Governor and Legislature and State Budget and State Government and Education & Workforce Development and Mike Pence and Government and Transportation, Distribution & Logistics

Indiana Republicans already clashing over budget

December 15, 2012

What the 2013 legislative session lacks in spectacle, it’s sure to make up for in surprises.

There’s nothing on lawmakers’ agenda like the 2012 right-to-work bill, which drew constant crowds of protesters. The General Assembly’s main task is to pass a two-year budget, and what that will include depends on a host of unknowns.

Will tax-revenue forecasts in December and April show the surplus continuing on the back of a recovering economy, or disappearing over the federal government’s fiscal cliff? How will a brand-new chairman of the House Ways and Means Committee fare in negotiations with his veteran counterpart in the Senate?

Republicans claimed the governorship and super-majorities in the House and Senate in the Nov. 6 election, but their leaders are not of one mind. Gov.-elect Mike Pence wants to cut the personal income tax, but lawmakers are wary that would leave the state short.

For the long budget-writing session scheduled to wrap up by the end of April, even a veteran legislative observer doesn’t know what to expect.

“I think this one is defined by the fact that there’s a lot of change,” Indiana Fiscal Policy Institute President John Ketzenberger said. “It’s really hard to predict what’s going to happen.”

The fiscal picture is completely different from four years ago. After two budget cycles of spending cuts, Indiana ended the 2012 fiscal year June 30 with a nearly $2 billion reserve and $500 million budget surplus. That sets the stage for debate about future spending priorities.

Lawmakers have to account for increased Medicaid costs as a result of federal health-insurance reform. There’s no way to do that and provide more money for education and cut taxes, Indiana Chamber of Commerce President Kevin Brinegar said.

“This is going to be the dominant issue—tax and fiscal policy and priorities,” he said.

House Speaker Brian Bosma, who was first to push back on Pence’s proposal to cut the income tax 10 percent, wants to see Indiana provide preschool education.

Senate Appropriations Chairman Luke Kenley said he doesn’t see how the state can afford that, either.

“It’s way too early on that issue,” he said.

Kenley said his priority for 2013 is finding a way to make up for declining

gas-tax revenue, part of which pays for road maintenance. “If we don’t come up with some road-funding solutions pretty soon … we’re going to hurt our economic vitality.”

Kenley, R-Noblesville, is considering an annual $20 license plate tax, which would raise $120 million a year. He also wants to help local governments meet road maintenance needs by approving local fuel taxes, which would be tacked onto the state tax, 18 cents per gallon.

Education

Education continues to top the majority party’s agenda, though the theme of 2013 will be work force improvement, rather than sweeping reform.

House Republicans are echoing Pence on closing the “skills gap,” which leaves jobs unfilled even at a time of high unemployment. Their agenda calls for more vocational education and dual-credit classes.

Bosma also hints at more changes to the way teachers are paid, possibly through bonuses for high performers.

“We have to be sure teachers are treated as faculty rather than factory workers and are rewarded, in some fashion, in the same way as we reward others in the private sector,” he said in his Organization Day speech.

Bosma made the same teachers-as-faculty remarks in a panel discussion before the Indiana chamber, and Senate President David Long backed him up, saying bluntly, “We’re going to have to pay our teachers more.”

Indiana has already tied teacher pay to students’ test performance, one of the most controversial education reforms. As longevity-based union contracts expire, school corporations are supposed to shift to merit pay, and Bosma wants to provide bonus pay for high performers, said Rep. Bob Behning, chairman of the education committee.

Bosma is also talking up the need for preschool, and there are likely to be competing proposals on that front.

The chamber wants to expand availability of preschool through state funding for low-income families. That initiative would probably create competition with general K-12 funding, which Gov. Mitch Daniels cut by $300 million in 2010 after state revenue fell short of forecasts.

Democratic leaders are still upset about that move, and they want school funding returned to pre-recession levels in the next budget.

“We’re going to keep talking about schools, and how important traditional schools are to most of Indiana,” House Minority Leader Scott Pelath said.

It’s no accident that the new ranking minority member on the budget-writing Ways and Means Committee is Indianapolis Rep. Gregory Porter, a past chairman of the education committee. Porter is new to Ways and Means, but he’s well-versed on a topic that consumes about half of state spending.

“The bottom line is that the more additional programs we have, the less money goes into the K-12 funding formula,” said Derek Redelman, the chamber’s vice president of education and work force policy. But the chamber wants to expand preschool funding because it would help close the achievement gap, which is worse in Indiana than in other states, he said.

Given all the pent-up demand for education spending, Behning said he’ll file a preschool bill that won’t cost the state significantly more money. Behning’s proposal is to require any child care facility using federally funded vouchers to provide “age-appropriate” education, as outlined by the state.

That would ensure that facilities serving low-income families provide more than baby-sitting, Behning said.

Any talk of increased spending is immediately followed by warnings about the cost of the Patient Protection and Affordable Care Act, or Obamacare.

Estimates prepared for Daniels predict that Medicaid costs will rise $600 million from 2014 to 2020 as people who are eligible but not covered sign up.

Expanding Medicaid eligibility could cost another $54 million to $140 million a year, depending on the source of the estimate. Milliman Inc., the firm hired by Daniels, made the high-end projection, but the Urban Institute recently released the much lower estimate based on the assumption that the state will save money as newly insured people use preventive care.

Leadership dynamics

Crawfordsville emergency-room doctor Tim Brown was tapped to lead the powerful Ways and Means Committee because of his knowledge of health care reform.

Yet Brown has never served on Ways and Means.

“Nobody on the leadership of that committee has got working experience in assembling a budget,” Ketzenberger said. “That’s fascinating.”

Meanwhile, Pence is building a team of veterans. He hired his campaign policy director, Chris Atkins, a former Daniels aide and tax expert who crafted the income-tax cut proposal, as budget director. Then he tapped Jeff Espich, the veteran legislator who just retired as Ways and Means chairman, as chief lobbyist.

Brown will have the most difficult job at the Statehouse, saying no to some of his colleagues while tracking gamesmanship, Ketzenberger said.

“It’s like the chess game they used to play on ‘Star Trek,’ three levels all being played at the same time,” he said. “That’s what chair of Ways and Means is like.”

Brown said he’ll rely on his subcommittee chairmen to help decide what’s important, and when it comes down to conference-committee negotiations, he’ll have experienced committee member Rep. Eric Turner of Cicero by his side.

“It will be a meeting of the minds, so to speak,” Brown said.

Mass transit

Central Indiana’s corporate community thinks this could be the year tax-shy lawmakers allow a referendum on expanding mass transit.

Indy Connect’s $1.3 billion plan to double bus service and build a rail line from Noblesville to downtown would require voters in Marion and Hamilton counties to approve a local income tax increase of 0.3 percent. First, though, mass-transit advocates need the Legislature to allow the referendum, which would most likely go on the 2014 general election ballot.

Ron Gifford, executive director of the Central Indiana Transit Task Force, is optimistic because the group is building support among urban and suburban lawmakers. Republican Rep. Jerry Torr of Carmel has authored the bill, and fellow Republican Cindy Kirchofer of Beech Grove is co-author, along with Democrats Gregory Porter and Cherrish Pryor.

The next step for supporters is to continue the bipartisan momentum in the Senate.

Gifford said he’s been meeting with Senate members who are undecided and wary of creating a service that will consume ever-increasing taxpayer subsidies.

“We feel very comfortable our numbers work,” Gifford said.

Mass transit advocates picked up a key ally this year when Republican Sen. Patricia Miller voiced her support for the referendum.

“The senators that represent other parts of the state will look to Marion County legislators,” she said. “I’m committed to the referendum. I’m supporting their right to choose.”•
 

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