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STATEHOUSE DISPATCH: Tax reform nudges state toward a la carte government

February 4, 2008

Most observers have viewed the 2008 legislative session as one almost singlemindedly devoted to property tax reform.

While, of course, that is true, if you step back, a broader truism begins to emerge. This is not only a session destined to produce property tax reform, but one that begins the process of changing the role of government and how it intrudes into the lives of Hoosiers-or how it helps them, depending upon your perspective.

Beyond property tax reform, this session is moving toward producing other significant changes in government-some intended, and others perhaps not-that will affect the level of services Hoosiers have come to expect from their local governments.

The property tax reform provisions that are moving through both chambers of the General Assembly would place major spending constraints on local governments, effectively requiring major budget cuts in many communities. Many local officials say the reductions would mean cutting deep into the bone.

Depending on what's in the final version, voters also can look forward to major capital projects' being delayed. That's because the projects would be subjected to local voter approval, and some may not succeed.

Hoosiers have changed their perceptions of government in recent years. State government used to be thought of as a single monolithic state office building in Indianapolis. Now we expect virtually everything once available there and every service that had to be transacted "downtown" (or at a license branch) to be accessible at warp speed at our fingertips from a wireless connection on a laptop computer in the easy chair at home.

Similarly, our schools had to have buildings, police needed cars, libraries relied on books, roads required asphalt, and parks were built on acreage.

All that remains true, even as the tax reform measure mandates spending cuts and subjects more projects to voter approval. What we end up with may approach a la carte government: Citizens will be entitled to receive only the services they directly approve of.

Lawmakers are pursuing a range of means to rein in government this session.

Some of the restrictions come in the guise of spending caps (such as imposing similar limits on state spending if lawmakers require spending cuts by local governments). Others are more overt.

The Senate narrowly passed SB 114 (but only after a second vote), legislation that would end involuntary annexations. Sen. Jeff Drozda, R-Westfield, the author, says his measure would protect property owners from aggressive municipalities, and eliminate costly remonstrance efforts.

Other bills-prompted, at least in part, by the much-vaunted Kernan-Shepard commission-would trim local government and its prerogatives.

Reducing layers of bureaucracy increases transparency and, at least in theory, imposes more accountability.

In the succeeding 2009 session, you can expect further changes in government organization that will have the same basic effect.

So government is being slapped on the wrist this session and being told to stay in its corner, doing only what we explicitly tell it to do.

As this transpires, the Legislature is considering other measures affecting how we conduct our lives and business, with some of the action sending contradictory messages.

We are moving closer to permitting some new forms of legalized gambling in bars and taverns, and not allowing government to further restrict where Hoosiers smoke.

Yet the Legislature also is sending a message to employers about keeping closer tabs on the legal citizenship status of new hires, and a move is afoot to hike business taxes to shore up the Unemployment Insurance Trust Fund, assisting Hoosiers who cannot help themselves through no fault of their own.

At this point, we're only about halfway through. And while there is considerable time for political and legislative gameplaying (not to mention evolving data that could result in changing imperatives), a few property tax relief specifics are taking shape.

We'll end up with some type of caps on taxation as a percentage of assessed value, but the jury remains out on whether (or how) they may be phased in, and whether business will face a higher cap. Whether certain high-valued homes should receive less relief also remains a hot-button item. The types of projects subject to referenda will be hassled out between chambers, and matters specific to certain counties (such as special shortterm "reconciliation" relief in the form of credits for Marion and a handful of other counties) also will be up for negotiation.

As local governments defend themselves and their services against irate taxpayers who want deep and immediate tax relief, keep your eye on the broader underlying issue of just how much government Hoosiers need, want and are willing to fund.



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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