As we highlighted last week, conference committees are underway in the General Assembly, as the House and Senate work to reconcile their differences on the bills that have made it this far…headlined, of course, by the two-year state budget (HB1001).
Legislators are in full deal-making mode – and with just ten days before FDIC (the fire fighters convention) comes to down and re-accommodate them from their Indy hotel rooms, it’s going to be an ‘amazing race’ to hammer out the necessary compromises before the buzzer sounds on the session.
Eyeing the 1%
No, your Chamber advocacy team isn’t channeling Bernie Sanders. All eyes were on the updated state revenue forecast released Wednesday, and there was good news – an upward revision of just over $200M over the next two years.
However, looking at the big picture, this positive bump represents just 1% of the total budget – Senator Kenley called it “petty cash,” and fiscal leaders largely agreed that the number wasn’t big enough to drive policy shifts in the final week of the session.
We get the math, but would note that the numbers being discussed on pre-K - $20M to double the existing pilot, roughly $32M to hit Governor Holcomb’s recent challenge to double the number of children enrolled, and $50M to meet our aim of creating a statewide early learning program – are also very modest in contrast to the major potential impact.
We also continue to believe that other revenues are needed to meet existing budget obligations and fully-fund Indiana’s infrastructure needs; we’ve focused on the cigarette tax as the best way to get there, but the optimistic revenue picture provides a little more breathing room.
We’re realistic about the attitudes of legislators (still gun-shy over fluctuations and variances between past forecasts and eventual tax collections) and the uncertainty over federal healthcare and transportation policy that creates even more reluctance to move forward with new spending at the state level. But we continue to believe in the economic rationale (and necessity) of investments in Indiana’s future – and as we move into the last half of April, hope springs eternal.
Up in Smoke
The shadow of ongoing federal debate over healthcare certainly looms over the proposed cigarette tax increase, with Senator Kenley and Governor Holcomb agreeing that revenue hikes should be held in our collective pocket in case additional Medicaid liabilities are shifted to the states.
We believe that the cause of healthier Hoosiers and a healthier business climate, along with a healthier infrastructure budget, are too important for such a “wait and see” attitude. With our partners in the Alliance for Healthier Indiana, we continue to ask the General Assembly to:
- Raise the price by $1.50 per pack. Increasing the price of tobacco has been proven the most effective way to lower smoking rates – therefore reducing the cost of smoking-related illness and chronic ailments, which help drive the very healthcare costs that lawmakers are worried about going forward;
- Use this increase in part to restore funding to $35 million for cessation and prevention programs: Dedicating $35 million to these programs would put us among the top-10 states for cessation and prevention funding;
- It’s true that reducing smoking eventually reduces cigarette tax revenues, but that calculus misses the broader economic benefit; smoking costs Indiana an estimated $6 billion annually in health care costs, lost productivity and premature loss of life – reducing these impacts will pay off in higher wages and business income, much larger contributors to the state’s general fund coffers;
- So in the meantime, we believe the cigarette tax hike makes it possible to shift gasoline sales tax revenues to the infrastructure budget from the general fund, helping secure Indiana’s economic future with a long-term solution to urgent infrastructure needs.
Hitting the Road
Before the General Assembly hits the road in a couple of weeks, it is absolutely critical that they pass a sustainable, fully-funded approach to expanding, repairing and maintaining the transportation infrastructure that’s a basic building block of Indiana’s economy as the ‘Crossroads of America.’
Unfortunately, the most recent Senate changes to HB1002 (which we described last week) falls short of meeting the ongoing transportation challenges identified by experts and employers alike.
It also links local road-funding distributions only to inflation – tying the longer-term funding trajectory for city and county construction to a baseline year (2017) with no regard for population growth, traffic counts or other criteria. This could slash funds flowing to cities and counties from the Motor Vehicle Highway Account by nearly two-thirds, and cripple the ability of growing regions (like Indianapolis, obviously) to keep up with the pace of people and employers moving in larger numbers to metro areas.
We’ve lauded the House and Senate for recognizing the need for a long-term infrastructure package with added revenues from dedicated sources; both plans feature gas tax increases and a mix of vehicle fees to help meet this goal. But let’s be clear – when it comes to conference negotiations and the bill that emerges to head to Governor Holcomb, we continue to endorse the House plan as the best option:
- Because of the gas sales tax shift (made possible by the cigarette tax revenue, as noted above) and a faster phase-in of fuel taxes, it better meets the projected billion-dollar annual shortfall in current infrastructure financing – we urge lawmakers to recognize the full scope of the challenge and embrace a proposal that pays for what we need, not set themselves up to revisit the issue;
- It doesn’t shift the funding burden to local governments; a trucker or commuter doesn’t care whether they’re driving on a state to local road, they just want to get where they’re going quickly and safely – we need a plan that addresses comprehensive infrastructure demands.
In short, the original HB1002 is more immediate, expansive, and supportive of all levels of government and our respective infrastructure priorities. There’s room for bargaining – i.e. a greater reliance on tolling to tweak the size of the cigarette tax increase or other revenues – but the final bill should be a generational plan for a more competitive, connected Indiana.
Pre-K Final Exams
The final negotiations on HB1004 (pre-K pilot programs) are taking place in conference committee – and it’s not too late to do the right thing on early learning, particularly with a more optimistic revenue forecast in hand. The All IN for Pre-K partnership is holding out for a ($50M) statewide program that gives kids across Indiana access to the same opportunities for lifelong success now only available to those whose families can afford it, plus a small sliver of eligible children in a handful of counties.
From a pragmatic perspective, we’re pushing for the best possible funding outcome with provisions that protect and expand regional progress. Key issues of note:
- Disagreement on how kids should be counted for child development grant funding – the proposed budget and FSSA have used a ‘half student’ count for pre-K, while advocates want more per-pupil resources with children in full-day pre-K counted as a full student;
- The Senate is committed to the Smart Learn IPad pilot program, while the House has been less enthused (but amenable to the program as a supplement) – we believe that this alternative misses critical social and emotional impacts while cannibalizing critical funds for an unproven experiment;
- Voucher expansion language is currently out of the bill;
- The All IN coalition is fighting hard to raise the eligibility income threshold to 185% of federal poverty level and allow include in-kind services to be used for the 10% local match mandate for pilot county participation (for more local flexibility, and to support wrap-around family services provided by other local agencies);
- The five current pilot counties (including Marion) have voiced their concerns on the danger of expansion without adequate funding increases, which could reduce the amount that current programs receive: The Indy Chamber has testified for a “hold harmless” clause to be added to protect the existing pilot programs if the final bill allows participation by other counties with only modest resources to support a systematic expansion.
Bonus Round: Budget and other Bills of Note
It would take a mind-numbing level of detail to describe the back-and-forth on other bills in conference. Notably, hearings continue on the budget (HB1001); beyond the fiscal implications of the issues we’ve already covered, we’re lobbying for continued (or increased) support for a number of initiatives either included in the original House blueprint or added later by the Senate – Regional Cities, the Indiana Bioscience Research Center, brokering more direct flights to and from Indiana airports, the Public Mass Transportation Fund, and more.
As the Pacers prep for the playoffs, we’re also cheering for SB515, which supports local sports corporations (here and elsewhere) to their efforts to drive sports- and hospitality-related investment in Indiana; the bill also clears the way for the city’s possible pursuit of an NBA All-Star game.
The next week, we’ll get more clarity on all these issues as final compromises emerge. Keep an eye on @IndyChamber and @FisherIndy for real-time updates, and we’ll send additional communications as merited in the home stretch.
We’ve said before that with GOP super-majorities in both houses, these negotiations should be more like a ‘family feud’ – but there are deep practical and philosophical difference yet to be bridged. We’ll keep you in the loop on what happens and what it all means as we cross the finish line and wait for the dust to settle over the next couple of weeks.