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STATEHOUSE DISPATCH: Desperate for cash, lawmakers embrace gambling

March 26, 2007

We recently told you how revenue growth was lagging the December fiscal forecast. One prominent Republican senator tells his constituents that his colleagues are now planning for a growth rate in this fiscal year of only 2.5 percent, not the 4.2 percent to 4.5 percent they had planned on at the beginning of the session.

While lawmakers will not have a new fiscal forecast for the biennium until the middle of April, they are clearly girding for a new fiscal reality-at least to a certain extent.

While they know money will be tight and demands remain unabated, a certain smug quality pervades your General Assembly as it approaches the final full month of lawmaking activity.

That's because legislators are once again prepared to tap into the golden goose-the legislative equivalent of found money.

The Senate Committee on Tax and Fiscal Policy easily moved the so-called "slots at the tracks" bill from committee to the Senate floor on March 20, with little discussion of the assorted public policy and fiscal aspects of the measure.

Senators amended the bill to quadruple the license fee and significantly trim the number of allowable slot machines for the horse racing venues in Anderson and Shelbyville, but only one senator even briefly questioned the wisdom of subsidizing the industry yet again (and why this industry over others).

Senators gave the 11 existing casinos a tax break as a sop toward them for the intrusion into their market, but no senator even questioned how much the casinos would be affected or how much the tax law change would cost the state. There was no debate among committee members of giving the new French Lick casino a special five-year subsidy, even as other casino properties grumbled about that money being redirected to use directly against them in marketing efforts. And no one so much as raised an eyebrow over a provision allowing riverboat casinos to abandon the expensive facade of maintaining engines and propellers.

Even the chairman of the committee, Sen. Luke Kenley, R-Noblesville, expressed his serious reservations with the substantive measure as he offered a comprehensive amendment to make it a better-structured package for floor consideration. He ultimately was one of only three votes against the bill in committee.

Few senators seemed enthusiastic about the expansion they were voting for, but their eyes were on the prize: the upfront $800 million in license fees the state could realize as quickly as this calendar year. As the bill cleared committee, that money would be directed to property tax relief and the life sciences fund sought by the governor.

The life sciences investment was originally intended to be funded by the franchising of the Hoosier Lottery for 30 years to a private entity, but that measure appears to have run out of luck in the House.

However, as Democratic Rep. Trent Van Haaften of Mount Vernon, the bill's author, suggested on the House floor and in testimony before the Senate panel, the current designation of the new largesse is simply a placeholder, with House and Senate negotiators likely to work out with the help of Republican Gov. Mitch Daniels just how that money should be directed. (Van Haaften, for one, wants to fund the proposed new state health insurance program for the uninsured and underinsured.)

While there undoubtedly will be a measure of debate on the floor of the Senate over the substantive issues involved in establishing "racinos" in Indiana, we seem to be moving past the question of the underlying methods of funding and on to what the spending priorities should be.

Look for lots of floor discussion about how to parcel out this money. Some lawmakers from districts without gambling are disappointed that the key amendment in committee stripped out the revenuesharing for non-gambling counties, and may seek to reinstate that distribution. Kenley is likely to hold firm on the property tax relief concept, because it will help fund the plan he is expected to reveal the first week of April.

Assuming this passes the Senate, House negotiators will likely seek to redirect some of the revenue from the life sciences to health insurance, full-day kindergarten, and perhaps even to a school funding formula fix.

We have also yet to hear Daniels weigh in. If he is not comfortable with the expansion of gambling (and he might not be if he is not in accord with the way the dollars will be spent), he can play a large role in shaping any new law as well.

But the governor understands that this bill is about the only revenue-raising option with any real legislative support left on the table, and if it pulls up lame, virtually any program needing new funding will falter.



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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