Daniels uncorks a few surprises

INDIANAPOLIS | Smokers, schools and local governments must step up if Indiana is to continue the progress made in the last year, Republican Gov. Mitch Daniels told lawmakers during his second annual State of the State address Wednesday night.

Indiana can improve its status as one of the unhealthiest states in the nation by increasing the state cigarette tax by at least 25 cents to 80.5 cents a pack, Daniels said, revealing one of a few surprises in his 32-minute speech.

After concentrating on state government efficiency his first year, Daniels said Indiana now must shed a layer of bloated local government by abolishing "the archaic system" of township assessors and transferring their powers to the county level.

"If the machinery of state government was due for an overhaul, our local level needs an extreme makeover," Daniels said, drawing a mix of laughter and applause.

Northwest Indiana legislators gave the governor's speech a fairly positive review, though some said they would have liked to hear more details about his plan to lease the Indiana Toll Road.

Most local lawmakers gave a thumbs up to Daniels' proposed cigarette tax increase, with some arguing an even greater tax hike is needed to target what they consider a huge health problem.

The governor used sports analogies to illustrate his vision, comparing himself to a distance runner striving to keep pace in the second leg of a long race. He likened the state to a baseball infielder charging hard to meet the challenges ahead.

One obstacle will be bested sooner than expected, Daniels said, announcing that an annual state deficit of $130 million will be erased by July.

"Balancing the people's books is a solemn duty, but it is not the whole business or the true purpose of government," Daniels said. "The highest purpose is to provide excellent public service to citizens at the lowest possible cost to taxpayers."

Along those lines, the governor wants schools to spend more money in the classroom and less on overhead.

Daniels made a step in that direction Wednesday night, announcing he will use tax amnesty money to send schools $156 million, or half what the state owes them from past years.

The payment should help cut costs for districts that have had to borrow against future state payments.

When it comes to transportation, Daniels said he doesn't mind borrowing.

"The plan we call 'Major Moves' would trigger tremendous job growth using in large part a very handy tool: other people's money," the governor said. "Two-thirds of the tolls paid on the Indiana Toll Road are paid by out-of-state motorists."

The governor is counting on those tolls to lure a private firm into a long-term lease of the toll road that would generate more than $2 billion. That money would fund most of the new construction in Major Moves, Daniels' 10-year transportation plan.

The governor said that without this new approach, long-sought improvements, including those planned for the Gary/Chicago International Airport "will continue to languish on the drawing boards where they have been for too long already."