Trickiest legislative issues remain far from resolution

February 23, 2009

Positive action, action for the sake of action, and inaction were all on tap in the General Assembly in recent days as lawmakers prepared to wrap up the first half of the session.

We also saw twists that could have a serious impact on the rest of the session, even if few recognized them for what they were.

House Democrats moved their version of the budget to the House floor, including a one-year funding plan for education, relying heavily on federal stimulus cash and state reserve accounts.

This measure is destined for a complete overhaul courtesy of Sen. Luke Kenley, R-Noblesville, in the Senate Committee on Appropriations that he chairs. Even then, you likely will see more major items than usual this session added to the budget bill in conference committee during the final week of deliberations.

One of those issues is a measure that saw no action when it faced a House floor vote Feb. 16. The Unemployment Insurance Trust Fund solvency bill was pulled by its author, House Committee on Labor Chairman Rep. David Niezgodski, D-South Bend, when he perceived a major party split on how serious an attempt the bill made toward resolving the trust fund deficit.

While the inevitable tax increases that no one wanted to be first to propose were finally inserted by Democrats in the labor panel, the Senate now will be called upon to perform the heavy lifting on this matter.

Both parties in the House acknowledge that, in its current form, the bill would result in only a modest step toward regaining solvency—raising only about $320 million (even with the federal stimulus package forgiving a portion of our interest obligations) toward what is effectively a $1.4 billion hole. Not all of that money must come upfront, and key lawmakers privately have been discussing a four- to five-year ultimate solution.

Assuming the Senate doesn't take the unemployment insurance bull by its horns, this might be settled behind closed conference doors, and inserted in the budget bill to prevent the federal government from imposing a tax to return the trust fund to solvency, as it can do if we remain in a deficit position for two consecutive years.

Key moves in recent days pave the way for revamps of how county government is managed (or not, if voters opt for the status quo), and potentially result in an even crazier quilt of local governance statewide. (The governor acknowledges a "patchwork" approach might be the only practical way of embarking upon reform.)

Senators also moved closer to election changes, lumping municipal elections with non-presidential-year state office elections, and altering when school board members are elected.

The House amended a statewide smoking ban bill to exempt casinos, racinos, and off-track-betting facilities, and to allow local governments to enact stricter bans. After these changes, the bill passed the House easily, with little of the emotional debate that marked a committee hearing.

The casino exemption followed casino industry estimates of a $150 million annual tax loss to the state from the 13 major gambling properties. The ban's author, Rep. Charlie Brown, D-Gary, suggested on the House floor the state still would come out ahead because the $390 million annual public health cost to the state from secondhand smoke (as calculated by IU researchers) outweighs lost tax revenue.

The ban bill still faces a fight in the Senate, and public health advocates will seek to bring gambling and other adult-only establishments back in the fold.

And speaking of gambling establishments, maneuverings by the two racinos and one casino may come back to haunt the industry. A vehicle bill passed the House Committee on Ways and Means at 9 p.m. Feb. 16 with little prior notice as to its content and significantly limited testimony.

The measure would provide five-year tax breaks to the casino most affected by a nearby Michigan American Indian casino, and to the two racinos, which say they overpaid for their licenses and overestimated revenue. They seek a tax break topping $32 million in year one alone. You can expect some public pushback on this.

With voters already uncomfortable about how the Indianapolis sports venue operating deficits may be addressed legislatively, bailing out the "gambling industry" could raise their dander.

As we approach the halfway point, the session balance appears precarious.

Feigenbaum publishes Indiana Legislative Insight. His column appears weekly while the Indiana General Assembly is in session. He can be reached at edf@ingrouponline.com.

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