With just over a month before conference reports have to be finalized for action, the General Assembly continues to set a fast pace to meet its demanding schedule. The Senate wasted no time diving into budget hearings this week, resurfacing the split between the House and Senate on taxes and spending priorities.
As the days tick by, the fate of big-ticket appropriations and modest new investments alike hang in the balance – along with how we pay for them – but so far, there’s been little “budge” in the budget debate.
Mo money, mo problems
One area of general consensus is that the state needs new revenues to fund infrastructure, if not other key programs. But to paraphrase Notorious B.I.G as legislative analysis, even when lawmakers agree we need more money, the debate over “how” breeds more problems.
Monday’s Senate Appropriations hearing centered on the proposed $1-per-pack cigarette tax increase that would fund anti-smoking programs (originally in HB1578 – awaiting action in Senate Commerce & Technology – and now included in the House budget) and also plug the $300M general fund gap left by a proposed shift of all gas tax revenues to road construction.
Senator Kenley has consistently expressed a preference for tolling, and restated his concern about relying on a “declining revenue source” (as cessation programs and higher prices cut smoking) to shore up the general fund. We respect the short-term arithmetic, but supporting a long-range solution for infrastructure compels us to make three key points:
- There’s a common-sense appeal to aligning revenue sources with use – i.e. gasoline consumption with highway needs; further indexing the tax to inflation (as called for in the House plan) is meant to meet growing infrastructure demand and rising construction costs, not boost the general fund;
- Reducing smoking, along with the repeal of the ‘Smoker’s Bill of Rights’ by HB1578, allows employers to manage healthcare costs among their workforce – savings that can be invested elsewhere (to create jobs and produce taxable business and personal income);
- Overall, as we’ve noted before, smoking costs the state more than $7B in medical care and lost productivity; cigarette tax revenue will (hopefully) decline over time, but reduced health costs also translate into public savings, and regained productivity nudges taxable wages upward.
What about attracting more taxpayers?
To that point, individual income tax collections still make up a sizable plurality of state revenues; we have to make sure this doesn’t also become a “declining revenue source.” In a talent-driven economy, we need more Hoosiers (and therefore more taxpayers to support government).
That’s why we urge the General Assembly to meet Governor Holcomb’s request for an additional $4M to keep the Regional Cities Initiative going, supporting metropolitan regions as the engines of state population and economic growth.
Legislators have been cool to the funding (not currently included in HB1001), but we see first-hand that quality of life is a business climate issue – employers expand and invest in places where they can be close to skilled workers and potential customers.
In a related development, SB507 was heard earlier this week in Ways & Means; the bill makes some useful updates to the Indiana Economic Development Corporation’s (IEDC) authority, including oversight of entrepreneurship programs and administrative changes to Regional Cities. But by halving the Governor’s proposed Next Level Fund and eliminating Regional Cities money altogether, new rules can’t produce results without resources.
A plea for pre-k:
Another long-term investment in creating more productive, successful Hoosier taxpayers is – obviously – more accessible, quality pre-K. We’ve detailed the unfortunate cuts to the proposed $20M pilot expansion – itself far short of the $50M that would create a preliminary statewide program.
On Wednesday, the Senate Education Committee heard HB1004. As we’ve described, the House plan expands the pilot program to ten counties with eligible households at or below 200% of federal poverty level. The Senate version, SB276, allows more counties with qualified programs to opt-in, and has a stronger provision requiring coordination of federal early learning resources (i.e. Head Start and Child Care Development Funds); it pegs eligibility to 128% of federal poverty.
The All IN 4 Pre-K partners support the HB1004 provision allow the 10% funding match for participating counties to be ‘paid’ with in-kind services, allowing more local flexibility. We also support an income threshold at 185% of federal poverty, consistent with free-and-reduced lunch program criteria.
These policy issues are significant, but the earlier point holds true: If we’re paying lip service to building a stronger workforce pipeline (as with SB198, strengthening Career and Technical Education programs), we have to put our money where our mouths are.
That starts with a forward-looking investment in pre-K, starting with $50M included in HB1001. Partners made that point loud and clear at this week’s Senate hearings.
Time saves money, too:
We’ve talked about time as a factor on the legislative schedule – let’s briefly revisit when time was an actual issue on the docket, too. This weekend, we spring forward an hour; a simple act that keeps Indiana in sync with most of the nation, saving employers (particularly in our logistics industry, and among businesses with national or global supply chains) untold hours of coordination and confusion.
In 2005, the Chamber – among a host of business and industry groups, including our emerging tech sector – pushed successfully for Daylight Savings Time. As we enter the home stretch for this year’s session, let’s recall that victory and push towards a few new milestones before time runs out.
In order to advocate for important priorities like infrastructure and early childhood ed, our Political Action Committee is thankful for the support of many people and organizations, such as:
Chip Garver from Faegre Baker Daniels
Anne Hathaway from Hathaway Strategies
Kristin Mays-Corbitt from Mays Chemical Co.