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STATEHOUSE DISPATCH: Out of spotlight, state efficiency initiatives advance

February 5, 2007

A pair of state studies last year attracted little public attention, but were highly-if warily-anticipated by business and industry, labor organizations, trade and professional groups, educators, local government officials, and even state agencies.

The legislatively created Government Efficiency Commission served up its recommendation, followed, after the election, by the Office of Management and Budget's Government Efficiency and Financial Planning office Program Results: an Outcome Based Evaluation (PROBE) analysis sought by Republican Gov. Mitch Daniels.

The Government Efficiency Commission offered some controversial suggestions, but many of its findings were innocuous (and often vague). Because no one truly had a stake in its overall work, there was little impetus for any organized effort to turn the findings into action.

The PROBE work was different. The governor was behind this, and he had his budget office staffers working on the effort for more than a year out of the spotlight. Most of those who had followed the OMB work expected that the final proposals would prove to be problematic, a major reason for not unveiling them until after the election.

Those suspicions were correct. The PROBE findings quietly added a whole new dimension to the debate.

The PROBE report was replete with suggestions that assorted boards, commissions and agencies take a new look at their missions, operations and even need to exist, causing all manner of interest groups to jump into action and raise assorted objections to intrusions into their respective turfs.

What also drew some interest was how Daniels reacted to the report in December.

"Demanding proof that government programs work, before spending additional money on them, must become standard operating procedure," the governor said.

That statement-and timing of the report-guaranteed that the assorted proposals would not be introduced in a comprehensive package.

In fact, there were few pieces of individual legislation introduced that covered any of the specific PROBE findings. However, some of the components found their way into other measures.

For example, the PROBE findings took aim at the Commission on Proprietary Education, created to protect students, educational institutions, the public and operators of private schools from dishonest and unethical practices.

The panel found that "the underlying rationale for the program's existence is dubious given that public dollars are being spent on approving degrees at private schools. Ultimately, it will be employers who determine the value of those degrees (by whether or not they hire the graduates of proprietary schools)."

Despite strong reactions by employers who were concerned that schools would leave Indiana if they could not be accredited here, leaving a big void in the trained labor pool, the governor's budget recommendations zeroed out the agency.

And PROBE staff also took aim at the little-known Merchant Collection Allowance, under which retailers are permitted to retain 0.83 percent of the sales tax liability as compensation for the requisite task of collecting and remitting the tax to the state.

"Today, many large retailers have systems that report and remit sales tax electronically at a relatively low cost," the PROBE report found. While "these retailers had to make an investment in the sophisticated technology, the fee is overly generous to the large retailers," and 23 states offer no allowances.

The OMB team recommended a cap on the merchant vendor allowance, and, despite significant opposition from the Indiana Retail Council, a graduated sales and use tax collection allowance for a retail merchant found its way into SB 500, which recently passed the Senate Committee on Tax & Fiscal Policy.

The state would recapture an estimated $22.2 million annually from the change.

The PROBE findings may have triggered a large legislative yawn when released, but some of its individual components quietly found their respective way into assorted bills that are now moving through the Legislature.

While some PROBE and Efficiency Commission findings might not make the headlines, they can affect the way business is conducted in this state-and whether businesses want to come to the state.



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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