STATEHOUSE DISPATCH: With session behind him, Daniels readying for next one

At the beginning of the session, Gov. Mitch Daniels told Hoosiers to fasten their seat belts. We told you to expect the session to follow Mario Andretti’s philosophy: “If everything seems under control, you’re just not going fast enough.”

The session began like a heat at the U.S. Nationals drag races in Clermont-quickly out of the blocks. Things seemed to bog down midway, reminding us of the Brickyard 400. The finish held form, however, with the governor downing the legislative equivalent of the Indy 500’s cold glass of milk, celebrating enactment of much of his agenda.

While the final week of the session wasn’t exciting, the unpredictable process meant somewhat surprising results.

As the April 29 deadline neared, House leaders realized some revenue-raising proposals-like the “clawback” of $70 million in local riverboat casino taxes, expanded gambling, sin taxes increases and the governor’s proposed income surtax-were anathema to many House Republicans, particularly the freshmen.

Most of the proposals would direct increased revenue to education spending, but leaders realized the Democratic votes attracted by this, the prospect of some additional funding for health care programs, and the Colts stadium package would not be sufficient to overcome the lost Republican votes. So they decided to pass the budget relying only upon GOP votes.

The GOP saw no defections in the House, and only three in the Senate-more than enough to pass a budget that served up a bit more spending for schools, but essentially a flat-line budget otherwise. Recall the general legislative rule: Divided party control makes for a larger budget as votes are traded off. The education increases also depend heavily upon local governments raising their property taxes.

So what does it all portend?

At 8:30 a.m. May 2, Daniels gathered his top staff and key department heads and began planning to implement the measures that passed the past few months.

Because the budget will not balance in the first fiscal year of the biennium, you can expect the governor to be even more zealous about the power of the purse. What many don’t understand is that, while the Legislature appropriates cash for programs, the governor doesn’t have to spend it all. While “impoundment” has been barred by law at the federal level since late in the Nixon administration, it is a practical tool in Indiana that you can expect Daniels to fully use.

One area the Daniels administration fell short in this past session was education. In fact, much of the substantive education agenda was legislative and not executive; while the governor did not get everything he sought, that may be somewhat deceiving.

Expect Daniels to gain approval for some of his preferences administratively, which is why he backed off on some legislation. For example, he can effectively restructure the membership of the State Board of Education yet this year and, when he does, he can effect the change in ISTEP+ testing from fall to spring without legislative acquiescence.

Senate Tax and Fiscal Policy Committee Chairman Luke Kenley, R-Noblesville, authored a local option income tax measure midway through the session that would have radically altered the way Hoosiers finance local government activities. Because of the complicated nature of the measure, the permanent implications and questions from local governments about the mechanics, Kenley never presented it for a final vote.

Nevertheless, this, along with the attendant issue of local government flexibility well beyond the Indianapolis Works proposal, will be a key legislative issue in 2006. It likely will receive a great deal of attention from a legislative interim study committee this summer.

Despite huge sums of money spent on lobbying on both sides of the telecommunications deregulation issue, the dereg bill failed after early and overwhelming passage in the House.

This issue, however, will not go away. SBC Indiana will not allow it to drop off the agenda and market forces at work both nationally and in Indiana will require that the state address this-soon.

The term of Indiana Utility Regulatory Commission Chairman Bill McCarty comes to an end this spring and he will not be reappointed. Watch for signs as to whether the new leader will intervene where the Legislature would not.