Chamber Comments on State’s Blue Ribbon Panel on Transportation Infrastructure

Indiana Chamber of Commerce President and CEO Kevin Brinegar on the release of the report from the state’s Blue Ribbon Panel on Transportation Infrastructure:

“The recommendations of the Blue Ribbon Panel on Transportation Infrastructure are an important first step. The group has identified priority projects and clearly defined the funding challenges. Equally important will be the work called for in HEA 1104 (2014), legislation outlining an Indiana Department of Transportation study of financing alternatives that will help meet future funding needs.

“In addition, it’s time for Washington to get its act together and assure that federal funding shortfalls are addressed. Some states are already cutting back on important projects in fear of Highway Trust Fund deficiencies as soon as August 1. What is truly needed – instead of short-term, crisis-avoiding extensions – is a multi-year renewal of the federal transportation plan.

“Superior infrastructure is one of the four drivers of the Indiana Chamber-led Indiana Vision 2025 and strong transportation via road, rail, air and water is critical to our state’s economic future.”

Gov. Pence Convenes Tax Conference

The Pence administration is looking for big and little ideas regarding taxes. The Governor – through the Department of Revenue and Office of Management and Budget – recently conducted an all-day discussion on ways to simplify Indiana’s tax code and tax administration as a means for making Indiana even more competitive in its quest to attract more business activity to the state.

The day began with comments from Indiana’s own Al Hubbard, former director of the National Economic Council and a longtime Indiana Chamber board member. His insights were followed by a panel of nationally recognized tax experts who discussed – at a high level – tax structure and the impact of taxes and tax reforms. Well-known economist Art Laffer (of the Laffer Curve fame) spoke at lunch.The afternoon consisted of breakout panels of various Indiana tax professionals who addressed different aspects of our tax system. Each session and all the talks were captured on video and most of the panelists also submitted papers or written comments on the topics they discussed (see the Indiana Chamber’s remarks, under the Tax Simplification section at www.in.gov/dor/5122.htm). The video link and other conference materials are available for review at www.in.gov/dor/index.htm. You can also submit your own ideas (up to two weeks post conference) at www.in.gov/dor/5120.htm.

The event was generally intended to generate, collect and consider ideas on how to make Indiana’s system simpler and better. Everything from big picture sweeping changes to down-in-the-weeds process tweaks were put on the table. There were many references to “broadening the base and lowering the rates.” The taxation of business personal property came up in a number of times. And a wide range of suggestions and recommendations on tax policy and procedure in the contexts of sales, income and property tax were brought forth. Indiana Chamber staff and numerous members of the Chamber Tax Policy Committee took part in the panel discussions and otherwise participated.

The question now is how this host of ideas will be digested by the Pence administration and the Legislature. Many members of the tax policy committees in the Legislature participated and were in attendance. And many of the attendees will also be participating in some way with the Legislature’s Blue Ribbon Tax Commission that will get under way later this summer. The Governor indicated that he hopes the commission and ultimately the General Assembly will give consideration to some of the things discussed at the conference. It seems likely that the conference will create momentum for some proposals. Many appear very doable and could be realized in the near term, others may take a much longer course or never pan out. Of course, only time will tell which ones fall into which category.

Accountabilty Panel Continues to Work; Core 40 Panel Getting Started

Nearly a year has passed since the media storm surrounding Indiana’s school accountability measures and the decision by state leaders to appoint a panel to develop new accountability metrics. Unfortunately, despite 10 day-long meetings, the panel remains far from completing its work.

The Indiana Chamber’s Derek Redelman serves on the panel and reports that he and several other panelists have been frustrated by the lack of support. For example, despite being told at the panel’s first meeting last fall that both the Department of Education and the Legislative Services Agency would have data sets to separately test any ideas that the panel developed, they were not informed until the fourth meeting of the panel that neither agency actually had the promised data. Similarly, despite member requests at the very first meeting to engage national experts to help with this work, the first opportunity for the panel to meet with any experts did not occur until the panel’s eighth meeting – more than six months into their work.

The panel made some limited progress at its latest meeting on June 26, but significant issues – like the preferred method for measuring student growth; the main reason for the panel’s formation – remain far from decided. In the meantime, the timeline for completing this work is quickly approaching, so the panel will meet again on July 8.

Meanwhile, a new task force – this one charged with a review of Indiana’s Core 40 diploma requirements – began meeting on June 11. The panel was originally formed in response to legislation mandating the development of a new CTE (career and technical education) diploma that would have created Indiana’s fifth and least rigorous diploma option. The Chamber opposed that mandate and joined with the governor’s office, the Commission for Higher Education and the Department of Education to kill the proposal, while agreeing instead to review our current diploma options.

The new task force is co-chaired by Teresa Lubbers, Indiana Commissioner for Higher Education, and Glenda Ritz, state superintendent of public instruction. It also includes representatives from K-12 education, career and technical education, higher education, and the business community – including the Chamber’s Derek Redelman.

Three questions appear likely to be the focus: 1) How can the diploma options provide an attractive and effective pathway for career and technical education students; 2) How can Algebra II (and/or other math requirements) be structured to effectively serve all college and career options; and 3) How should the diploma options be adjusted in response to rising remediation rates for college-bound students?

The next meeting of the task force is scheduled for July 24; recommendations are expected next summer.

Chamber Survey: Nearly 40% of Employers Left Jobs Unfilled Due to Under-Qualified Applicants

Jobs are there, but the employability of some Hoosiers isn’t matching what’s available says a new statewide survey by the Indiana Chamber of Commerce. Of the 532 participating employers, 39% (202) said they recently have left jobs unfilled due to unqualified applicants.

“That number is way too high and speaks to the work that policymakers, educators and employers still have to do. And also what individuals often need to do to make themselves more marketable for the type of employment they desire,” asserts Indiana Chamber President and CEO Kevin Brinegar. “Collectively, we need to do better at connecting the dots regarding the open jobs and the qualifications it takes to land one of them.”

The survey, in its seventh year, asked employers about their recruiting practices, training and continuing education offerings and skills needs in their workforce. More than 40% of the survey participants had under 50 employees and just over one-third represents manufacturing or advanced manufacturing industries.

In response to what education level is required for their unfilled jobs, two-thirds (67%) indicated beyond a high school degree, with 38% saying middle skills (certificates, certification or associate’s degree) and 29% a bachelor’s degree or higher. The most often cited occupations in need of good applicants were those in the skilled trades (such as an electrician or plumber) and engineering (from technician to design).

What makes getting the right talent pool mix all the more critical, Brinegar notes, is that 96% of the respondents said they expected the size of their workforce to increase or stay the same over the next 1-2 years. The majority – at 57% – are actually looking to add more employees during that time.

On a related topic, more than 70% of respondents (72%) said that filling their workforce was challenging, with nearly 20% labeling it the single biggest challenge they faced. “So even those that are able to find people for their open positions are having to spend more time on it than they would like, and more time away from the company’s direct mission,” Brinegar offers.

When it came to identifying what skills are the most difficult to find among applicants and new hires, several “soft skills” that are traditionally not assessed in an education setting were at the top.

Work ethic was the most lacking at 55%. Communication, problem solving and attendance/punctuality each registered 42-43%. Each of these soft skills was indicated as far more challenging to find than academic skills, such as reading, writing and math. Only 10% of the respondents said they had no challenges finding the skills they needed.

Derek Redelman, the Indiana Chamber’s vice president of education and workforce policy, emphasizes that “employers have tried to help themselves and their workers by offering tuition reimbursement, but not enough are taking advantage of the opportunity.”

Case in point: Over half of employers surveyed (242 of 447) reported having tuition reimbursement programs. Yet, 64% of those respondents (156 of 242) stated the programs were seldom used by their employees and 5% said they were never used. Only 31% of employers reported that their tuition reimbursement programs were used frequently.

“Hoosier employers are frustrated by the skills of available workers,” Redelman declares. “They are willing to invest time and resources to address those challenges, but what’s too often missing is the willingness of workers and applicants to pursue the training and skills that employers value.”

Employers surveyed also expressed interest in working with the education community to a greater extent. Two-thirds of respondents (67% of 458) said they felt businesses should be more involved in reviewing high school diploma and college degree requirements. And 90% felt employers should be more involved in the design of career and technical education (CTE) programs to make sure they were on target. Over half of employers (56% of 458) reported that they are currently involved with local schools, including internships (35%), classroom presentations (18%), job shadowing (16%) and more.

Consistent with last year’s results, over two-thirds of employers (72% of 508) said they were getting little to no support from Indiana’s workforce development system: Some 36% reported knowing about WorkOne but never having had any contact; 25% accessed the system but were not finding the services helpful; and 11% had no knowledge of these services. Only 19% of employers reported success in hiring applicants using WorkOne recruiters or the Indiana Career Connect job matching system.

“Given the continuing needs of employers and the persistent number of unemployed adults, these responses point to the critical importance of the Governor’s focus on these issues and, specifically, the development of a strategic plan through the Indiana Career Council and local employer engagement through the Works Councils,” Redelman concludes.

According to Brinegar, the results of this employer survey will also guide how the Indiana Chamber concentrates its efforts to achieve several goals under the organization’s long-term economic development plan, Indiana Vision 2025.

Among those goals: increase to 60% the proportion of Indiana residents with high quality postsecondary credentials, especially in the STEM-related fields (of science, technology, math and engineering); see a notable increase in Hoosiers having bachelor’s degrees or higher; and develop, implement and fully fund a comprehensive plan for addressing the skills shortages of adult and incumbent workers who lack minimum basic skills.

View the survey results and executive summary at www.indianachamber.com/education.

July/August BizVoice Building a Buzz

Today, we’re unveiling our July/August edition of BizVoice magazine.

And the headline is actually a joking nod to our cover story about drones… assuming they make some sort of buzzing sound as they fly. If they don’t, well, let’s just ignore it and move on.

This issue covers a gamut of topics. Here are a few of the top stories (but you can view the full edition via our interactive online version):

A Day at the Farm: Planting Memories, Exploring a Legacy

Pictures will speak a thousand words in the upcoming issue of BizVoice® in my feature story on twins Ted and Tom McKinney. For me, images of my day at the family farm in Tipton where they grew up are etched in my mind. The experience was among my most enjoyable memories – professionally and personally.

I visited the farm to interview them for an article that will appear as part of our agriculture series in the July-August issue. Why the McKinneys? That’s the question Ted humbly asked as we met and shook hands.

First, the family history is deeply rooted in farming. There’s the strong Purdue University connection (they’re third generation graduates of the College of Agriculture). And like their parents and grandparents before, both Ted and Tom are dedicated to making a difference in their community.

Tom is a seventh-generation Indiana farmer (he guides operations at the Tipton farm and another family farm in neighboring Clinton County). Ted is director of the Indiana State Department of Agriculture.

Touring the farm, which spans a few thousand acres, brought the McKinney legacy to life. Their passion for agriculture was contagious. Their childhood memories were rich. I could almost see the old yellow barn that served as a clubhouse of sorts in their youth before it was destroyed by straight line winds and made way for a modern shop.

I could picture them working alongside teens in the 1970s detasseling seed corn (the McKinneys were just 16 years old when they started managing their own crews) as they cultivated a strong work ethic and spirit of camaraderie. Tom operated the business for more than three decades.

“It was more than a money-making business. It was about transforming people’s lives,” declares his brother Ted.

Both have spent their lives trying to do just that.

Ted, among other causes, has been heavily involved in FFA and was instrumental in bringing both the organization’s national center and its convention to Indianapolis. Tom is president of the Indiana 4-H Foundation and has donated his time to a variety of other state and local initiatives. Each has brought his leadership to a variety of roles at Purdue.

Check out our memorable afternoon with one of Indiana’s first farming families in BizVoice when the July-August issue debuts on June 30.

Throwback Thursday: Purdue’s Long History of Agricultural Contributions

While digging into the fertile soil of our archive room, staff has discovered an Indiana Chamber report from August 1945 titled, “Aids Behind the Farm: A Directory of Functional Analysis of Governmental and Civic Organizations in the Field of Farming.” (Yes, the title is certainly a mouthful – potentially equaling a bushel of vegetables from a Hoosier farm.)

The booklet includes features on major farm-related organizations in Indiana – and the nation – like the Indiana Farm Bureau, The Grange, the National Farmers Union and the National Council of Farmer Cooperatives. One such prominent organization highlighted is Purdue University. The 1945 entry about the school reveals its history and mission, and why it’s such a benefit to the agricultural industry:

In 1869 the Indiana General Assembly took steps to establish an institution of learning and it received $340,000 from the Federal government which sum is held in trust by the state at interest. In 1869 the General Assembly accepted from John Purdue, a philanthropic businessman of Lafayette, and other public spirited citizens of Tippecanoe County, the sum of $200,000 and a tract of 100 acres of land. It also voted to name the institution ‘Purdue University.’

In 1879 the College of Agriculture was founded. Prior to 1900, few students attended the college and intensive efforts had to be made to acquaint farmers with the value of agricultural training. The first short course in agriculture was held in the winter of 1887-1888. These intensive winter short courses are still permitting hundreds of farmers to attain further knowledge of profitable agricultural practices.

Even then, Purdue’s county extensions played a major role in building the state’s agricultural climate. (The school has an extension in all 92 Indiana counties.):

An integral part of the work of the Extension Department is carried on through the efforts of more than 30,000 volunteer local and neighborhood leaders. County Extension Committees, organized in each county, are composed of local people who know the immediate needs of the county and who help to plan the extension program of their counties to meet the local problems. These people help to bring to Indiana farmers the information and facts which they need to meet their particular problems speedily and proficiently, and to advise returning veterans interested in farming.

In 4-H Club work, more than 3,600 young men and women serve as junior leaders and 2,200 parents and other adults serve as volunteer local leaders.

Chamber’s Bill Waltz: State Budget Holding Steady for Now

There are plenty of ways to parse the revenue collections over the first 10 months of the current (2014) fiscal year. Officially, the general fund numbers are 0.5% below the most recent (December 2013) forecast. But they are 1.7% below the 2013-2015 budget based targets. Neither percentage warrants great concern, representing in dollars $61 million (0.5%) and $194 million (1.7%), respectively. But the last two months of fiscal year 2014 will be worth noting for the purpose of identifying trend lines. The March and April numbers came in very close to the December forecast, but the problem is the December forecast adjusted the predictions downward from the April 2013 forecast on which the budget is based.

Last month’s actual collections were 6.4% below the original forecast. So there is a need for the May and June collections to be close to the revised forecast amounts, or else the budgeting going into the second fiscal year of this biennium will get trickier. If those collections drop off, the forecasters and budget-makers will be looking at less than desired numbers going into the new budget making session next year. Sales tax revenues are the real key since they make up 49% of the collections. The sales tax numbers are not bad, but are very modest, showing 1.5% growth over last year. Corporate revenues remain stalwart, 14.5% above target for the year. On the other end, gaming remains down, 7.1% below target. All in all, the budget is in an alright place, but there is a lot to be determined in the coming months as far as expectations going into the next biennium.

Stay Tuned for Real Interim Action on Tax Issues
Nothing is happening just yet, but things are in the works: This will not be an ordinary interim for tax matters. The Pence administration is currently busy organizing a major event for next month. The initiative, dubbed the Indiana Tax Competitiveness and Simplification Conference, is set for June 24. It will be opened by Gov. Pence and feature a few nationally recognized speakers. There will also be panel sessions on a variety of tax subject areas. Panelists will have a work group type format. This is a “by invitation” conference. More details will be reported next month.

Dovetailing the Governor’s conference to some degree will be the Blue Ribbon Commission established by SEA 1-2014. It is expected that his body will begin to take shape in the coming weeks.

The Legislative Council has recognized the commission (referenced as the Commission on Business Personal Property and Business Taxation) in conjunction with the other interim committees sanctioned for interim activity (via Council Resolution 14-01). Senate Pro Tem David Long will name one of his Senate colleagues as the chair and Speaker Brian Bosma will name one of his House colleagues as the vice chair. Four other legislators will likewise be appointed, while the Governor will have a designee. And the remaining seven members will be laypersons representing various interested parties, including the Indiana Chamber, the Indiana Manufacturers Association, the Realtors Association, agriculture and local governments.

Chamber Analysis of Governor’s Request to Expand Healthy Indiana Plan

The Pence administration last week unveiled plans to request a waiver from the Centers for Medicare & Medicaid Services (CMS) to expand the Healthy Indiana Plan (HIP). This expansion of HIP would be in lieu of a traditional Medicaid expansion. The announcement had been anticipated for several weeks.

The Healthy Indiana Plan, or HIP 2.0 as it is now being referred to, will have three “pathways” to coverage: HIP Basic, HIP Plus and HIP Employer Benefit Link. It is funded through the existing cigarette tax, the hospital assessment fee and federal Medicaid funds.

The Basic HIP plan is for Hoosiers below 100% of the federal poverty level (FPL). Basic members use an entirely state funded power account (similar to a health savings account) to cover a $2,500 annual deductible. The HIP Plus plan is for Hoosiers under 138% of FPL. They will be required to make contributions that range from $3-$25 per month. Members of HIP Plus and the state will jointly fund the power account based on a sliding income scale. This plan also includes dental and vision coverage.The HIP Employer Benefit Link allows HIP eligible individuals to enroll in either HIP Plus or receive a defined contribution power account funded by the state to access an employer-sponsored program. The defined contribution must be used to pay for premiums, co-pays or deductibles.

The Indiana Chamber has supported the expansion of HIP as an alternative to a traditional Medicaid expansion. The HIP plan has encouraged individual responsibility by attempting to mirror consumer driven health plans. HIP also reimburses at 100% of Medicare (higher than Medicaid), which ensures more provider participation and reduces cost shifting to the private sector, a point that is important to employers. The Indiana Chamber believes that the HIP Employer Benefit Link option will be an interesting program to potentially provide coverage to Indiana’s working poor. The Indiana Chamber will be securing more details on how the program will be implemented and will provide our members that information as it is received.

On a related note, this $25 million budget savings to the state – if the HIP expansion is approved by CMS – could cause some problems for insurance carriers providing health insurance coverage to the individual market in the insurance exchange/marketplace. The state is transitioning from a (209b) state, with its own disability definition, to what is called a “1634” state. Under a 1634 state, the administration will accept disability definitions of the Social Security Administration. As a result of the switch, the state will no longer be required to maintain a spend-down program. This program allowed those with high medical expenses to become eligible for Medicaid after they spent a designated portion of their monthly income on medical expenses. As of December 2013, there were over 134,000 people in this spend-down program.

Of that spend-down population, nearly 7,500 have incomes over 100% of FPL. It is this population that will be transferred to the insurance exchange/marketplace to purchase qualified plans in the commercial market. Medicaid claims for those individuals have been over $1,800 per member per month. Total claims for March 2013 through March of 2014 were $134 million. That amount is significantly higher than under normal individual insurance plans.

Insurance carriers participating in the insurance exchange filed their rates in May of last year. Those rates included calculations for the high risk pool being transitioned into the exchange, but the 7,500 “1634” transition eligibles are not included in those rates. This has serious impacts on those carriers: Significant losses to those participating which will result in considerable increases in current rates to cover the cost; those carriers that waited and will be coming into the exchange in 2015 have an advantage over those current participants in that they are taking on none of this additional risk; and for the smaller carriers there is a concern whether they will be able to participate in the exchange in the future, thus potentially jeopardizing Hoosier choices.

The Indiana Chamber will continue to evaluate and comment on this issue as more information is available.