STATEHOUSE DISPATCH: Senate doesn’t hesitate to check House, governor

Why do we have a bicameral legislature, with four-year terms for senators and two-year terms for House members? Because, as George Washington reputedly told Thomas Jefferson, the framers created the Senate to “cool” House legislation, just as a saucer was used to cool hot tea.

We’ve just seen evidence of this, and also of another important phenomenon, one that reminds us of just how separate our branches of government truly are.

We recently mentioned how the “adults” in the Senate were being asked to do the heavy lifting on House Bill 1001, the property tax relief measure that breezed through the House with overwhelming bipartisan support. That bill moved across the rotunda with an empty promise to eliminate the property tax by the end of the decade. It contained some more immediate relief, but was bereft of solutions for replacing the lost property tax revenue in the long term, putting pressure on senators to make the potentially politically unpalatable choices on revenue replacement.

The House bill also failed to fill the so-called local government fiscal toolbox. Cities and towns asked the Legislature for more home-rule flexibility-including taxing authority to compensate for reduced property tax revenue-a move supported by Gov. Mitch Daniels.

So it was left to the Senate Tax & Fiscal Policy Committee to piece the bill together with enough assorted components to keep key concepts alive, and allow them to be sorted out over the final three weeks of the session in private negotiations and conference committee deliberations.

As a result, Committee members, led by Sen. Luke Kenley, R-Noblesville, jettisoned the fiscal heart of the House bill, eliminating the state takeover of child welfare levies and a corresponding onetime child welfare tax credit for residential taxpayers; dumping a residential property tax rate cap; pulling out the proposed requirement for referenda to approve expensive local building projects; and, of course, dumping the provision that would have ended all property taxes by 2009.

In its place, panel members voted unanimously to increase the homestead deduction when trending kicks in. They amended the bill to authorize local government units to raise local income taxes to fund increases in their operating costs, or to reduce property taxes-but not to merely offset such increases.

Some residential property taxes would also be capped at 2 percent of the property’s assessed value, a sop principally to a pair of counties in the northern tier. The bill would also make it more difficult for local governments and schools to fend off construction remonstrance efforts.

Interestingly, one key provision from another House bill was also melded into HB 1001 by the Senate. The Committee approved a change in how companies would be assessed corporate income taxes, phasing out payroll and property as factors, and relying more heavily on sales. This item, which originally was contained in HB 1007, had pitted assorted corporate interests against one another in a quiet battle in the House. Entities with lots of fixed assets and employees in the state-but minimal sales, such as some auto and steel manufacturers-were locked in a battle against retailers and others with substantial Indiana sales or income, such as casinos.

This battle-essentially over the philosophy behind corporate taxation-was largely overlooked in the House, but should now come to the fore as the measure progresses through the Senate.

We also mentioned above that there was a separation of powers matter playing out.

Recall that in recent years when the House of Representatives and Governor’s Office were controlled by Democrats, Senate Republicans were the last line of defense on many issues.

As we watched the annual action unfold, many of us were lulled into believing it was a partisan drama playing out, with Senate Republicans protecting the republic against attack from Democrats.

But as we watch events in 2006, Senate Republicans seem to be following the same approach, cooling the House tea, but they are also reluctant to drink that tea-or gubernatorial Kool-aid.

As we saw in the Senate Appropriations Committee, senators were not reticent about removing sweeteners added by the House to ensure passage of the governor’s Major Moves transportation program, and tinkering with key provisions that Daniels was hinting earlier in the session were deal-breakers.

While the governor was emphatic about how changes in the Major Moves package, as embodied in HB 1008, could endanger the $3.9 billion deal, many senators-of both parties-privately seemed concerned that lawmakers were left out of any significant role in shaping the deal. With the originally proposed 75-year duration, the statewide effect, the economic development impact, and the sheer dollar and job numbers at stake here, senators feel a responsibility to get this deal down right.

After all these years, civics class lessons come back into play.