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STATEHOUSE DISPATCH: Gambling quenched lawmakers' appetite for new revenue

May 7, 2007

The 2007 session of the Indiana General Assembly is now history. Whatever else might have been involved in shaping its outcome, nothing was so determinative as the revelation in the closing days that property taxes-driven by the first application of trending, rising property values in general, the elimination of the inventory tax, and some old-fashioned political legerdemain on the part of some assessors in different regions of the state-were expected to rise an average of 24 percent for taxes payable in 2007. On top of that, they were also expected to jump another 11 percent in 2008.

Initial projections had suggested that taxes would grow "only" 14 percent or so on average this year. Still, lawmakers had felt that amount was significant enough that property tax relief was a top priority of the session.

But with the new numbers, short-term tax assistance for homeowners became an imperative, and all philosophical questions about expanding gambling as a means to finding the funding-the only quick-fix source available-seemed to evaporate in the rush for relief. Senate conservatives persuaded Senate Republican leadership to broach the idea of $300 million in relief with Republican Gov. Mitch Daniels, then House Republicans fell into line.

So property tax relief needs-essentially one year's worth of relief-drove the numbers behind the upfront revenue negotiators needed to squeeze from the state's two horse-racing tracks in exchange for the privilege of hosting slot machines. For permission to install 2,000 slot machines, each track must pay the state $250 million, with every penny of those fees to be devoted to property tax relief.

In the end, the slots-at-the-track measure passed overwhelmingly in the Senate after eking out a one-vote win in its earlier iteration.

Lawmakers also expanded the state health insurance program (that had appeared dead a few weeks earlier) with the help of a boost in cigarette taxes, making this a landmark session for health care advocacy coalitions.

A few other bills of lower public profile but with broad implications also were decided in the final days.

The conference committee report on Senate Bill 500, the omnibus tax bill, passed the Senate with only one negative vote, but it required Republican defections to gain a two-vote majority in the House. Among the key provisions: a tax exemption for the National Football League Super Bowl and related activities, and replacement of the current sales and use tax collection allowance for retail merchants with a graduated three-tier allowance that allows the state to keep more of the tax revenue.

Falling short was yet another attempt at resolution of the long-standing debate over who should be allowed to sell packaged alcohol. SB 339 sought to establish a standard definition for a "grocery store" to bar convenience stores and gas stations from selling alcohol. The measure was the subject of attempts by the package stores to require other retailers to abide by even stricter standards to be allowed to sell alcohol.

The conference committee report was ultimately defeated in the Senate, largely over unrelated concerns about permit expansions for a new lifestyle center retail development in northwest Indiana.

Almost lost in the last-minute property tax fuss: a relatively uncontroversial balanced budget that provides for full-day kindergarten, major K-12 and higher education spending increases, and funding to hire 400 more child welfare caseworkers and to fund state employee raises.

What to watch for before the Legislature reconvenes for its 2008 session: how successful Daniels is over the interim in selling his proposal to lease the Hoosier Lottery to a private operator.

With "indicative bids" showing a willingness by at least two prospective bidders to offer the state more than $2 billion upfront for the privilege and another $200 million or so annually over the life of the contract, the governor can make the case that there would be a lot of money available for longterm tax relief, college scholarships, life sciences research, and more.

Dangling that kind of money in front of lawmakers in a cash-starved environment just might unleash a frenzy that could lead to lottery lease authorization next year. Just recall the fascinating dynamics that kept things humming at the Statehouse until midnight April 29.



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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