Biz issues move to back seat: Property-tax reform leaves little time for other work

Reforming the state’s property tax system will consume so much of the legislative session that the Indiana General Assembly isn’t expected to give much attention to other issues pertinent to the business community.

Compounding matters is the fact that the session, which runs from mid-January to mid-March, is of the short variety, meaning legislators have less time to debate issues than they would during the long, odd-year meetings.

“I think [property tax reform] is the most intense and voluminous issue I have seen,” said Sen. Luke Kenley, R-Noblesville, who has served the Senate 15 years. “It touches on so many things, the 2008 session could be known as a single-issue session.”

Gov. Mitch Daniels’ proposal would cap owner-occupants’ property taxes at 1 percent of a home’s market value. Rental housing would have a 2-percent cap, and businesses a 3-percent cap.

Corporate leaders such as Indiana Manufacturers Association President Pat Kiely aren’t thrilled with that prospect. Over time, he expects the disparity caused by those caps will grow and businesses will suffer.

“This one feels almost like a special session being called just for property taxes,” he said. “We’re pretty much focused on survival, to be quite honest, and trying to keep our cost structures here competitive.”

Daniels would offset the lost revenue from lower homeowners’ property taxes by hiking Indiana’s sales tax to 7 percent. Business leaders are concerned about how that change would affect Indiana’s economy, particularly its retail sector.

At any rate, many remaining business matters likely will languish another year, said Ed Feigenbaum, publisher of Indiana Legislative Insight.

“I get the sense from talking with individual lawmakers that they are almost being discouraged from trying to mount any efforts on behalf of anything that might distract from the tall task at hand,” he said.

Following is a roundup of various measures affecting business that may see some action at this session: Hoosier Lottery

One issue that surely would have surfaced is the governor’s proposal to lease the Hoosier Lottery to a private operator. The deal might have generated $2 billion for new programs to attract top research professors to Indiana’s research universities and to offer scholarships to merit scholars who stay in Indiana after college.

The measure, which failed last session, is destined for the dustbin again, much to the chagrin of Indiana Chamber of Commerce President Kevin Brinegar. He said his organization would have been “highly interested” in revisiting the issue.

“To us, it was a very reasonable approach,” he said. “You would be running the lottery the same way the riverboats and the two horse tracks are operating. We’re not reinventing the wheel.”

Feigenbaum is a bit surprised, he said, that Daniels didn’t reintroduce the lottery initiative as a way to bring relief to homeowners smarting from high tax bills. The money from privatization could have helped launch a property-tax relief fund or been used retroactively, he said.

Kernan-Shepard commission

The recommendations of this panel, led by former Gov. Joe Kernan and Indiana Supreme Court Chief Justice Randall T. Shepard, definitely will be on the table.

“There will be a lot of business-related issues discussed, but they will all be generated by the property-tax situation,” said Toby McClamroch, managing partner of Bingham McHale LLP, which held its annual Legislative Conference on Nov. 30.

Daniels appointed members of the Kernan-Shepard commission panel to study and recommend local government reforms. Consolidating schools or libraries and abolishing township-level and countylevel assessors are among the issues the panel is studying. Whether a constitutional convention is necessary to achieve significant reforms is being pondered, too.

Brinegar and Kiely, as well as other corporate leaders, no doubt are eager to hear the commission’s recommendations.

Environment

An environment-friendly utility bill backed by the Hoosier Environmental Council that died in the final hours of the last session likely will be revived.

The measure, by Rep. David Crooks, DWashington, would have required that certain percentages of electricity be sold from renewable energy sources such as wind or landfill gases.

So-called renewable electricity standards have been enacted by 25 states. Indiana’s utilities generate electricity mostly from coal, which, when burned, emits pollutants like sulfur and mercury.

“We’re very interested in the renewable energy standard and don’t see a reason why the property tax issue would preclude that kind of proposal from going forward,” HEC Senior Policy Director Tim Maloney said.

For its part, the state chamber supports renewable energy use, but not when mandates are involved, said Brinegar, citing cost implications.

Another environment-related bill supported by HEC that died last session could again be introduced by Rep. Matt Pierce, DBloomington. The green-buildings legislation would require new state buildings to be constructed using the Leadership in Energy and Environmental Design standard.

Unemployment compensation

The state’s Unemployment Compensation Fund, which contained $1.6 billion at the start of the decade, has dwindled to about $383.5 million. The IMA and the state chamber want the Legislature to make changes to the system, but serious discussion likely will need to wait.

“Can we do it in the same year we’re doing property taxes?” asked IMA Lobbyist Ed Roberts. “Probably not, but it is a concern.”

Even though Indiana has a relatively low unemployment rate, the state is compensating about 800,000 weeks of benefits a year more than it had at the start of the recession in 2001, at an average payout of $290 a week, Roberts said.

Statutory changes that increased benefit amounts, and a drop in the state’s work force, are a few factors contributing to the loss of funds, he said.

Insurance

To no avail, pro-business lawmakers have tried in the past to reel in high health care insurance costs by stripping certain mandates from fully insured plans.

This session, however, the insurance industry is concerned that additional mandates might be added to those health plans.

Dan Seitz, a managing principal of Bose Public Affairs Group who represents several insurance organizations, expects bills mandating coverage for prosthetics and stereotactic radiotherapy will be introduced. Indiana already has nearly 20 health-benefits mandates, such as coverage for childbirth or autism testing.

A mandate last year extended from 19 to 24 the maximum age at which children can receive coverage from their parents’ insurance, regardless of the children’s income.

Seitz thinks problems caused by the new dependency law might cause some emplyers to drop coverage.

In some markets, mandated benefits increase the cost of health insurance as much as 45 percent, according to the Virginia-based Council for Affordable Health Insurance.

Information technology

The 2008 Public Policy Agenda of Tech-Point, a not-for-profit that promotes the technology advancement, lists two, $2 billion appropriations to assist research and development and work-force development.

One would support universities and other researchers in attracting staff, faculty and students, and the other would fund work-force development needs.

TechPoint President and CEO Jim Jay doesn’t expect the proposals to advance this session, but said it is important to familiarize legislators with the issues.

That seems to be sage advice, particularly given the words of Neil Pickett, who spearheads the governor’s efforts in the General Assembly.

“He’s been pretty clear that he’s going to have a short agenda,” he said.