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STATEHOUSE DISPATCH: Budget process smoother, but effect uncertain

May 2, 2005

As legislative veterans well know, there is nothing like a deadline to force action. The April 29 date for final adjournment of the Indiana General Assembly's 2005 session did just that-helped along by new House rules requiring a proposed budget to be available to lawmakers at least 24 hours before a final vote.

After some four months of sorting through philosophical issues, fiscal issues, political issues and sometimes even personal issues, lawmakers finally reached agreement on a biennial budget.

At least members of the Republican majority came to closure on the budget; Democrats complained about being entirely frozen out of the final negotiating process.

But as Republicans saw it, Democratic support for the budget would be irrelevant if consensus could be achieved among the overwhelming majority of GOP senators and the 52 House Republicans.

Reaching that consensus was not as easy as it might have seemed from the outside. While most Hoosiers might assume Republicans would be united, the Senate and House majorities had different ideas for the budget.

A key bloc here was House Republicans elected in the last few cycles, particularly 2004. Many of these newer members viewed any tax hike as anathema. Even so-called "sin" taxes-such as a cigarette tax increase that could be directed to Medicaid expenses-were viewed unfavorably by these lawmakers.

They were able to stick together on this philosophical issue, moving some in the House, such as Ways and Means Committee Chairman Rep. Jeff Espich, R-Uniondale, who wanted to spend a bit more money on education, away from increased spending.

Legislators from counties receiving large amounts of riverboat casino tax proceeds also banded together in the House to remove a Senate-backed provision to redirect some $70 million in riverbooty from their communities to the state for use in other programs.

As a result, one casualty will be repayment of money owed by the state in back payments to schools, universities and local governments.

This budget, in its form as of this writing, will mean that-assuming the economy remains stable and a newly enacted limited tax amnesty program reaps what the state expects-the state's so-called "structural deficit" will be wiped out at the end of the biennium in July 2007. There is minimal wiggle room at best, however, and reserves will not be built back up, which could mean trouble in the event of an economic downturn.

The property tax replacement credit-funded from the recent 1-percent increase in the state sales tax-will be capped at 2005 levels, meaning that, at least in the second year of the biennium, many homeowners will almost certainly see their property taxes increase. Democrats charge that major local tax hikes will be inevitable and schools certainly will be hurting financially.

While the budget increases spending on education 1.2 percent in the first year and 1.3 percent in the second, educators insist that this rate, which trails inflation, is grossly insufficient, and will lead to the layoffs of employees, including hundreds of teachers. They also contend that scores of districts will see funding decreases under the new school funding formula since cash follows students.

Republicans who drafted the budget compromise language said other changes in the final budget would allow some freedom for districts to use money in some formerly restricted funds to pay for other expenses, easing the pain.

As the budget was being recrafted, Indianapolis Mayor Bart Peterson was stumping in the media, in the streets and in the Statehouse for passage of his Indianapolis Works program. The secondterm Democrat personally guaranteed the tens of millions of dollars of savings he projected from its passage.

Lawmakers and others will be debating the true impact of this budget for months-as interest groups begin lining up their priorities for the 2006 session.



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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