Pro-business groups are celebrating the end of a legislative session that some dubbed one of the most favorable on record.
Among their biggest victories: a reduction in corporate income taxes, an overhaul of the state’s unemployment insurance system and the weakening of an immigration bill that initially resembled a controversial Arizona law.
Sweeping—but controversial—education reform also resounded as a win for business interests. They see moves such as paying teachers based on performance and providing vouchers for low-income students to attend private schools as ways to provide better options and strengthen the state’s work force pipeline.
“There are always some additional things you would like for them to accomplish, but overwhelmingly, this was a very positive session,” said Indiana Chamber of Commerce President Kevin Brinegar. “It ranks right up there with 2002,” when the state did a major tax restructuring.
A couple of measures will begin to affect businesses’ pocketbooks in the next couple of years. Starting in 2012, the state will start to phase in a four-year decrease in the corporate income-tax rate from 8.5 percent to 6.5 percent. Business lobbyists say that will make the state more competitive for attracting jobs and will put companies in a better position to grow.
“It will bring a boost to small-business owners who are struggling in this economy,” said Barbara Quandt, director of the Indiana chapter of the National Federation of Independent Business. “The vast majority of new jobs are created by small businesses. Anything we can do as we emerge from this significant recession will translate into more Hoosier jobs.”
A restructuring of the state’s unemployment insurance system also will reduce the amount businesses have to pay in state taxes to reload the indebted fund from which payments are made. This year, the changes would lower an increase in premiums businesses statewide must pay from $866 million to $723 million.
At the same time, it will trim worker benefits 25 percent.
But that bill wasn’t a total business victory. In addition to the state taxes, Indiana businesses also must repay the federal government principal and interest for $2 billion borrowed to cover unemployment insurance payments.
During the last two weeks of the session, the state chamber had pushed for a bill that would allow the state to issue a bond to repay the federal government and secure lower interest rates. That legislation—which Brinegar estimates would have saved businesses $100 million to $200 million on the $2 billion repayment—didn’t pass.
“It was a hard sell because [legislators] had a lot on their plates,” Brinegar said. “It was a really unfortunate decision not to move forward.”
The immigration bill initially proposed revoking businesses’ licenses after three violations of hiring undocumented workers. Under the bill that passed, the penalties were lighter. Businesses knowingly hiring such workers would lose out on tax deductions related to salary and benefit expenses for those employees.
The banking industry entered the session with a lot at stake: the fate of a $250 million bank-insurance fund that Gov. Mitch Daniels had considered tapping to help bolster state coffers. Legislators avoided raiding the Public Deposit Insurance Fund, but they did give the state another 10 years to repay $50 million borrowed from that fund in 2003.
Because banks didn’t agree on a deal to forgive the loan altogether, lawmakers also exempted banks from the corporate income-tax break.
Banking lobbyists say they’ll be back next year to push for banks to receive it.
“Our bankers are going to be questioning why we’re not included in that,” Amber Van Til, vice president of government relations for the Indiana Bankers Association, said of the group’s plans for next year.
There were other disappointments for business interests, too.
A few labor bills passed, including one maintaining that workers can vote to unionize by secret ballot and another preventing local government units from setting minimum wage above state and federal levels.
But the granddaddy of all labor bills, so called “right-to-work” legislation that bars union membership from being a condition of employment, was shifted to a summer study committee. It’s an issue that’s received strong support from groups such as the Chamber and NFIB, which hope it will become a focus again next session.
They’re less hopeful about one area: local government reform. Watered-down bills creating anti-nepotism provisions and reforming township government in Marion County died on Friday.
After several years of pushing for reform, Brinegar said his group will have to get “positive signs from legislative leadership and the governor” that the issue could get traction before making it a priority in the next session.