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FEIGENBAUM: 'There is no money' takes on new meaning

December 18, 2010

feigenbaumNew House Speaker Brian Bosma, R–Indianapolis, cautioned the 60 members of his Republican caucus to buckle their seat belts, because they will see some things in the 2011 session they have never seen before.

That will certainly be true, given the influx of almost 20 new House members, all Republicans, who have never been through any legislative session. But this will be a unique experience even for returning members.

We’ve become accustomed over the past decade to hearing legislative budget-crafters complain “there is no money,” with their pleas for fiscal restraint turning increasingly plaintive each biennium. But the situation is more critical this year than anyone involved in the process (experience reaching back at least 40 years) can recall.

General Fund revenue lags the latest forecast through the first third of fiscal year 2011, but even if revenue hits forecasts, state revenue at the end of fiscal year 2011 would still be almost $800 million below what was assumed in the June 2009 budget as passed. Without the spending reductions ordered by Gov. Mitch Daniels in 2010 and 2011, Indiana already would have burned through its reserves.

The situation becomes even more acute when you think back to passage of the budget in the 2009 special session. Recall that this budget cut spending from previous levels, drawing upon $2.3 billion in federal stimulus funding to help support Medicaid and education spending—the latter a new state responsibility.

With revenue declining to 2005 levels, stimulus dollars drained, and all the “easy”—and many of the painful—budget cuts already made, cobbling together a working budget will prove difficult.

And there are more roadblocks to be dodged in doling out dollars.

One key problem is the insolvent Unemployment Insurance Trust Fund. Indiana owes the federal government $2 billion for trust fund payments, and must start paying back as much as $100 million in interest in 2011. These interest payments may not legally come from trust fund premiums; they must originate from other state resources.

The biggest non-budget fiscal issue likely will be how to handle the fund going forward. Employers will be hit with a new $21 per-employee federal unemployment tax surcharge as long as the state fails to make progress toward paying off the fund debt, and questions will be raised about whether the 2009 fund premium fee increase—delayed for one year by the 2010 Legislature—will be allowed to take effect, or be modified.

The premium fee hike has proven more politically controversial since its passage than it was at its implementation, with bipartisan support from the governor, Senate Republicans and Democrats, and House Democrats. House Republicans then voted en masse against it, labeling it the largest tax increase in state history. In the 2010 elections, some Senate Republicans who supported the fee hike were assailed for it—by both GOP primary opponents and Democrats—and many of the new House GOP members campaigned against any type of tax or fee hike.

The 2009 increase by itself wasn’t even enough to replenish the fund, and Daniels now proposes coupling fee hikes with benefit cuts—the former uncomfortable for Republicans, the latter anathema to Democrats.

Beyond the detailed talk about dollars, education reform will be the key policy issue occupying the attention of lawmakers. The pressure is on internally from the governor and Superintendent of Public Instruction Tony Bennett, also a Republican, and externally from business and community leaders across the state.

The education agenda is broad, including issues related to school choice, charter school expansion, school performance evaluations and takeovers, and teacher merit pay. These issues will entail spirited debate.

There will be the usual modicum of other issues up for consideration, filling the calendar between the time budget parameters are first hammered out and numbers eventually filled in after the spring revenue forecast. But they will have to take a back seat late to drawing new legislative and congressional districts once census data is delivered.

Some criminal justice, energy, gambling and social issues will be among these, with solons expected to address matters such as sales of now-unregulated marijuana-like drugs that counties and communities are banning, texting while driving, zoning for wind energy farms, land-based casinos and shifting of racino revenue, and same-sex marriage.

But hot-button issues—including right-to-work—will be closely scrutinized before even gaining committee hearings because of their potential to disrupt the process.

Bosma was correct to get those seat belts pulled tight, but given the attention to budget issues amid limited resources, his fully caffeinated caucus may find itself running tight circles around the legislative track for more laps than they anticipated.•
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Feigenbaum publishes Indiana Legislative Insight. Views expressed here are the writer’s.

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