By Kirk Johannesen, The Republic
johannesen@therepublic.com
While lawmakers and the public debate the merits of property and sales taxes, economist Morton Marcus said the real question is how much money a local government needs to raise.
"Are our schools overfunded? Are the roads too good? Is police protection too good? If we're not spending too much, then why reduce funding to local government?" Marcus said.
State Sen. Greg Walker, R-Columbus, said controlled spending is needed to ensure a healthy state economy, which makes Indiana attractive to businesses.
He noted that bordering states have increasing unemployment rates.
Michigan (7.7 percent), Ohio (5.9) and Illinois (5.3) all had unemployment rates above the national average (4.7) for October, according to government reports from those states. Also, the rates in those states are higher than they were in October 2006. Illinois increased 1.2 percentage points, Michigan 0.6 and Ohio 0.4.
Indiana's unemployment rate for October was 4.6 percent, down from 4.9 in October 2006.
Indiana needs a strong, attractive economy, Walker said, because the state needs workers. He said southern Indiana would need about 6,000 workers to fill jobs created by Honda, Cummins and secondtier suppliers that would locate nearby.
The organization of government must be re-examined to provide better oversight, Walker said.
Multiple boards can approve budgets, construction projects and spending plans that place too much of a burden on taxpayers and the ease with which boards can approve projects makes them more likely to add new projects and debt, he said.
The lack of oversight is a problem because too much of the revenue collected through taxes is used to pay debt, Walker said.
Jerry Conover, director of Indiana Business Research Center at Indiana University, said, "If the Tax and Capital Control Board in each county can organize and manage its work efficiently, so as to respond promptly to budget proposals by the various local taxing units, then it should succeed in controlling the overall tax burden faced by property owners."
Referendum debate
Gov. Mitch Daniels has proposed controlling spending by using referendums to approve all large, public construction projects or spending plans.
A referendum is a vote on a special issue, and usually is tied to a primary or general election, giving registered voters the power to approve or deny it.
Indiana uses a remonstrance process, in which citizens have to appeal a board's approval of a project, such as construction of a new school. To defeat it, they must gain more signatures than project supporters.
Using a referendum recognizes the need for public input, Walker said. A remonstrance does not.
"It's not the government's money, it's the people's money. They should have input," Walker said.
Conover said growing communities might find the process cumbersome, but he thinks most communities are not growing rapidly and tend to spend more conservatively.
A potential referendum would require more foresight and planning for projects.
"That's what it's intended to do, giving taxpayers a chance to approve or disapprove projects that otherwise local officials might approve without much public discussion," Conover said.
However, he stressed the need for continuing to fund school projects.
"Investment in quality schools and a strong learning environment is probably the most important thing taxpayers can support to foster long-term economic growth and competitiveness for Hoosier businesses," Conover said.
Marcus believes many public schools already need more funds, and he thinks school projects would have little chance of approval with a referendum because most people would vote with their pocketbooks.
"I think the whole referendum idea is a mistake," Marcus said.
State Rep. Milo Smith, R- Columbus, said schools will struggle to convince retiring baby boomers without children in schools to support building projects.
He wants more time to examine the idea of using a referendum, and consider making changes to the remonstrance process.
A remonstrance could be made more private, Smith said, like an absentee ballot, which could make the process less daunting, and make people more willing to sign.
Don't rush
Smith said lawmakers should examine the proposals carefully - and not adopt quick fixes.
"We are so notorious for having a knee-jerk reaction to everything," he said.
Marcus agrees, and thinks any action proposed by Daniels and the Commission on State Tax and Financing Policy should be shelved for at least five years.
He said letting the new assessment system run its course for a few years would allow for better examination and identification of problems.
However, voters are not patient. Smith said they are expecting results by the 2008 general election.
Marcus said many voters are angry without knowing all the facts.
"Do they know property taxes are lower in Indiana than Illinois?" Marcus asked.
Smith said many lawmakers fear being voted out of office unless they act quickly, which is making their jobs more difficult.
"Every legislator should do what they think is best for their district in the state of Indiana and not just do what they need to get re-elected," Smith said.