Bauer blames Daniels for special session-WEB ONLY

Democratic Indiana House Speaker Patrick Bauer is blaming Republican Gov. Mitch Daniels for the need of a special legislative session.

The General Assembly did not pass a new state budget by last night’s midnight deadline for adjourning the session, which will force Daniels to call a special session to get one approved.

Bauer said today that Daniels wanted a special session because he had been missing in action during most of the legislative session and wanted to show his power. Bauer said Daniels this week kept moving his budget target for how much money should be in the state surplus at the end of two years.

Daniels issued a statement early today saying the budget bill that lawmakers voted on spent too much.

Many state lawmakers are grumbling over the fact that they will be called into their first special session since 2002.

“I think it only gets gets worse,” said Senate Appropriations Chairman Luke Kenley (R-Noblesville). “It’s hard to see how it will get better but maybe it will work.”

A two-year spending plan passed the Republican-controlled Senate on a 37-13 vote minutes before the last night’s midnight deadline, but the Democrat-led House voted 71-27 against the bill, with no Republicans voting for it. They said it spent too much and would leave the state with a shortfall after two years.

The bill’s defeat in the House means Daniels has to call lawmakers back for an overtime session, since the current budget expires at the end of the fiscal year on June 30. Each day of a special session would cost taxpayers a minimum of $12,420 in legislative per diem.

Daniels said a special session was better than the alternative, because the Senate Republican bill that was voted on spent too much.

“It is far better that the Legislature try again than to have an irresponsible budget that I would have been compelled to veto,” he said in a statement. “It is critical that Indiana avoid the fiscal disaster and massive tax increases that would result from dramatically increasing spending while revenues are falling.”

The statement did not indicate when he might call lawmakers back.

The House and Senate did approve a plan designed to fix the state’s bankrupt unemployment fund. It would raise taxes on employers and make administrative changes in hopes of saving money, but it would not cut benefits.

The key sticking points on the budget between Senate Republicans and House Democrats were spending increases for schools and a dispute over how large the state surplus should be at the end of the next two-year budget cycle in June 2011.

House Democrats proposed providing schools with a 4 percent increase over the next two years and said their budget plan would leave a $1.3 billion surplus at the end of the biennium. Like an initial Senate Republican plan, the increase for schools would largely rely on federal stimulus money.

But Kenley said Tuesday that he wanted to take $100 million out of proposed spending for schools and stash it away so the budget would have a $1.4 billion surplus after two years.

Kenley said recent economic bad news, especially in the auto sector, required a larger surplus, which would help protect education funding if needed. He also said that without a $1.4 billion surplus, Daniels would probably veto a budget bill. Daniels had cautioned lawmakers last week against spending too much or tapping into the state’s reserves.

Senate Republicans said their plan would leave a $1.4 billion surplus, and eventually House Democrats agreed to put that proposal up for a vote even though it would mean less money for schools.

But that meant that numerous House Democrats likely would vote against it, so there would need to be plenty of Republican votes for it to pass. Republicans provided none.

House Minority Leader Brian Bosma (R-Indianapolis) said the Senate Republican plan spent far too much and would leave the state with a deficit at the end of the next two-year budget cycle in June 2011.

“This is a recipe for a big tax increase,” Bosma said. “If this budget passes, it’s not only a missed opportunity, it’s going to be a drain on every Hoosier family. This budget serves the needs of government – big government.”

House Republicans also wanted unlimited growth in charter schools and $5 million in tax credits for people who donate money to K-12 schools for scholarships.

Bauer (D-South Bend) issued a statement after the lawmakers adjourned.

“After many hours of negotiation, Indiana House Democrats agreed with Gov. Mitch Daniels and Senate Republicans to endorse a biennial state budget that placed a higher priority on building and preserving a state surplus than ensuring that schools had the state support needed to help our children get the education they deserve,” he said.

“We chose this option because we were told that the House Democratic budget proposal took away too much of the governor’s cherished surplus, even though the House Democratic budget would have provided additional state funding to create jobs and help our schools avoid cuts in programs, personnel and services.”

The House and Senate did approve the proposed fix of the unemployment fund.

The fund has been spending hundreds of millions of dollars more in benefits than it has been collecting in employer taxes. The state’s jobless rate was 10 percent in March, its highest level since the recession of the early 1980s.

Indiana employers currently pay annual state unemployment taxes of 1.1 percent to 5.6 percent on the first $7,000 of an employee’s income. Employers with a history of layoffs pay more.

Under the bill passed Wednesday night, the taxable wage base would be raised to $9,500 and new tax rates would be phased in. Next year the minimum rate would be 0.7 percent and the maximum would be 9.5 percent. In 2011, the rates would range from .75 percent to 10.2 percent.

There would be no cuts in benefits, something Democrats were adamantly opposed to, especially during a recession.

Sen. Brandt Hershman (R-Wheatfield) said some changes – including a phase in of higher tax rates – were meant to address concerns from House Republicans and the business community. Proponents said it was a responsible plan for ultimately fixing the fund and would allow companies, despite the higher taxes many would face, to remain competitive.

But several House Republicans blasted the plan.

“This is a huge increase on business owners,” said Rep. Jerry Torr (R-Carmel). “This is going to cause more people to be unemployed.”