Stimulus to change dynamics at Statehouse-WEB ONLY

There’s no doubt that Gov. Mitch Daniels, lawmakers and school officials will cash the check when Indiana receives its share of a federal stimulus package making its way through Congress.

Daniels and legislators began this session expecting to have little new money to spend over the next two years, but now the state and its schools stand to receive up to $5 billion collectively – possibly by mid-February.

That’s how much they would get under a stimulus bill passed by the U.S. House, and although the figure could change before the bill becomes law, the state is banking on getting some big, big bucks.

That might be great, but the infusion of cash also presents a new dilemma, one that will change the dynamics of this legislative session: precisely how the money should be spent, and how the stimulus dollars will affect drafting a new two-year budget.

“In a way it’s a positive problem to have, but will turn into a very serious problem if we mishandle it,” Daniels said.

The Republican governor and legislative leaders at least agree on what that serious problem could be – steering the money toward ongoing projects or programs built into the base budgets of the state and schools, only to see the dollars disappear after two years.

Leading lawmakers and Daniels say the money should be spent for one-time purposes that will create jobs quickly and help boost Indiana’s sagging economy. Indiana’s unemployment rate soared from 7.1 percent in November to 8.2 percent in December, when more than 260,000 residents were out of work.

The U.S. House version of the stimulus bill comes with plenty of strings.

For example, about $1 billion would flow to public schools under a federal funding formula without any control by state lawmakers on how it should be spent. Daniels is urging school officials to spend the money on one-time expenses, but that would not be his decision to make.

The state would get up to $2 billion for capital projects, but that is divided into categories. For example, $750 million is set aside for roads and bridges. About $100 million is to be spent on mass transit. Another $150 million is to be spent on clean water projects.

Because the state could lose stimulus money unless it is spent quickly, agency officials already are seeking bids for projects that could begin soon. But who will be responsible for approving them, and who is to decide how $1.3 billion the state is getting for budget relief and discretionary education spending will be doled out?

They are among many questions that have not been answered in their entirety.

Daniels said he will consult with lawmakers on how to spend the money – probably a politically wise move since House Speaker Patrick Bauer, D-South Bend, says the General Assembly should have a say in the decisions.

Daniels will need support from Democrats who control the House to win passage of some of his legislative initiatives, including a new two-year budget he can accept. To cut them out of stimulus spending surely would make some of the road blocks he could meet even bigger.

Agreeing on spending decisions almost always proves difficult, and a deluge of federal dollars could complicate matters.

Daniels was vague last week on saying how discretionary stimulus dollars should be spent, saying only that they should be spent quickly to create jobs. He did suggest that a one-time state tax cut could be a possibility if it directly resulted in new jobs.

But Bauer was cool to the idea of state tax cuts on top of the federal ones included in the current stimulus plan.

“A tax cut doesn’t help 266,000 people who don’t have a job,” he said.

House Democrats have proposed what they call a state stimulus package, which would include tapping unspent money from the lease of the Indiana Toll Road and spending it now on local and state road projects. Daniels has balked at that idea, but Bauer says it would create jobs now, and the federal money would create even more of them.

Senate Minority Leader Vi Simpson, D-Bloomington, said whatever discretionary money comes to Indiana should be incorporated into the two-year budget lawmakers will draft so they are coordinated with state dollars. But she said there are many unknowns, including what the final, federal stimulus law will be and how it should be used in Indiana.

“Everybody is grappling for just the right answer,” she said.

Daniels and lawmakers have a dilemma on their hands, all right, and as it stands now, it’s a $5 billion one.