Legislature and State Government and Statehouse Dispatch and Opinion and Government & Economic Development

FEIGENBAUM: Early committee hearings were mostly theater

January 2, 2010

In what has become an increasingly common phenomenon, the General Assembly once again convened a series of high-profile legislative committee hearings during the month before lawmakers return en masse to Indianapolis for their work.

The December hearings by both House and Senate committees focused on issues that legislative leaders designated as key session priorities, but the committee work was largely unremarkable, with predictable testimony derived from the usual suspects.

Panels made a head start on some measures that would amend the property tax caps into the Indiana Constitution (and a trailer bill to prevent assessments from unfairly increasing to compensate for lost local government revenue), delay implementation of new unemployment insurance rates (to preserve jobs), and tighten some loopholes in ethics and lobbying laws.

But the work was more theatrical than substantive; nothing emerged from the hearings that was not expected (or, as some cynics might suggest, that was not scripted), and it is questionable as to just how important the early action was.

Indeed, committee work is where the legislative “heavy lifting” is typically performed, yet lawmakers acknowledged that some of the items they approved still needed major work—to be handled on the floor.

So December’s work largely amounted to the legislative equivalent of a beer slogan: great rhetoric, less filling.

Many hours of committee work must still be devoted to complicated and controversial matters involving renewable-energy incentives and net-metering policies; legislative redistricting standards and the process by which districts will be drawn; whether (and how) to help the state’s gambling industry, change the land-based casino ban, and allow casinos in new areas; taking additional steps toward Kernan-Shepard Commission local government reform; and adjusting state tax policy to better comport with the new economic realities.

That last item—state tax policy—may be a new element this session.

You may recall that the newly revitalized Indiana Fiscal Policy Institute made a splash during the fall with a report suggesting Indiana could help fill a fiscal shortfall by extending the state sales tax to some array of services.

While that analysis didn’t spur lawmakers into a contest to cover the most services by a sales tax, the proposition did prod some to muse publicly about sales taxes in relation to the budget deficit.

At the Bingham McHale Legislative Conference, Senate Committee on Appropriations Chairman Luke Kenley, R-Noblesville, took note of recent Department of Revenue statistics about the miserly level of use-tax remittance by Hoosiers. He suggested that requiring Internet retailers to collect and forward sales tax to the state of Indiana on purchases from within Indiana could boost state coffers by $150 million to as much as $300 million annually.

Just as important, Kenley observed, such a requirement would eliminate the “competitive disadvantage” Hoosier retailers confront when our 7-percent sales tax is compared with no tax and free shipping online.

He wants to open a dialogue with the Indiana congressional delegation about tightening interstate online taxation policies, and may also examine what can be done with state laws to collect more revenue already due the state and place Hoosier retailers on a level playing field.

Of course, at the heart of the state sales tax issue, much of the talk of changing casino-related laws, and the unemployment insurance tax rate and taxable wage base changes headed into 2010 is the economic straits facing the state and region.

December’s revenue forecast— with the new methodology ordered up by Republican Gov. Mitch Daniels—was disheartening, making it clear state reserves will be exhausted and state coffers face a serious structural deficit this budget cycle.

Lawmakers are unanimous in their reaction to the new numbers.

“Any legislation that has a fiscal [impact] is going to see the circular file,” promises Senate President Pro Tem David Long, R-Fort Wayne.

“I won’t hear any bills that spend more money,” vows House Committee on Ways and Means Chairman Bill Crawford, D-Indianapolis.

Republican and Democratic legislative fiscal leaders also promise “no tax increases” this session.

While lawmakers will largely defer the specific necessary (unpopular) program cuts to the gubernatorial knife, they may become involved in forging a rubric for those cuts, particularly those related to K-12 education.

To determine how the process might evolve, pay close attention to a pair of specific indicators.

Within a few days, December revenue collection data will be available. If sales taxes lag 2009 numbers or the latest forecast, cuts may need to be even deeper than contemplated.

Similarly, if the January revenue collection report (which you will see in early February) shows that income-tax collections are significantly behind 2009 levels and the forecast, that could portend an even tougher year than expected, and lawmaking will reflect that.•

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

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