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STATEHOUSE DISPATCH: So far, session is all about unearthing new revenue

February 26, 2007

Sure, it's a budget session, and one would expect fiscal talk to dominate the discussion.

But the one thing that has surprised us so far this year-and we are literally at the midpoint-is just how much the dollar debate has consumed this Legislature.

Through the first few weeks of the session, the big sport was picking the over/under on when the relationship between Gov. Mitch Daniels (R) and House Speaker Pat Bauer (DSouth Bend)-and thus between Republicans and Democrats as a whole-would deteriorate to the point that the business of the people would be adversely affected.

Yet we've made it to a critical point in the process without such a blow-up, and we will posit that one key reason is legislators seem to be unusually obsessed with looking under any programmatic rock they can find to uncover additional funding sources.

In doing so, they seem more concerned with the cash than with the source. And they almost seem less concerned with where the money will be spent than with the search itself.

So what do we mean by these platitudes?

Recall that lawmakers entered the session with warnings from Daniels and their own fiscal leaders about state finances.

The governor suggested that spending be limited to a 4-percent growth rate over the biennium, with projected "new" revenue of some $1.6 billion to $1.8 billion for the biennium.

While that new revenue sounded good to legislators who had tightened the belt in the last budget, paying back some obligations and accounting for inflation and regular program growth alone effectively depleted that new money, and both parties sought expensive new programs, such as full-day kindergarten and health insurance coverage for needy Hoosiers.

Then there was talk about finding bucks to fund further property tax relief.

As a result, lawmakers have found it difficult to "just say no," and are actively searching for new revenue streams.

They are not alone in their quest.

The governor has proposed privatizing the Hoosier Lottery, seeking a $1 billion minimum payment and annual $200 million revenue stream, with the upfront dollars used for higher education scholarships to combat the "brain drain," for research, and for professors (a plan tweaked in the Senate). He also backed an indeterminate cigarette tax increase to pay for his health insurance proposal.

Lawmakers, however, have been even more obsessive about the cash.

The Senate is advancing the Lottery "lease," seeking more of a focus on life sciences investment for the non-scholarship proceeds.

Democrats in the House quickly jumped on the cigarette tax, taking it to more than 50 cents a pack. But after taking umbrage at their budget proposal's being labeled a "whopping big net tax increase" by the governor, Democrats slashed the tobacco tax to 25 cents a pack in a strange form of retaliation.

Meanwhile, House lawmakers, in bipartisan votes in both the Public Policy and Ways and Means committees, approved slot machine franchises for the two horse racing tracks to bring in new revenue.

But legislators were vague about where taxes generated by the new slots and $150 million-plus in license fees would be directed. Some $27 million annually now allocated to the tracks from riverboat casino subsidies would be used for the health insurance programs as now drafted, but the bulk of the tax revenue would simply be sent to the general fund as the legislation currently stands.

The first half of the session has clearly been all about the money. There has been a dearth of debate over details, such as whether we should expand gambling, or whether a tobacco tax hike is a proper tool for funding ongoing health insurance.

Between now and April 29, the focus will shift to programs to be funded with those dollars and priorities. Watch to see how much discussion there will be of whether the sources and amounts are appropriate. If some of that discussion lights up, some of the new funding sources might be affected.



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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