Competing interests to collide in final days of session

This is when it starts to get ugly (and next week, we’ll probably tell you this is when it gets really ugly).

The two principal matters that all agree must be resolved are the biennial budget and a plan to return the Unemployment Insurance Trust Fund to solvency.

Complicating things—and poisoning the waters—is the so-called "bailout" for the Marion County Capital Improvement Board.

Senate Republicans passed their version of the two-year budget April 14, and it may meet with more approval from House Democrats than from Republican Gov. Mitch Daniels. The budget would provide real increases in funding for K-12 education and allow some higher education capital projects to proceed, but only with the inclusion of federal stimulus funds.

Daniels does not like the substitution of federal dollars for state ones here, concerned about plunging off the fiscal cliff in 2011 with a $330 million-plus structural deficit when federal largesse runs out. Senate Republicans point to the $1.3 billion in state reserves as a safety net, but the governor remains skeptical.

House Democrats still advocate a one-year budget because of the economic uncertainty, but that insistence will not last. Because of the strong education funding component in the Senate GOP plan, Democrats likely will acquiesce while continuing to push for more state stimulus spending along the lines of the House-passed bipartisan road-building bill.

At the margins, Democrats would like to see less spending on corrections, and want the school funding formula tweaked from the Senate preference (directing dollars largely based on school district population) to allocate more cash to urban school districts. There will be a tussle over a tax credit the Senate seeks for those who enroll their dependents in private schools, and over restrictions on what schools can do with dollars in their capital projects funds.

Don’t rule out Senate Republicans’ advocating deeper cuts if revenue forecasts are cataclysmic.

Meanwhile, the Unemployment Insurance Trust Fund continues to be the $1.4 billion gorilla.

As more and more Hoosiers are forced to turn to unemployment insurance, the insolvency situation continues to be exacerbated. And with the uncertainty hanging over General Motors and Chrysler and their key suppliers, potential solutions become more expensive.

House Democrats appear intransigent about benefit reductions for displaced workers in any form, and rumblings are that this is a deal-breaker that could force a special session. While a solvency solution has been debated for more than 15 months, if a trust fund fix is not negotiated this session, it doesn’t seem a solution can wait until next year.

Of course, there still isn’t even a consensus on how high the tax increase should be; how industries or companies that are bigger contributors to layoffs may be penalized; whether certain industries or occupations should be ineligible for compensation for "regular" layoffs; how high a surcharge should be charged on premiums and for how long; and other issues related to the phase-in.

Threatening to disrupt the delicate balance (which hasn’t even been attained yet) is the CIB assistance package.

Some lawmakers view it as an imperative, but the farther you travel from the Mile Square, the less interested you find lawmakers in solving CIB’s cash crunch.

Not only is this an "Indianapolis problem," many lawmakers grumble, but when they have sought similar help for their areas, they were met with deaf ears from Indianapolis. That chorus is particularly loud from Lake County.

The governor didn’t help advance matters when he suggested the CIB dilemma required a local solution, giving those who don’t want to see sales tax dollars diverted from state coffers through changes in taxincrement financing districts more ammunition to fire against the proposals.

The fact that the need for dollars emerged late in the session, and that Indianapolis’ Republican mayor, Greg Ballard, was tardy in coming to the table with input didn’t help. Now, as assorted parties offer ideas to solve the operating shortfalls, some are so quickly cobbled together that they don’t even contemplate implications for areas outside Marion County.

What is beginning to emerge is the likelihood that the budget will become a home for assorted controversial matters. While the House and Senate might be comfortable with the fiscal end of it, the governor clearly isn’t. And the measure is likely to become even more problematic for him if laden with a temporary or permanent unemployment insurance fix and a CIB rescue.

What may be necessary components for passage could be conditions precedent to a gubernatorial veto.

The last time a budget was so objectionable to a governor was 1993. A budget bill veto was overridden within hours, sticking Democratic Gov. Evan Bayh with a budget he didn’t want-and authorizing casinos in the same bill.
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Feigenbaum publishes Indiana Legislative Insight. His column appears weekly while the Indiana General Assembly is in session. He can be reached at edf@ingrouponline.com.