Worsening economy exacerbating legislature’s challenges

We’ve told you about all the work facing key senators in the next few weeks as they massage much of the fiscal legislation
approved (or, in the case of the Unemployment Insurance Trust Fund, ignored) by the House.

But there is more you need to know in a general sense about the coming weeks.

Brace yourself, because things are destined to get messy: the politics, the process, the personalities, the context, and the
issues and their substance, all at once.

Beyond the usual litany of changes to criminal and civil laws; an occasional hot-button matter that attracts public attention,
such as cell phone use in cars; and some noncontroversial changes that no one outside the limestone pillars of the Statehouse
pays any attention to, a handful of major matters must be resolved this session.

Unfortunately, there seem to be no easy solutions, and the worsening economy doesn’t make it easier. You may recall the pre-session
rhetoric about budget-making being easier in tough times. Lawmakers declared that it is typically more difficult to say no
to interest groups when surpluses must be divided among many hungry mouths than in tough times, when they can simply point
to the lack of available funds in opting against feeding any entity.

But in the past when times haven’t been good, they have been good enough. Lawmakers had largely been able to avoid major program
cuts, but that won’t be the case this year — or biennium.

February revenue collections were 10 percent below those for the same period last year, and $42 million below even the recent
pessimistic December fiscal forecast. Year-to-date revenue collections are down 3.8 percent over the year before. Sales tax
collections are down for the fourth consecutive month, the first time they have declined compared with the prior year for
that many straight months. Individual income tax collections remain 5 percent below the prior year, and Indiana is on pace
to see such revenues trail prior-year collections for only the third time in the past 30 years.

Unemployment also soared in January to 9.2 percent, Indiana’s highest rate since the early 1980s.

Against this dismal background, senators must cope with several key issues, and seek to minimize the partisan and institutional
(House versus Senate, and General Assembly versus governor) friction that can derail progress.

The Senate Committee on Appropriations has been hearing from state agencies and affected interest groups about budget components.
Expect that panel, under the leadership of Sen. Luke Kenley, R-Noblesville, to take the House-passed budget, add the education
components back in, and whip it back into the traditional comprehensive biennial budget format, rather than accept the House
Democrats’ contention that education should be treated differently, and addressed on a single-year basis due to the economic
uncertainty.

Some level of road and infrastructure funding from the separate bipartisan House stimulus bill will be rolled into the budget,
as will be some of the federal stimulus funding.

Sen. Kenley will be walking a tightrope here, trying to discern just how much federal stimulus funding will be appropriate
to include, given unknown amounts, timing and strings. You can expect lots of questions about just how much federal funding
will be substituted or added to forestall cuts in education funding, and whether capital projects at schools and colleges
should be considered true education funding.

The Indianapolis Capital Improvement Board operating shortfall becomes a more acute and delicate issue each day given the
individuals and entities tied to this; civic pride in the teams and facilities; and the mix of state, regional and local government
involvement. In any ordinary session, this would likely be the highest-profile issue.

Shoring up and restoring the Unemployment Insurance Trust Fund will be a task for the Senate Committee on Tax and Fiscal Policy,
where Sen. Brandt Hershman, R-Wheatfield, will build on the work of the Senate Committee on Pensions and Labor in reaching
consensus on a package that will have to include an adjustment in taxes and benefits. Hershman must ensure that adequate benefits
are paid while not unduly burdening business, and will face the dilemma of addressing the short-term crisis with the longer-term
fund liquidity problem.

Added to the mix: the continuing dialogue over making the property tax caps permanent, and the genuine disarray on local government
reform issues. The Kernan-Shepard reform package died in the House March 10, and Democrats didn’t kill it there without Republican
support. Look for some basic reforms to be revived, as the governor won’t relent.

So the environment isn’t the most conducive to deliberative lawmaking, and legislators will be earning every penny of the
first real pay raise they received in decades — a chunk of which their leaders withheld from them out of economic concerns.

___

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