Expenditures: Wages of State Employees: Increasing the state minimum wage to $10
per hour by July 1, 2022 could increase state expenditures by approximately $700,000 in FY 2023, while the
$13 per hour increase in FY 2024 could increase expenditures by around $9 M. The bill also calls for
continued increases to the minimum wage annually thereafter. The increase in expenditures would continue
to grow each year and would be significant. Only about 1% of state employees earn less than $10 per hour,
and would see a wage increase due to this bill in FY 2023; however, 6% of state employees earn less than
$13 per hour, and 13% earn less than $15 per hour. Approximately one-third of the costs for wage increases
would come from the General Fund. This estimate is based on point in time employment estimates for state
employees, and includes the cost of fringe benefits. [This bill has the potential to impact all agencies as
employers, thus impacting all funds that provide operating funds to agency staff.]
An increase in the state minimum wage may also affect expenditures by the State Educational Institutions
as well as private organizations that do business with the state. These requirements may increase contract
costs for the state. These potential increases are indeterminate at this time.
SB 106                                                1
Additional Information - The Bureau of Labor Statistics estimates 32,000 people in Indiana earned the
minimum wage (or below) of $7.25 per hour in 2019. Indiana has 2.3% of national employment, and 2.0%
of the national share of hourly wage earners at or below the minimum wage. Based on information from the
State Personnel Department, an average of approximately 470 persons employed by the state of Indiana were
paid an hourly rate below $10 per hour in 2019 and 2020, and nearly 2,000 earned less than $13 per hour.
These estimates include seasonal and part-time workers.
Explanation of State Revenues: Adjusted Gross Income (AGI) Tax: Increasing the minimum wage of
certain employees will increase the tax revenue collected from individual AGI tax beginning in FY 2023. The
increase in AGI tax revenue from the increases in wages to state and local employees will generate
approximately $320,000 in FY 2023 and $1.4 M in FY 2024. Revenue from the AGI tax is deposited in the
state General Fund. The estimates were calculated using the state effective tax rate of 2.94%.
To the extent that private-sector employees earned increased wages under this bill, state income tax revenue
would increase. The impact would depend on hiring and wage decisions and is indeterminate at this time.
Explanation of Local Expenditures: Wages to Local Employees: LSA estimates the provision may impact
around 6,000 local employees in FY 2023 and 17,600 local employees in FY 2024. This is based on the
estimate of local minimum wage earners nationally and uses the wage distribution of state employees to
estimate the number of local employees earning below the proposed minimum wage. These minimum wage
increases could increase expenditures for local units by $21 M in FY 2023 and by $88 M in FY 2024. The
increase in expenditures would continue to grow. This only includes cost increases to wages. The estimated
number of local employees earning fringe benefits is indeterminable at this time. To the extent many of these
positions may be part-time or seasonal in nature, the true cost would be different.
Explanation of Local Revenues: Local Income Taxes: Increasing the minimum wage of certain employees
will increase the tax revenue collected from local income taxes. This increase in wages will generate
approximately $173,000 in FY 2023 and $772,000 in FY 2024. This is estimated using the average local tax
rate of 1.59%.
To the extent that private-sector employers pay increased wages under this bill, local income tax revenue
would increase. The impact would depend on hiring and wage decisions. The effect is indeterminate at this
time.
State Agencies Affected: All agencies as employers.
Local Agencies Affected: All units as employers.
Information Sources: State Personnel Staffing Data, Bureau of Labor Statistics:
https://www.bls.gov/opub/reports/minimum-wage/2019/home.htm,
https://data.bls.gov/cew/apps/table_maker/v4/table_maker.htm#type=0&year=2019&qtr=A&own=3&ind
=10&supp=1
Fiscal Analyst: Camille Tesch, 317-232-5293.
SB 106                                               2
Statutes affected: 
2. Senate Bill (S): 22-2-2-3, 22-2-2-4