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What did the legislature accomplish?

‘Energize Indiana’ makes a difference
Statement from the Governor’s office

‘Energize Indiana,’ a visionary and bipartisan job-creation plan, will improve individual Hoosiers’ lives and allow the state to provide important services, especially to its most vulnerable citizens, Gov. Frank O’Bannon said Thursday after signing House Enrolled Act 1001 into law.
‘Energize Indiana, our long-term vision for our state’s future, now becomes a reality for Hoosiers who want meaningful work, who seek education, who want to research an idea, who want to grow a business,’ O’Bannon said. ‘Energize Indiana creates opportunity and offers hope to Hoosiers for a more secure future.’
O’Bannon spoke at a gathering in his office of lawmakers who supported HEA 1001 and others whose work led to its passage April 27.
The job-creation plan ‘ if ultimately funded for 10 years, as the governor envisions ‘ will help create 200,000 high-wage, high-skill jobs in four high-tech business sectors. It also authorizes university construction projects, immediately creating high-wage construction jobs and ultimately providing much-needed space for research and other purposes.
‘Energize Indiana diversifies our economy, making life better for Hoosiers and strengthening our state’s position when the next inevitable economic downturn occurs,’ the governor said. ‘It creates high-wage, high-skill jobs, providing meaningful work for our people and encouraging our college graduates to stay in Indiana.’
‘Energize Indiana creates an economic environment that adequately supports the state services Hoosiers need and deserve ‘ good schools, health care and public safety. It erases the uncertainties of today and ensures that we will always be able to care for our most vulnerable citizens.’
O’Bannon hailed the General Assembly’s bipartisan effort to pass the job-creation plan, which he and Lt. Gov. Joe Kernan unveiled Dec. 4. Since then, they have traveled the state and sponsored events in the Statehouse to inform Hoosiers about the plan, which has won strong editorial support from several Indiana newspapers. Media outside the state also have taken notice, singling out Indiana for taking bolder steps than most states during a national recession.
Energize Indiana’s initiatives build on the work undertaken last year by the O’Bannon-Kernan administration and the General Assembly to overhaul Indiana’s tax structure, making it more conducive to job creation and retention.
It also builds on work done in the past several years to raise academic standards in Indiana’s K-12 schools so they are among the highest in the nation and to create the state’s first Community College system so nontraditional students have access to higher education.
Under HEA 1001, Energize Indiana will, among other things:
‘ Focus on four industry sectors ‘ the life sciences, advanced manufacturing, information technology, and high-tech distribution ‘ that are identified as promising areas in which Indiana should diversify its economy.
‘ Provide $75 million over two years (and a commitment to continue the program for 10 years) for the 21st Century Research and Technology Fund, which makes grants to universities and companies to research and develop ideas.
‘ Grant authority to bond for $344 million in university construction projects, including five research projects, creating new jobs immediately and providing research and other facilities in the future.
‘ Provide $9 million over two years for technology parks, which assist startup companies.
‘ Provide $8.4 million over two years for rural development.
‘ Pump $290 million over two years in new money into K-12 public schools.
‘ Shore up the budget for state assistance to college students with $60 million.
‘ Extend the 10 percent research and development tax credit to 2013, worth $675 million; create several other tax credits, including those to promote Indiana venture capital initiatives; adaptive reuse of coal ash and ethanol products, biodiesel agricultural products; and industrial expansion and development.
‘ Allow use of $25 million in federal economic-stimulus money a year for five years to assess the skills of Hoosier workers; identify the skills required for 1,800 selected job categories and match workers with jobs; and allow use of another $8 million in federal money for local WorkOne Centers.
‘ Permit use of $39.2 million in federal money to modernize and simplify the state’s unemployment insurance system, allowing recipients to receive their checks more quickly and enabling businesses to pay unemployment taxes online.
‘ Expand authority of the Indiana Port Commission to finance $100 million in economic-development projects throughout the state, not just at port sites.
‘ Encourage the Public Employees Retirement Fund and the Teachers Retirement Fund to invest $100 million in Indiana high-tech businesses.
‘ Provide $10 million to expand the I-Light optic network between major research institutions.
‘ Designate $1 million to promote Indiana’s business-friendly tax structure.
‘Provide $2.2 million for improvements at the Gary-Chicago Airport.
‘ Reduce property taxes for the steel industry.
HEA 1001 also includes the state budget, which reaches a positive bottom line only by freezing expenditures on growing needs, such as Medicaid, the health care program for the poor and the disabled, and prisons.
‘It will take strong leadership and careful management to make the state budget work and to ensure that budget shortfalls do not harm those who rely on the state for help,’ the governor said. But the Energize Indiana provisions contained in HEA 1001 will help ensure that important services are adequately funded in the future.
Budget is a temporary fix
The Indiana Chamber of Commerce

The 2003 long session of the Indiana General Assembly earns one distinction. It is the first time since the mid-1990s that a budget-writing year has ended without the need for a special session to pass a two-year budget. A reason for celebration? Not really.
In reality, the final budget document is only a stopgap measure to keep the state in business as it contains an ongoing operating deficit of at least $400 million. While the economic development initiatives within the bill represent a strong start, all concerned acknowledge that they do not constitute a comprehensive, long-term plan to revitalize the state’s economy.
Biannual budget sessions are intended to set the state’s spending priorities for the next two years. The 2003-2005 document will be the subject of immediate and constant review. At some point, perhaps before the end of the year, legislators will have to come back to the Statehouse to take up the issues that are so important to the state’s economic and fiscal future ‘ a fact upon which legislators readily agree.
The budget borrows from various funds instead of dealing forthright with the state’s financial problems. The economic development initiatives included are positive and encouraging, but are much less than originally envisioned or needed.
This result was predictable as early as Jan. 14, when Gov. O’Bannon’s State of the State address featured a list of past accomplishments and barely a recognition of the state’s budget woes. With legislators hearing nothing from the CEO of the state about how to proactively move forward, it is no surprise that the subsequent course was a failure to address or resolve the state’s fundamental fiscal and economic weaknesses. Arguably, legislators are not to blame as it is difficult to play a concert without a conductor.
A mid-session analysis by outside fiscal policy experts revealed that if the state continues on the path of doing business as normal, a budget deficit would remain until at least 2009. That is six more years not having the funding available to improve schools, develop information economy businesses and jobs, and take care of the many other state needs.
In six years, it will be too late to solve Indiana’s problems. Our best and brightest students will leave the state like never before; companies will not grow or expand their businesses as quickly ‘ if they remain at all; and, as the Indiana Chamber has warned since the mid-1990s, the state will fall in the latter category in a world of haves and have nots.
There are several positive aspects within the budget. They include:
‘ No new business taxes or a rollback of the tax restructuring gains made last year.
‘ No delay in the current property tax reassessment, which continues to be a cloud of uncertainty hanging over the state until it is completed.
‘ An emphasis on holding the line in Medicaid and corrections spending, albeit accomplished with a meat ax rather than a surgeon’s knife.
The school funding formula was the primary area of disagreement between the House and Senate. Dispute is understandable when there is not enough money to go around to assist both fast-growing suburban schools and a number of urban schools that are seeing declining enrollments. Fix the economy, increase the state’s revenues and future budget battles will be able to offer win-win situations instead of ‘win a little, lose too much.’
In an ironic twist that we don’t care to see repeated, the primary reason for the mostly amicable legislative session is that there was no money to spend. Arguments over spending priorities and divvying up discretionary funds were few and far between when the funding pot was empty.
What needs to occur next, preferably sooner rather than later?
First, the governor needs to improve the lines of communication between the executive and legislative branches, particularly with members of his own Democratic Party. Second, a resolution to the ongoing reassessment saga is required to provide an accurate picture of how the state’s property tax (and subsequent revenue) picture will change.
The Indiana Chamber has said many times that is not too late to act. Those chances, however, are very close to running out. We stand ready to assist, as soon as the policymakers decide they’re ready to dig in and get the job done.
Indiana’s budget, filled with hope, falls short
The South Bend Tribune

The budget forged by the Indiana General Assembly last weekend is filled with hope, hope that the economy picks up, revenue increases, and the state is able to pay for its spending.
The $22.7 billion, two-year budget calls for spending much more money than the state expects to take in. Indiana has an $800 million deficit. This budget plan, which Gov. Frank O’Bannon is expected to sign, is projected to cut that deficit in half.
Lawmakers made up the difference by dipping into the state’s cash reserves and other sources, which will dry up when the next two-year budget season comes around ‘ unless, of course, the economy makes a dramatic turnaround.
We share the hope that Indiana bounces back. But it is just that ‘ a hope. No experts are rushing to predict a sharp upswing for the state’s economy. In two years, if the economy remains stagnant, the General Assembly will not be able to repeat what it has done this year. State legislators will have to balance the budget, and make tough spending decisions they mostly avoided this time.
The budget has some strong points. School spending will increase slightly. Part of O’Bannon’s economic development plan will be funded, which is essential if the state is to improve its chances for increasing revenue.
That plan was originally an ambitious 10-year venture. After traversing the General Assembly, it is now a smaller two-year plan, which laudably includes $75 million in spending for the 21st Century Fund, a program that encourages high-technology partnerships.
Also included in the overall spending package is $2.4 million for Indiana University South Bend for campus land purchases and a new information technology major.
However, lawmakers failed to even address the biggest budget problem facing Indiana: the Medicaid crisis.
Medicaid, the federal program that provides health care for the state’s neediest people, is severely underfunded in this two-year budget plan. It is ‘flatlined,’ which means that with anticipated growth in Medicaid costs and demand, largely due to Indiana’s aging population, the state will be hundreds of millions of dollars short of paying for Medicaid. Plus, without state funding increases, Indiana will miss out on millions of dollars in federal matching funds.
The most equitable way to deal with the Medicaid crunch would have been a small increase in the state’s income tax, but lawmakers took a pass, and passed the problem on to O’Bannon. The governor has said he won’t make severe Medicaid cuts. He does have discretion to redistribute state funds, but it is not yet clear what he plans to do.
Here’s hoping.
Lawmakers played dodge ball
The Indianapolis Star

The best that can be said about the 2003 legislative session is that lawmakers put some desperately needed money into economic development, found a little extra money for schools and left town on time.
Beyond that, the session looked a lot like dodge ball.
Lawmakers dodged their duty on Medicaid. With health care costs rising faster than the rate of inflation and more Hoosiers entering the program, their decision to flatline Medicaid spending translates into a $574 million cut. It will be up to the O’Bannon administration to figure out where cuts can legally occur. Hoosiers can count on longer waiting lists for vital services such as home-based care for disabled and elderly and potential cuts in provider reimbursement rates that could deter doctors from treating Medicaid patients.
Lawmakers dodged their duty to balance the budget. For the second budget-writing session in a row, lawmakers admitted they couldn’t match expenditures with revenues. The most optimistic analysis is that they trimmed the state’s existing $800 million deficit by half. As they did in 2001, lawmakers pinned their optimism on the prospect of a recovering economy that will bring in higher-than-expected tax revenues.
Lawmakers dodged their duty on Energize Indiana. Rather than embrace the governor’s creative plan to sell bonds backed by future tobacco settlement proceeds to fund $1.25 billion worth of good ideas, they opted for spending half that amount and using traditional funding options. The result: Indiana will still be spending far less than experts say is needed to become competitive in the high-tech, high-information sector.
Lawmakers dodged the public’s demand they show leadership. Rather than raise taxes or identify specific programs to eliminate to put the budget into balance, or take any actions that might be viewed as political risks, they handed the deficit back to Gov. Frank O’Bannon to finish solving. O’Bannon has made lots of cuts already, and in announcing Sunday that he would sign the budget bill, acknowledged he will have to make more.
In providing slight increases for K-12 schools, 2.3 percent in 2004 and 1.9 percent in 2005, lawmakers at least recognized that education is the foundation for a strong future. Indiana has new, rigorous academic standards in place that have yet to be met. The state cannot expect students and teachers to do more with less money.
In every other area, lawmakers consigned state government to continue the balancing act of doing more with less. Lawmakers have left Indianapolis, leaving many serious challenges behind for others to tackle.

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