Statehouse Dispatch

Governor focuses on economy, not aid

January 19, 2009

In the law, when you don't have the law on your side, you argue the facts. Conversely, when the facts are against you, you argue the law.

In essence, that is how Gov. Mitch Daniels is setting up this session with his State of the State address Jan. 13. The state effectively has no discretionary money to spend, so there are no arguments over which idealistic new programs deserve funding.

With the focus off of spending, the governor turns his attention to a hard sell on other matters that don't require cash—and, in fact, might actually save the state some money.

The State of the State address was the second major speech the governor made in two days. On Jan. 12, he delivered his second inaugural address, an opportunity he used to set an overall tone for the coming four years.

He pegged the count for his inaugural address at 714 words—fewer than you are reading in this column. Yet he still managed to convey a spirit of optimism in the face of adversity, suggesting that Hoosiers seize an opportunity to lead.

The next day, he elaborated on that theme, distinguishing Indiana from the pack, reminding his fellow Hoosiers just how far they had come in four years, and how that progress, both in attitude and real terms, would serve the state well in the coming months.

The governor offered some specifics, hitting hard on key areas in which he believes action is imperative.

Interestingly, most of his attention was directed to proposals that had no direct relation to matters involving the economy, economic development or job creation. Health care and health insurance, issues which had commanded his attention in previous State of the State addresses, were absent.

Democrats, who had their first chance that same day to pick apart his budget proposal, seized on the absence of job-creation initiatives in their response to the State of the State.

House Speaker Pat Bauer, D-South Bend, reprised the mantra he hammered in a floor speech when lawmakers returned to Indianapolis earlier this month. Investment in jobs is the Democrats' top priority, and he intends to move some of the governor's favored agenda items to the back burner until his colleagues help jump-start Indiana's economy and return Hoosiers to work.

While most State of the State addresses reveal a popular new program or two, Daniels' speech was, understandably, devoid of any surprises.

No new taxes, further spending restraints, and education and local government reform were what Hoosiers heard the most about.

Even though the governor used fun rhetorical flourishes to push for increasing school consolidation, moving school dollars from administration to education, and restoring discipline to the classrooms, he didn't tackle some of the thornier issues related to property tax caps and restructuring local government.

Business and agricultural interests remain suspicious at best of the ownership-classified statutory property tax caps, which the governor is campaigning hard to institute as a permanent part of the constitution. Democrats are largely against passing a resolution this session to bring the caps to a statewide vote, preferring to wait to assess the impact on local governments and property owners.

Left unspoken by both sides in this face-off is the impact of the recession on property values, and how that might now affect tax revenues and the caps.

Legislation is pending in the Senate that would cap or rescind the sales-tax increase if caps are abandoned and restrict increases in the assessed value of property—but homesteads only—at 5 percent annually.

You will also see a battle over using the $1.3 billion state "surplus" (or the approximate one-third of that amount which is in the Rainy Day Fund) to fund programs or tide us through the biennium. Republicans seek to safeguard those resources; Democrats are less reticent to tap them.

While the governor promises no budget-balancing gimmicks, some are already questioning why the Daniels administration seems to be spending some $235 million more than anticipated revenue during the first year of the biennium.

While the shortfall is expected to be rectified in the second year of the two-year budget, when the economy is expected to turn around, the governor has been critical of similar budget-making betting on the come that happened in the previous decade.

And though the governor laid down the law on tax increases, lawmakers must prop up and restore stability to the Unemployment Insurance Trust Fund. This will almost certainly require a business tax hike. There was also no talk of worker classification issues, even as a bipartisan agreement is being forged between the two chambers that will affect tax revenue.

Perhaps the lesson is not to allow lofty rhetoric-nor its absence-to distract you from everything at stake and the task at hand this session, however painful it might be.

___

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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