Earlier today, Indiana House Speaker Brian Bosma and Indiana Senate President David Long announced a deal had been reached on House Bill 1001, the two-year state budget. Indiana Chamber of Commerce President and CEO Kevin Brinegar reacts to the budget provisions:
"The new state budget has a strong focus on jobs and economic growth, putting additional investments into education and workforce development while also making important tax cuts.
"Trimming the individual income tax rate by 5% will not only benefit working Hoosiers but also many of the state's smallest business owners.
"It was particularly important to see some K-12 funding restored (cut during the last budget process) and more dollars targeted for our highways and infrastructure system.
"Meanwhile, the immediate elimination of the inheritance tax is long overdue and will lift a significant burden off of small, family-owned businesses.
"We commend House and Senate leaders, the governor's office and all those who got the budget to where it is — fiscally sound and including a wide variety of positive provisions for Hoosiers."
State budget watchers have been talking about the April update of the revenue forecast for months. This is because everyone knew that the numbers that came out this week revising the December projections for state tax receipts over the next two-plus years would be the numbers that control the final form of the FY 2014-FY 2015 biennium budget. While the significance of the April update is not to be diminished, the reality is that many of the “down in the weeds” budget crafters are the same people that generate the forecast. The Revenue Forecast Committee includes fiscal analysts from each of the four caucuses and a representative from the state budget agency – and these people are the ones that the fiscal leaders work with to put the budget together. So this means the folks who have been doing the hands-on budget detail work had a pretty good idea of what the April numbers would be earlier than when they were publically presented on Tuesday. But they couldn’t really generate revised numbers until they had enough indication of what the overall economic forecast would be. It is those trends and indicators that serve as the basis for the group’s revenue projections. The economic forecast (or outlook as they call it) is performed by IHS Global Insights (the largest and most renowned
economics organization in the world).
The revenue forecasters apply economic variables to their formula guided by IHS Global Insight’s economic forecast/outlook for Indiana. The group’s presentation this week indicated continuation of a stable but slow recovery, a slight slowing of consumer spending and higher nonwage income. In response to the economic picture, the revenue forecasters made some modifications to their revenue forecasting model and also made an adjustment to the gaming tax projections to account for more out-of state-competition. The resulting bottom line was an upward revision of $290 million over the previous forecast for the balance of FY 2013 (+$33M), FY 2014(+73M) and FY 2015 (+$184M). Nearly all of the increase is attributable to projected individual income tax receipts in the next biennium. The individual income tax projections were increased by 3% and 4% for FY 2014 and FY 2015 respectively. This translates to $70 million and $151 million more than the December forecast.
The forecast’s show of strength in personal income growth could itself become the subject of debate in the budget negotiations since it can be argued two different ways. Those supporting a tax cut will point to it as evidence that the state is collecting too much in this particular category of revenue, while those cautioning against a cut will suggest that this demonstrates the volatility and uncertainty of a steady income stream. Will the forecasts cause the House budget-makers and the Senate budgetmakers to change their thinking and reconsider the tax cuts? Perhaps, but consider that $290 million is only 1% of the total budget and is really nothing more than an adjustment of a prior estimate.
However you want to view it, it is a positive upswing and that fact alone should help the Governor’s cause for the individual income tax rate reduction.
I'll risk showing my age by asking how many remember the advertising phrase: "How many licks does it take to get to the Tootsie Roll center of a Tootsie Pop?" The ads on U.S. television go back to 1970.
I was somehow reminded of that when reading a recent headline that said: "How many clicks does it take to get to state tax information online?" Not quite as exciting or tasty a subject, but there is that alliteration.
The Tax Foundation asked the second question. Indiana was one of five states at the bottom of that list, requiring five clicks in order for a visitor to the state web site to find 2012 individual income tax rates. Three states (Colorado, Massachusetts and Pennsylvania) provided access with only two clicks.
A second query focused more on quantity of information rather than ease of locating. States were evaluated on the availability of 2012 and 2013 tax rate schedules, tax tables and tax forms. Five states had a perfect six score; Indiana was one of 11 with a five out of six.
What does it all mean? One takeaway is that states would be well served to reduce taxpayer frustration at an already frustrating time for many by making tax information available in an easy-to-locate manner. And, anytime you can pull out a 43-year-old Tootsie Pop reference, you have to take advantage of it.
Indiana Chamber President Kevin Brinegar sat down with Inside INdiana Business recently to discuss the most pressing topics in the state legislature as the end of session nears. See the video on IIB:
A bill that would create a tax district to fund upgrades at the Indianapolis Motor Speedway continues to make its way through the legislature. Some lawmakers want to add guarantees that would protect state funds if the facility would be sold. In this week's INside the Statehouse segment, Indiana Chamber of Commerce President Kevin Brinegar says he's "cautiously optimistic" the legislation will pass.
Our partners at Network Indiana/WIBC report a proposed amendment to the bill calls for the speedway to receive a portion of the money the horse racing industry now receives as a loan, rather than forming a tax district. The chance would also give an additional $5 million to the Indiana Economic Development Corp. for other motorsports industry efforts.
Brinegar says the Indiana House and Senate are not too far apart on a two-year state budget. He believes the final product will look closest to the Senate's proposal, which passed through committee last week. That plan includes a smaller individual income tax cut than the 10 percent proposed by Governor Mike Pence and an increase in K-12 funding by more than $330 million. Pence has called the proposal "a good start."
Differences also remain on education issues. The Senate has passed a bill that would halt the implementation of Common Core standards. House Education Committee Chairman Bob Behning (R-91) has refused to hear the bill because he believes the standards should move forward.
Few will argue with the idea that federal government spending is out of control. The Heritage Foundation's Federal Spending by the Numbers is a comprehensive look at the situation. We'll share a few of the many bullet points that just make me (and I'm sure many of you) wonder why our political leaders can't realize that the current course is a disastrous one.
Over the past 20 years, federal spending grew 71 percent faster than inflation.
In 1962, defense spending was nearly half the total federal budget (49 percent); Social Security and other mandatory programs were less than one-third of the budget (31 percent). Two major entitlement programs, Medicaid and Medicare, were signed into law by President Johnson in 1965.
In 2012 entitlements were nearly 62 percent of total spending, while defense dropped to less than one-fifth (18.7 percent) of the budget.
Federal spending per household reached $29,691 in 2012, a 29 percent increase (adjusted for inflation) from $23,010 in 2002. The government collected $20,293 per household in taxes in 2012.
The excess of spending over taxes produced a budget deficit of $9,398 per household in 2012.
For every $6.80 the federal government collected in taxes in 2012, it spent $10. Consequently, $3.20 out of every $10 spent was borrowed.
Major entitlements (Social Security, Medicare, Medicaid, Children's Health Insurance Program, Obamacare) will increase from 44 percent of federal spending in 2012 to 57 percent in 2022.
In 1993, Social Security surpassed national defense as the largest federal spending category, and remains first today.
Federal energy spending has increased steadily over the past decade with the government increasingly subsidizing activities like energy efficiency, energy supply, and technology commercialization. An unprecedented $42 billion was spent in 2009 as part of the stimulus, a nine-fold increase over the 2008 spending level.
Interest on the debt is the fifth largest federal spending category, even at today’s low interest rates.
All entitlements (excluding net interest) total nearly 62 percent of all federal spending today.
Spending on the largest, Social Security, Medicare, and Medicaid, will leap from 10.4 percent of GDP in 2012 to 18.2 percent by 2048.
The big three entitlements alone will absorb all tax revenues by 2048. Other spending, such as national defense or interest on the debt would have to be financed completely on borrowed money.
Medicare is the fastest-growing major entitlement, growing 68 percent since 2002. Medicaid grew 38 percent and Social Security 37 percent.
Eli Lilly Federal Credit Union, now known as Elfcu, has served Lilly's employees and their families for over 80 years. In 2008, the credit union began to add membership from Select Employer Groups as it became more independent from Lilly itself. Now, employees from selected companies are eligible for Elfcu membership as a no cost voluntary benefit.
Aside from its array of services, Elfcu has separated itself as a leader in financial wellness.
"We are a financial wellness provider that happens to be a credit union," explains communications and education manager Michelle Payne. "We strive to understand not just what our customers want but to understand what their goals are so we can help them make the right financial choices. We're not just about our products and transactions here, but about our members' overall financial success."
As an example, Elfcu recently launched a partnership with financial guru "Pete The Planner" (Peter Dunn) with its "Fastest Way to $5K" 12-week educational program. Dunn recommends ways consumers can acquire the most savings, and Elfcu offers the tools and programs to help them achieve those goals.
When asked how economic conditions have impacted Elfcu's operations, business development manager Todd Shickel contends credit unions were dealt a softer blow than some.
"The credit unions have always been a safe haven for a member's banking services, so we didn't feel the impact of the financial tsunami like many financial institutions did," he relays. "Some financial institutions were impacted, but we have very responsible lending programs designed to be a better fit for the consumer — not what will generate the most revenue for the credit union."
He adds that the biggest change he's seen recently is in the realm of health savings — a change that emphasizes why financial wellness is so important.
"Employers have started to go to the high deductible, consumer-driven health plans," Shickel says. "They have a tool that goes with them called a health savings account — and we have a very robust health savings account platform that helps differentiate us in the marketplace. It gives the members a portal and tools to become better health care consumers… In the newer high deductible plans, it's up to the consumer to find the best services, and they have a stake in those services."
Elfcu, which boasts a global membership base, also works to parlay technology to give its clients the best possible service.
"Our access options really do exceed a lot of our larger banking competitors," Payne notes. "We launched mobile banking (elfcuMOBILE) last summer, which features a smartphone app and text banking for those without a smartphone. One fantastic feature is the remote deposit capture, so you can snap a photo of your check and upload it for a deposit. We also have a dynamic eBranch Internet banking system that we're continually updating."
She adds that beyond those electronic options, Elfcu offers more than 5,000 shared branches nationwide and a surcharge-free network of over 60,000 ATMs.
See Elfcu's entire video series on its YouTube page, and be sure to explore its newly designed web site at elfcu.org, including its new Life Lessons financial wellness blog.
Do you have a topic you're passionate about, and would like to know what the Indiana Chamber is working on in that area? We've developed some web pages highlighting key issues that will show you what we're focused on and offer some background on our public policies. See the pages below, and more information will be added weekly to these as the session progresses.
While the Indiana General Assembly began its work on January 7, new Gov. Mike Pence had to wait a week for his January 14 inauguration. He quickly went to work, however, with significant positive actions on his first two days on the job.
A series of executive orders that Pence signed following his official ascension into office included a moratorium on new rules and regulations (with obvious emergency exceptions) that were not proposed before January 14, as well as a cost-benefit analysis of existing administrative rules. Priority will be given to review of those rules with the most negative effect on job creation and economic development.
Candidate Pence promised this action leading up to the election. While federal regulatory challenges are often at the forefront today, this step will help ensure that state government is not unnecessarily limiting job and economic growth.
On day two, the Pence team delivered a two-year, $29 billion spending plan to the State Budget Committee. The first six pages of this extensive document provide an overview of the key elements.
This is a very good starting point for legislators. It is a fiscally sound proposal, with a focus on meeting key state priorities and providing the 10% individual income tax relief (which also encompasses 90% of Hoosier businesses) that Pence proposed in his campaign. As we’ve indicated previously, lawmakers have questioned whether the income tax cut should take precedence over other budget desires. That will be worked out in the legislative process and could be determined by the updated revenue forecast that will be presented in early April.
A few highlights:
A 1% increase in each of the next two years for K-12 and higher education. The second year for K-12 would have that 1% be divided among the state’s highest performing schools. Combined, the education funding totals 65% of the budget.
While the administration did not include money to specifically expand the Medicaid program as outlined under federal health care reform, it does significantly increase funding for health insurance for the poor – from $1.65 billion this year to $2.1 billion in 2015.
The budget calls for a change in projected excess revenues. After 12.5% of annual spending is set aside in reserves, the remainder would be divided between the automatic income tax credits that were enacted during the Daniels administration and a new fund to help maintain roads, bridges and other infrastructure critical to economic growth.
Spending is kept in line in this proposal. A structural surplus is maintained and reserves are allocated effectively, with the infrastructure fund a good start to the larger question of financing future transportation needs. The Chamber will be working with the governor’s team and legislators to help ensure that as many pro-job, pro-economy priorities as possible are achieved in a responsible manner.
Get ready for a heaping dose of bummersauce: They say the only certainties are death and taxes — but you can also count on your 2013 checks being smaller because of those taxes. CNN Money has the bad news:
Payroll taxes are key for financing Social Security, and the break of the past two years has forced the government to replenish the funds with borrowed money. The tax break was always meant to be temporary.
Workers earning the national average salary of $41,000 will receive $32 less on every biweekly paycheck. The higher the salary (up to $113,700), the bigger the bite, but business owners say their lower wage employees will feel it most.
Deborah Koenigsberger, who owns the Noir et Blanc fashion store in Manhattan, has yet to have the talk with her only part-time employee, a college student.
"It's going to hurt me to tell her this. She can't afford a decrease," Koenigsberger said. What unnerves her is the feeling that she's lost control as a business owner watching out for her employees.
Keval Mehta, CEO of In-R-Food, a smartphone app developer in Durham, N.C., worried the tax increase will threaten morale. "They don't get paid enough for what they do," Mehta said.
The 1-year-old company has yet to make a profit, having just launched software that scans grocery products and lists ingredients and nutritional values. His four employees could make upwards of $80,000 a year elsewhere, but three of them earn less than half that. They put in long hours, must work from laptops while on vacation, and no, there isn't a health insurance plan.
All that made it even more difficult to warn them during the holidays about the oncoming pay cut. Mehta promised them he'd make up the lost pay if the company's finances improve next year.
"Currently, they're working on passion. But that can only drive you so much," Mehta said. "I don't like that I don't have control over this. It wasn't a decision I made. But as a CEO, you take responsibility for everything. You're automatically at fault, because you're the captain of the ship."
Indiana Chamber president Kevin Brinegar outlines the Chamber’s legislative priorities in 2013. Education issues remain a key focus, and some critical tax issues must be addressed to help businesses thrive.