Chamber President Kevin Brinegar offers a two-minute wrap-up of the 2013 legislative session. Highlighting his review are thoughts on the new budget, tax relief and critical education and workforce development issues.
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.
Mike Ripley, the Indiana Chamber's VP of health care policy, was recently interviewed by the Indianapolis Business Journal about Medicaid expansion in Indiana. Here's what he said:
Mike Ripley, a health care lobbyist for the Indiana Chamber of Commerce, talked about the business group’s views on a proposed expansion of coverage by the Indiana Medicaid program. As it stands now, the 2013 Indiana budget bill includes a plan passed by the Senate as Senate Bill 551, which would have OK’d the Pence administration to negotiate a block grant deal with the U.S. Department of Health and Human Services to expand Medicaid coverage via a program like the Healthy Indiana Plan. When that bill was altered in the House to remove the block grant concept, the chamber dropped its support. The altered House bill is now dead, and the original Senate plan has been added to the budget bill. Its ultimate fate is still unknown.
IBJ: Why did the chamber drop its support of SB 551 when the House altered it so it no longer required the state to negotiate a block grant with the government?
A: The inference is that, you’re on the hook for the full expansion, however you do that. And at the end of the day, how do you pay for that? How I’ve interpreted the block grant is, "OK, we’re going to get X amount of dollars and then we expand as much as we can." But without that, it’s pretty much open-ended.
IBJ: Why is an open-ended expansion of Medicaid, which is what President Obama’s health reform law originally called for, a problem—particularly considering that the federal government will pay 100 percent of the expansion costs for three years and then step its support to no less than 90 percent by 2020?
A: Then after 2020, what happens then? Where do you come up with those resources? That’s where we’ve been very concerned from a business perspective. Because who’s going to foot that bill? Employers are.
IBJ: Why do you prefer expanding coverage via the Healthy Indiana Plan, which gives participants a health savings accounts to pay for health care, but also caps enrollment if their use of health care exhausts the state’s allotted revenue for the program?
A: It has better reimbursement [than Medicaid] for doctors and hospitals. And it puts some skin in the game for individuals. I think that’s the best of all worlds. You’re not going to get everybody covered. But it’s something we can cope with financially.
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.
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:
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An election of historic proportions has just taken place in our nation and right here in Indiana. There were some big surprises, big changes, and a lot of "status quo" outcomes. Read all the results in the Indiana Chamber/IBRG’s 2012 General Elections Report.
The things that didn’t surprise political analysts:
The things that did surprise political analysts:
The Indiana Chamber’s non-partisan political action program, Indiana Business for Responsive Government (IBRG), had a good election: 61 of 77 IBRG-endorsed candidates facing opponents won their races; 8 of 9 candidates endorsed for the U.S. Congress were victorious.
The Elections Report will be updated as final results and additional analysis are assembled in the hours and days following the election. Check back at www.ibrg.biz or www.indianachamber.com for updates. For more information or questions, please contact Jeff Brantley (jbrantley@indianachamber.com), vice president of political affairs and PAC.
Indiana Business for Responsive Government (IBRG), the non-partisan political action program of the Indiana Chamber of Commerce, was heavily involved in support of pro-jobs, pro-prosperity candidates.
Richard Mourdock (R) and Joe Donnelly (D) are in a statistical dead heat for the open U.S. Senate seat, with 17% of voters in that race still undecided, according to a new statewide poll released today by the Indiana Chamber of Commerce.
By a 41% to 39% margin (within the survey’s margin of error), Mourdock enjoys a slight lead over Donnelly. In addition to the 17% of respondents who are undecided, 3% support Libertarian candidate Andrew Horning.
In the election for Indiana Governor, Mike Pence (R) holds a commanding 50% to 32% lead over John Gregg (D), with Libertarian Rupert Boneham supported by 3%. In that race, 15% of respondents are still undecided.
The scientific public opinion poll of 600 registered voters statewide was conducted by Market Research Insight from August 6-9, 2012. The poll has a margin of error of +/- 4% and utilized live interviewer telephone surveys to maximize accuracy. Dr. Verne Kennedy, senior analyst for Market Research Insight, served as project director for the poll. Kennedy has conducted more than 200 public opinion surveys in Indiana over the past two decades.
When poll respondents were asked to identify their political affiliations, results were 46% Republican and 38% Democrat, with 16% identifying as independents. Mourdock and Donnelly achieve similar support levels among their respective party voters, but 41% of self-identified independent voters are still undecided.
“As typical, both Democrats and Republicans are relatively polarized, favoring the candidate for their party,” Kennedy says. The 16% of Indiana voters who say they are completely independent will likely determine the outcome of the Senate race.
“Mourdock has the advantage in the election because more of the 17% of undecided voters on this race identify themselves as Republicans than Democrats,” Kennedy explains. “For instance, among those voters undecided on the U.S. Senate race, 33% indicated their support for Pence for governor compared to 6% who support Gregg in that race.”
The public opinion poll was commissioned by the Indiana Chamber of Commerce and its non-partisan political action program, Indiana Business for Responsive Government (IBRG). Learn more by viewing the polling report and crosstabs.
An interesting report from the Indiana Fiscal Policy Institute, via Inside INdiana Business:
The Indiana Fiscal Policy Institute (IFPI) today released its report "Indiana’s Fiscal Condition – A Different Set of Policy Choices" that provides analysis regarding the State’s financial picture and also anticipates the challenges facing a new governor and the General Assembly in 2013.
"The new governor and legislators still will certainly have a tough time balancing the budget, but this time it will be in the form of resisting temptation to spend instead of identifying ways to cut expenses," said John Ketzenberger, president of the IFPI. "There will likely be pent-up demand among many constituents for new or additional spending and it is harder for policymakers to say no to them when there are surplus funds."
The report previews the unique set of circumstances facing the state as it enters a transition phase after Nov. 6 when, for the first time in eight years, the state will have a new governor. It’s likely, too, that nearly 40 percent of the members of the General Assembly will be entering their first or second terms, a remarkable period of turnover for the legislative body. Just days after taking office the new governor and the remade Legislature will begin the work of assembling the state’s next two-year budget. Add the fact there will be a new chair of the House Ways and Means Committee, and this will be a most interesting session from a fiscal perspective.
Among the questions likely to be considered in the 2013 General Assembly session are:
- How will any new spending affect the state’s surpluses? Will these expenditures be one-time expenses, such as capital projects, that reduce the overall surplus, or will they be ongoing expenses, such as education, that will affect the structural balance?
- Will surplus funds be used to further reduce taxes?
- Should the state undertake plans to reform how it funds the Teachers Retirement Fund?
These questions and others also are affected by the sluggish economic recovery and concerns that another recession would create renewed havoc on tax revenue. Indiana’s increased reliance on sales and income taxes to pay for education, especially, makes it vulnerable to economic downturns that would make additional spending moot. The new policymakers will have to carefully consider these economic factors as they consider the state’s fiscal future.
The full report can be found on the Indiana Fiscal Policy Institute Web site – www.indianafiscal.org
Any time eight members of a nine-person Congressional delegation can agree on something these days, it must be a good thing. That is the case with the Small Business Paperwork Mandate Elimination Act of 2011.
H.R. 4 is expected to be considered on the House floor today and the subject of a vote on Thursday. The 273 co-sponsors include all six Indiana Republicans (Larry Buschon, Dan Burton, Mike Pence, Todd Rokita, Marlin Stutzman and Todd Young) as well as Democrats Andre Carson and Joe Donnelly. Only Pete Visclosky is missing from the co-sponsor list, which, of course, doesn’t disqualify him from supporting the bill.
For those who don’t recall the provision or prefer to block it out in order to try and get a good night’s sleep, a section of the Patient Protection and Affordable Care Act mandates that small business owners file a 1099-MISC with the IRS for all payments of $600 or more to a vendor in a tax year. In other words, just about everything. In a regulatory world gone awry, this might be the biggest nightmare of all if allowed to proceed.
The repeal earlier passed the Senate 81-17. Let’s hope common sense prevails in the House this week. The Small Business & Entrepreneurship Council has additional background and facts.
UPDATED: Thankfully, the U.S. House has voted to repeal this ridiculous measure. Surprisingly, despite being listed as a co-sponsor, Indiana Rep. Andre Carson voted against the measure. All eight other Hoosiers representatives sided with the majority in a 314-112 vote. The Senate has passed a slightly different version, so a compromise will need to be reached. Journal of Accountancy has the story.
Much to the surprise of many Hoosier politicos, Sen. Evan Bayh has decided NOT to run for Indiana governor in 2012 and recapture the office he held in 1989-1997. The Indy Star has the report:
Bayh’s decision ends, at least for now, an era in Indiana politics. The son of former U.S. Sen. Birch Bayh, he burst onto the political scene in 1986 when at age 30 he won election as secretary of state before sweeping to victory as governor two years later.
Democrats had hoped he’d resurrect them in 2012, as he did in the 1980s, by running for governor. And, while Bayh had turned his back on a third term in the Senate earlier this year, saying he did “not love Congress,” Democrats were optimistic that a chance to return to a job he had clearly relished would prove irresistible.
“If all I cared about is politics I’d run for governor because I loved being governor, and the prospects were probably favorable” that he’d be elected, Bayh said.
But, he added, “I want my kids to know that they were their parents’ top priority, and more important than ambition. I’ve been privileged to be elected five times. You only have your kids once.”
He said he doesn’t know yet what his next chapter will bring when he ceases to be an elected official Jan. 5, when the man who replaces him, Republican Dan Coats, is sworn in to office.
In the article, state Democrats express disappointment as it likely means they’ll have a very difficult time taking back the office. One also wonders how this will impact Rep. Mike Pence’s gubernatorial considerations.
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