Indiana's new property tax cap law affects Bloomington's budget

By: Taj Simmons

BLOOMINGTON — Cities across Indiana are figuring out their possible budgets for 2026. Bloomington is dealing with a smaller budget than in 2025, and city leaders say the new property tax cap law is the reason why.

"It's been difficult," said Bloomington city controller Jessica McLellan, who is in charge of the city's budget. "It's been a challenging year so far to try to get ready for a lot of unknowns."

Bloomington's proposed 2026 budget is now ready for the public to read. It projects the city's general fund income will decrease from $58 million this year to $54 million next year.

"It's not easy to cut things, and it's not easy to tell people you need to make hard choices," McLellan said.

Bloomington's total proposed 2026 budget is $147 million of expenses against $120 million of revenue. More than a third of that revenue comes from property taxes, and another third comes from Bloomington's local income tax.

McLellan said city departments tried to cut what they could from their budgets before their reports even made it to her desk.

"I don't know all of the different ways and all of the different choices they made, but I know every department has left things on the cutting room floor," McLellan said.

The city changed its budgeting approach to focus on six key areas: Public Safety, Affordable Housing and Homelessness, High-Performing Government, Economic Development, Community Health and Vitality, and Transportation.

Despite the property tax changes, McLellan is proud that the city could deliver an acceptable budget proposal under the circumstances.

"This budget hopefully gets closer to accomplishing all of our goals, and we all want the city to be the best that it can be."

City leaders will present the proposed budget to Bloomington City Council throughout next week. The first hearing is scheduled for Monday at 5:30 p.m.