'Everything's on the table' for Indiana legislators

INDIANAPOLIS -- Austerity is the order of the season here as state legislators prepare to craft a state budget amid calamitous revenue projections and rising unemployment.

Local legislators want at least to maintain spending on cherished programs like primary education and Medicaid, but in the parlance of the Statehouse, "everything will be on the table" when the session convenes on Wednesday.

As Gov. Mitch Daniels did last year with an autumn plan to restructure Indiana's tax system, he preemptorily directed the upcoming debate by unveiling a legislative agenda last month to streamline local government across the state.

Looming over the proceedings are the property tax caps the General Assembly enacted last session. The Daniels-endorsed caps are on the books and now the governor and many legislators want to move forward with an amendment to the state constitution to protect them.

But others want to wait.

Daniels recently announced a $763 million state budget shortfall for 2009, thanks largely to shrinking sales tax revenue, which was supposed to replace the property tax proceeds government lost because of the caps.

Rep. Linda Lawson, D-Hammond, supported the tax caps last year, but she thinks the General Assembly should tread carefully before enshrining them in the constitution.

"If the first quarter 2009 state revenue numbers are as bad as many fear, then we should hold off on the amendment," Lawson said.

If the legislature votes to adopt the amendment either in 2009 or 2010, it would appear as a ballot referendum in 2010.

Sen. Ed Charbonneau, R-Valparaiso, said he and his colleagues essentially cut a deal with Hoosiers to push ahead with the amendment.

"A lot of it is perception. We told people we would do this," Charbonneau said.

Don't delay, some say

Sen. Brandt Hershman, R-Wheatfield, newly minted chairman of the Senate's Tax and Fiscal Policy Committee, worries a one-year delay would be a prelude to scuttling the amendment.

"If people say, 'We want to look at the state's financial numbers,' I find it likely they will come back and say, 'The financial numbers don't support an amendment,' " Hershman said.

Legislators will debate whether the time is right for the tax cap amendment or Daniels' proposal to consolidate school districts, do away with township government and replace county commissioners with a single elected county executive officer.

They have no choice but to adopt a two-year budget. And it couldn't come at a worse time.

"The legislative session is going to be double the work with half the reward," Rep. Earl Harris, D-East Chicago, said.

Harris dreams of increasing education funding for his constituents, but he knows he may have to settle for holding the line on spending for kindergarten through high school -- at least this year.

Harris helped craft House Bills 1858 and 1902, the 2003 legislation that gave millions of dollars in property tax breaks to the region's biggest?industries.

Many local officials have cited the laws as key contributors to the financial crisis that has hit Gary and other area municipalities, which are heavily reliant on tax revenue from the steel mills and BP.

Going forward, Harris said he would be willing to look at retooling the legislation. "Everything's on the table," he said.

No 'blood from a turnip'

But Harris said the nationwide economic downturn makes it unlikely the industrial taxpayers can shoulder a heavier financial burden.

"It's like squeezing blood from a turnip," Harris said. "You look at the problems with the auto industry -- who's buying steel? Their revenue is way down, just like everyone's."

And there's the rub.

Daniels recently announced cuts in state government would make up much of the 2009 shortfall. He said state employees will forego pay raises and asked local government employees to do the same.

Without offering specifics, the governor said a large portion of the cost savings will come from the state's Medicaid program.

Cuts to Medicaid services are not part of the savings, Daniels said.

But Hershman, who will play a key role in crafting the biennial budget, acknowledged legislators might need to consider it if the state's revenue situation gets bad enough.

"Everything's on the table," Hershman said. "I say this not to alarm the people who rely on Medicaid benefits, but to urge my colleagues to look at this as an opportunity.

"Sometimes the most lasting, profound improvements come at times when the toughest decisions need to be made."