INDIANAPOLIS | The state is giving local government an extra two months to set budgets for next year, a move that will allow cities, schools and other service providers to better adjust to a property tax overhaul legislators approved in the spring.

Cheryl Musgrave, commissioner of the Indiana Department of Local Government Finance, issued an order Friday extending the budget deadline from Sept. 30 to Dec. 1. It's assumed that by then most counties will have mailed late property tax bills, which will give local budget makers a better idea of what they can spend.

"By extending this deadline, local officials will have more time and information to plan and adopt budgets that will better match tax bills with the taxpayers' ability to pay," Musgrave said.

Hammond City Council President Dan Repay said the extension will give city officials more time to plot spending reductions.

"I think it's good news," he said. "Everyone is rushing now."

State analysts say Hammond has to trim an estimated $3.5 million to comply with new property tax caps created by the General Assembly. Overall, local government in Lake County must trim about $96 million, compared to just $1.4 million in Porter County

The so-called circuit breaker will cap homeowner tax bills at 1.5 percent of assessed value next year in Porter County, meaning the owner of a $100,000 home would pay no more than $1,500 in taxes. Legislators created a special debt exemption for Lake County, putting the ceiling on homeowners' bills there closer to 2 percent.

The caps, which provide taxpayer relief by restricting the revenue that flows to local government, are helping to usher in what Gov. Mitch Daniels calls a "new era of taxpayer protection." But there's still a hangover from last year, when region tax bills went out more than six months late. Lake and Porter are among 32 counties that have yet to win state approval for their 2008 budgets, which had been making it difficult to plan for next year.

Lobbyists for associations that represent Indiana counties, cities and schools released statements Friday praising the state's decision to extend the budget deadline.