All About the Water

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The governors of the Great Lakes states recently approved a request by a Wisconsin city to draw water from Lake Michigan after its existing water supply dried up. But because the city isn’t in the watershed of the Great Lakes, the two Canadian provinces that share Great Lakes water rights say the request should be denied.

Waukesha, Wisconsin will be allowed to tap Lake Michigan for up to 8.2 million gallons per day once it completes a $207 million pipeline project that would draw in lake water and return fully-treated wastewater.

Delegates for the governors of Michigan, Minnesota, Wisconsin, Illinois, Indiana, Ohio, Pennsylvania and New York gave their unanimous consent to the first formal request to divert water outside the Great Lakes basin during a meeting of the compact council.

The 2008 compact prohibits water from being sent outside the basin watershed. Communities like Waukesha, located over the line but within a straddling county, can apply under a limited exception.

The eight governors approved the request over the objection of widespread opposition. Mayors, legislators, policy-makers and citizens around the Great Lakes have worried about the precedent Waukesha’s application represented.

Waukesha is under a court-ordered deadline to provide safe drinking water by mid-2018. The city draws most of its water from a deep aquifer that is contaminated with unsafe levels of radium, a naturally occurring carcinogen. The city has a population of about 70,000 people.

Kiplinger warns that more water conflicts will flare up, citing California, India, South Africa and the Middle East among the likely areas of dispute.

Waiting … and Waiting on a Highway Funding Fix

30449450Federal highway funding is running low. Nothing new there. The Indiana Chamber, and many others, have called for long-term solutions from Washington instead of short-term fixes that simply extend the uncertainty.

How are states reacting to the current dilemma. According to the Kiplinger Letter:

  • Arkansas, Georgia, Wyoming and Tennessee have postponed 440 projects totaling more than $1.3 billion
  • Iowa, South Dakota and Utah have increased gas taxes. Others that may follow include Georgia, Idaho, Minnesota, Nebraska and South Carolina
  • Seeking funds from advertisers: Virginia sells space on highway rest stop signs to GEICO; Travelers Marketing sponsors highway patrols in Massachusetts
  • Partnering with private investors: Florida is seeking private funds to rebuild portions of Interstate 4; New Jersey, Pennsylvania and Virginia are seeking similar ventures

Kiplinger editors add:

But states can only do so much on their own. Ultimately, Congress must act. Odds favor another temporary fix this fall. A long-term solution will likely wait until 2017. Congress and a new president will have a fresh opportunity to tackle broad tax reform, including a possible hike in federal fuel taxes, which no longer approach what’s needed to pay for highway work.

Not what many want to hear in terms of the time frame.

Minnesota’s New Site Helps Students Make College Pay

minnPeople in powerful positions often have access to the best information.

Minnesota high school students now have the ability to expand their power base. When they are agonizing over technical school and college choices, they can now look at marketplace data that show which academic programs have high placement rates and what recent graduates are being paid.

For the first time in its history, the Minnesota Department of Employment and Economic Development (DEED) is making this information available to the public on its website.

The data reveal a pattern of underemployment among recent graduates. For the Class of 2011, among those completing programs ranging from certificates to graduate degrees, by their second year out of school, only 42 percent had full-time jobs that they kept for a whole year.

But the most intriguing statistics are the wage breakouts among academic programs. Here are some of the highlights for the Class of 2011 two years after completing their education:

  • Among students who earned bachelor’s degrees in marketing, 52 percent had full-time jobs and 31 percent were working part-time. The median annual salary for full-time employees was $35,373.
  • Among bachelor’s graduates with general business degrees, the median annual wages for full-time employees were $57,227. In this major, 59 percent were employed full-time and 21 percent were working part-time.
  • Those with special education and teaching degrees at the bachelor’s level had annual median earnings of $35,312.
  • Technical education translated into good-sized paychecks for people who completed certificate programs or associate degrees. For example:
  • Annual median earnings were $44,196 for full-time workers who obtained associate degrees in electromechanical instruments and maintenance technology. In this program area, 60 percent held full-time jobs in their second year out of school.
  • Plumbing program graduates also saw high job placement. Among students who completed certificate programs for plumbing, the annual median earnings for full-time workers were $41,229. Forty-five percent were working full time and 42 percent were employed part time in the second year out of school.

The Minnesota Legislature passed a bill requiring DEED to take the wage and employment data that the state receives from employers and present it to state residents in a format that’s easy to use. Called the “graduate employment outcomes tool,” people can use drop-down menus on the DEED website to look up wage and placement data by academic program.

Check out the site.

A Different Kind of Inheritance Tax?

We were proud to join many Hoosiers and legislators in the 2012 session in striking down Indiana’s inheritance tax.

While it’s not quite the same thing, this story from Minnesota raises interesting questions about the government’s role in monitoring monetary gifts from one person to another. Read the saga of the waitress/mother of five and her alleged "drug money" donation, and let us know in the comments section if you think the police did the right thing. The Duluth News Tribune has the story:

For the struggling waitress with five children, the $12,000 left at the table in a to-go box must have seemed too good to be true.

Moorhead police decided it was just that.

Now, the waitress is suing in Clay County District Court, claiming the cash was given to her and police shouldn’t have seized it as drug money.

“The thing that’s sad about it is here’s somebody who truly needs this gift … and now the government is getting in the way of it,” said the woman’s attorney, Craig Richie of Fargo.

Moorhead police Lt. Tory Jacobson said he couldn’t discuss the matter.

“We certainly have an ongoing investigation with it, with suspicion of narcotics or the involvement of narcotics investigators,” he said.

Assistant County Attorney Michelle Lawson also declined to discuss the pending lawsuit.

The Forum isn’t identifying the waitress in order to protect her in case the cash was part of a drug deal.

According to the lawsuit filed three weeks ago:

The waitress was working at the Moorhead Fryn’ Pan when she noticed that a woman had left a to-go box from another restaurant on the table.

The waitress picked it up, followed the woman to her car and tried to give her the box, but the woman replied, “No, I am good; you keep it.”

The waitress thought that was strange, but she agreed and went back inside the restaurant, the lawsuit states. The box felt too heavy to contain only leftovers, so she looked inside and found cash rolled up in rubber bands.

“Even though I desperately needed the money as my husband and I have 5 children, I feel I did the right thing by calling Moorhead Police,” she states in the lawsuit.

Police arrived and seized the money, which the woman was told amounted to roughly $12,000. She was first told the money would be hers if it wasn’t claimed within 60 days, the lawsuit states. Then she claims she was told to wait 90 days. Continue reading

Will GOP Voters Be Cheering for “My Man… Tim?”

With Gov. Daniels out of the running for the presidency, candidates seem to be scrambling to fill the void of "calm, sober guy who can manage budgets." According to a recent article in the Daily Caller, former Minnesota Gov. Tim Pawlenty appears to be vying hardest to be "the other Mitch Daniels."

In a Facebook town hall Tuesday, presidential candidate Tim Pawlenty positioned himself as the logical alternative to Indiana Gov. Mitch Daniels, who announced on Sunday that he would not enter the race for the White House…

Then the former Minnesota governor took one question on the subject of his education policies.

“In the state of Indiana, our governor has been really hard on teachers,” asked one girl. “What is your view of education?”

Pawlenty voiced a position on education similar to the reforms passed by Daniels in the last Indiana legislative session: school choice and vouchers, support for charter schools, and saying that education policy should be geared to help children and should “put their needs first, rather than the interests of adults in public employee union movement.”

The choice of the question seemed deliberate, as a way to position Pawlenty as the natural alternative for Daniels’ supporters.

There was a marked contrast between Pawlenty’s presentation and the way another candidate, former Massachusetts Gov. Mitt Romney, conducted a Facebook town hall last week.

Pawlenty sat at a table in Florida in front of the U.S. flag and a state flag. He wore a suit and tie and read questions off his iPad, conveying a serious atmosphere and emphasizing his tech savvy.

Romney, who has been accused of being too stiff and buttoned down, wore a shirt during his town hall, with the top two buttons unbuttoned. The town hall took place in Nevada, and in the background were a number of people who had volunteered to make phone calls to fundraise for the former Massachusetts governor.

Pawlenty’s town hall seemed much more produced and polished. But despite the fact that a Facebook town hall is meant to convey the idea that anyone can have access to the candidate, it was clear that both chose their questions carefully.

Critics argue his past support of cap-and-trade legislation will hurt him in the GOP nomination — and they say his milquetoast delivery won’t go over well in primaries. What do you think?

Hot Dog! Likely New Frankfort Mayor is 23-Year-Old Butler Student

My parents and grandparents are from Frankfort and I lived there until I was five, so it’s an Indiana town I have a strong affinity for. Seeing this news yesterday was quite intriguing: Soon-to-be Butler University grad Chris McBarnes won the GOP primary, likely making him the town’s next mayor.

Good luck to him, and I think it’s safe to say he won’t end up like another young government exec — "Parks & Recreation" character Ben Wyatt. Wyatt became mayor of his hometown of Partridge, Minnesota at 18 years old, only to bankrupt the burg by investing all too heavily in "Ice Town." Newspapers then blasted the young mayor with the headline: "Ice Town Costs Ice Clown Town Crown." Thankfully, Mr. McBarnes seems far more fiscally responsible, so this likely won’t be an issue.

Every weekend since October, McBarnes said, he and a core group of supporters were out knocking on doors and talking to residents. He estimated the group of about 25 volunteers knocked on the doors of 90 percent of the homes in Frankfort.

The grass-roots approach succeeded in raising about $15,000, most of which came in donations of less than $100, McBarnes said.

Terri Jett, an associate professor and chairwoman of Butler’s political science department, said McBarnes’ strategy was diligent and effective. Jett didn’t have McBarnes as a student or know him from campus, but she said his message must have resonated in Frankfort.

"The success of someone his age depends on the makeup of the community," Jett said. Frankfort "looks to be a changing community with an influx of immigrants and a population that’s relatively young. So there are people there who are not so tied to the old system."

McBarnes talked to potential supporters about his plans to unify city and county governments, end infighting and promote small-business growth. He promised to engage citizens and make sure people could speak up at local government meetings without feeling intimidated.

Youth involvement also was part of his platform. McBarnes wants to create a job-shadowing program to help high school students explore various professions. He also hopes to work with city youths and inspire them to return to Frankfort after college.

"Some of the youths feel shoved aside in this community," McBarnes said. "I want to make sure those who go on to further education are proud of their community and make them want to come back."

Other commitments he’s made include preserving municipal employee health insurance benefits, working on city beautification, seeking grant funds and assisting with the Frankfort Roundhouse — a project to build a proposed railroad museum and business center on the city’s west side.

Online vs. Main Street Tax Debate Continues

The dispute over collection of online sales taxes is not a new one. The Alliance for Main Street Fairness argues that online-only retailers have a distinct advantage, but the author offers that convenience (not avoiding sales taxes) drives the buying decisions for many. TechJournal South offers analysis:

Federal law currently requires retailers to collect sales taxes in states where they have a nexus (a physical presence such as a store, warehouse or other facilities). Since Internet-only retailers do not have a nexus in most states, they are not currently required to collect the taxes.

Other states wrestling with the problem include Arkansas, California, Florida, Illinois, Indiana, Minnesota, New Jersey, Pennsylvania, Tennessee and Texas. The National Conference of State Legislatures says states lost about $8.6 billion in 2010 in failing to collect sales tax from online and catalog sales. The number is projected to be approximately $37 billion from 2009 to 2012.

Personally, we can see how buying a big ticket item from an online retailer might save a significant pieces of change, but even there, we doubt that most people buy online just so they won’t have to pay sales taxes. We buy online because it is convenient. We can do our shopping from our desks, which has inherent advantages that will not disappear when online retailers collect sales taxes.

We shop online because we often find a much wider selection available at the lowest possible prices online, whether we are looking for a book, a camera, or a refrigerator. We save gas and wear and tear on our vehicles and ourselves. But we have never bought an item online to avoid paying a sales tax.

Sooner or later, we suspect, this problem will be resolved through legal means that require online retailers to collect state sales taxes. That’s fine with us, although we think states threatening to collect years of back taxes are certainly wrong-headed as well as on legally shaky ground.

In the meantime, the way states and the online retailers are going about dealing with the problem is just causing more problems: such as Amazon dismissing its associates in North Carolina and other states attempting to use their status to say the reatailer has the physical presence in the state to create a nexus.

That move causes grief for many online startup businesses. Some larger ones actually left North Carolina when Amazon fired its state associates, and others complain it makes it harder to get that early revenue necessary to achieve outside growth funding.

Amazon is not helping matters by negotiating not to pay sales taxes even in states such as Texas, Indiana, Nevada and Tennessee where they have distribution centers.

The whole mess will likely require action on the part of the US Congress.  “The Main Street Fairness Act,” H.R. 5660 was introduced in the US House in July 2010, and it would behoove Congress to vote on the bill.

All in the Nuclear Family

Did you know:

  • There are currently 104 nuclear reactors in 31 states (count Indiana among the other 19)
  • Nuclear provides about 20% of the nation’s electricity
  • No new nuclear facilities have been built for decades due to environmental opposition and regulatory uncertainty

Minnesota has banned all new nuclear plants, and 12 other states have put various restrictions on any potential construction.

Some states, and a number of other countries, have demonstrated that nuclear can be a safe and valuable contributor to the energy mix. A strong energy policy that promotes a serious look at nuclear as part of the solution would be a welcome addition.

Others Start Paying Attention to Right-to-Work

The Indiana Chamber’s right-to-work study has gained attention in neighboring states, including Ohio.

The Columbus Dispatch repeats key findings and says that some Ohio lawmakers would prefer their state, not Indiana, become the 23rd to join the RTW fold. Sure, the article (as it should) presents both sides. Only the arguments against, as usual, are more rhetoric than facts.

There have also been rumors of RTW talk in Kentucky, Wisconsin and Minnesota, among others. As one Ohio legislator reaffirmed, the first Midwestern state to pass RTW will become a "jobs oasis."

We would prefer that oasis be a Hoosier one.

Indiana’s Business Tax Climate: Not a Perfect One, But a Good 10

We’re No. 10! We’re No. 10! Not exactly the rallying cry one is used to hearing, but a refrain that deserves more plaudits than usual. Here’s why Indiana’s ranking in the Tax Foundation’s 2011 State Business Tax Climate Index is noteworthy:

  • It’s not easy to make substantial improvements in this area. Indiana has ranged between No.12 and No. 14 over the last five years
  • The top eight seemingly head the list by default as they do not impose one of the big three taxes (sales, income or corporate income). So, without too much of a stretch, you could say Indiana is second on the list
  • We’re far away from the bottom 10; in order from No. 50, that’s New York, California, New Jersey, Connecticut, Ohio, Iowa, Maryland, Minnesota, Rhode Island and North Carolina

The Indiana Chamber’s advocacy efforts certainly are contributing factors to the state ranking. Historic tax restructuring in 2002 (including elimination of the inventory and corporate gross receipts levies) is among the Decade of Policy Victories document reflecting major legislative accomplishments from 2000-2009. The Chamber has also achieved success in general property tax reductions and an expansion of a variety of tax credits (good for business, but not earning high marks in this report).

According to the Tax Foundation, the worst tax codes tend to have:

  • Complex, multi-rate corporate and individual income taxes with above-average tax rates
  • Above-average sales tax rates that don’t exempt business-to-business purchases
  • Complex, high-rate unemployment tax systems
  • High property tax collections as a percentage of personal income

Indiana’s rankings in the five categories are: corporate tax index, 21st; individual income tax index, 11th; sales tax index, 20th; unemployment insurance tax index, 12th; and property index, 4th.

Since this tax analysis game is not for the faint of heart, a little more from the Tax Foundation on how it all works.

The methodology of the State Business Tax Climate Index is centered on the idea of economic neutrality. If a state’s tax system maintains a “level playing field” for businesses, the index considers it neutral and ranks it highly. However, each state’s final score depends on a comparison with the other 49 states.

The overall index is composed of five specific indexes devoted to major features of a state’s tax system. Each of these five indexes is composed of several sub-indexes.

Each state’s laws and tax collections were assessed as of July 1, 2010, the first day of the 2011 fiscal year. Newer tax changes are the subject of commentary in an appendix but are not tallied in the scores and rankings.

The Tax Foundation has data charts, further analysis and a full 60-page report. By the way, you have to go west for most of the rest of the top 10 (in order): South Dakota, Alaska, Wyoming, Nevada, Florida, Montana, New Hampshire, Delaware and Utah.

And finally, going into a state budget year that will bring pressure to raise revenues, let’s all keep the vital importance of the tax climate in mind on business attraction and expansion decisions.