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STATEHOUSE DISPATCH: Think the state's awash in cash? Think again

January 8, 2007

Most observers assume there will be a confrontation between House Democrats, led by Speaker Pat Bauer, D-South Bend, and Republican Gov. Mitch Daniels this session. They suggest it's like watching a hockey game and just waiting for a big fight.

But confrontation need not be a synonym for breakdown , and while legislative Democrats and Daniels have some different philosophies about the role of government, they also have some basic agreements on just what should be accomplished before the end of April.

Lawmakers reconvene Jan. 8 facing a very full agenda. They do so with a Republican governor and a Democratic House of Representatives for the first time in a generation, and new leadership in the Senate for the first time since the 1970s.

Solons must hammer out a two-year budget, their sole constitutional obligation this session. But even absent the bottom line and line items, there's a philosophical divide between legislators of both parties and the executive: Lawmakers generally view the budget as an end, while this governor, at least, sees it as a means to an end.

They will likely tackle education-funding issues and full-day kindergarten, revamping how local government finances its activities, and address the issue of privatization of government services in assorted contexts. Speaker Bauer says the problems of the state revolve around property taxes, health care and education, and those areas need to be addressed.

Overarching all these matters will be the amount of money lawmakers will have to work with. The governor asks that spending be limited to a 4-percent growth rate over the biennium based on a forecasted low rate of economic growth. That would mean "new" revenue of some $1.6 billion to $1.8 billion over the biennium. But the state faces some $2 billion of immediate obligations.

Why is new revenue spoken for? Lawmakers point to funding property tax replacement credits with some $100 million to $150 million (with property-tax growth seen at almost 15 percent in 2007); $265 million to $330 million in outstanding higher education commitments, repayment of deferred tuition support ($65 million) and other payments to local governments ($285 million); $100 million more for teacher pension obligations; Medicaid growth needs (some $220 million); and a new, $100 million request from the Department of Correction.

Add in $240 million to support a 4-percent funding increase for K-12 education and another $150 million for the fullday kindergarten proposal (as outlined by the governor), and public pension demands, and the bucks add up.

And that's before taking into account inflation or some $200 million in capital outlays that a Senate fiscal analysis suggests schools need to meet full-daykindergarten classroom requirements.

This also comes before any other potential spending, such as for the Daniels' administration's proposed health insurance program for low-income Hoosiers, raises for state employees, money needed to help make equitable tweaks in the school-funding formula, and scads of other items on which legislative largesse might be bestowed.

There are also some long-term issues on the agenda. A large bloc of lawmakers from both parties wants to eliminate property taxes by the end of the decade, and the property tax circuit breaker will be on the table as well, with businesses and homeowners finding themselves at odds.

On top of fiscal issues, much more is on the table, some due to the new Democratic House majority's releasing pent-up proposals, and others the result of assorted needs and the natural progression of events. These include a close review of privatization proposals; Interstate 69 funding and routes, and the proposed Indiana Commerce Connector; immigrationrelated matters; and gambling expansion.

As a result, the session's byword will be priorities. Legislators must determine just what matters are most important to them and the state and then winnow down the amounts needed even further.



Feigenbaum publishes Indiana Legislative Insight. His column appears weekly while the Indiana General Assembly is in session. He can be reached by e-mail at edf@ingrouponline.com.
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