Tue, May 13 2008
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INDIANAPOLIS — It was an extraordinary scene under the Statehouse rotunda Wednesday. There was Gov. Mitch Daniels, Democratic House Speaker B. Patrick Bauer, Ways & Means Chairman Bill Crawford and Sens. Luke Kenley and David Long. All had big smiles on their faces.
They signed House Enrolled Act 1 — the cap and cut property tax reforms that I’ve been writing about since last summer. With an angry populace ready to throw the bums out, what we got was some splendid bipartisan statesmanship. While the legislation raises the sales tax from 6 to 7 percent, there’s an average property tax cut of 38 percent, according to Bauer.
And legislators even did some restructuring. All but 44 township assessors are now out of business. The rest will face a referendum in November, and judging from that $4 billion assessing error in Marion County, they are truly an endangered species. The state is assuming police and fire pensions, school operating and child welfare costs.
Remember the Carmel family who died after skidding into a pond last winter? The legislature responded by calling for a reduction of 9-1-1 call centers to two per county. (Lake County, for instance, has 17.)
I’m calling it Hoosiers with one shoe. The tax reforms will be fine for a few years, but they will erode until Indiana voters demand that their local governments, Gov. Daniels and the legislature put the other shoe on. And that is the 27 recommendations found in the Kernan-Shepard Commission report. Otherwise, we’ll just continue hopping.
Kernan-Shepard recommends a variety of reforms: a single county executive, school district consolidations, city elections on the same years as federal elections. The tax reforms won’t work unless we reform the rest of government.
“I believe the caps and spending limitations will now be the force that will pull Kernan-Shepard off the shelf, where otherwise it would collect dust,” Gov. Daniels told me on Tuesday as we chatted for about 90 minutes in his Statehouse office. “The people who would otherwise guard their turf and who would otherwise protect the redundant systems of today will have to get serious about cooperation, collaboration, consolidation.”
I’ve written that local governments when budgeting next August and September might be in chaos when they deal with the caps. What words of comfort did Gov. Daniels offer mayors, councilmen and commissioners?
“To the vast, vast majority all this means as they will have no growth,” Daniels responded. “Many will have no problem at all. Some will have minor problems. And to all those folks, I’ll say look at state government. We cut the level of growth to 2 percent for a couple of years and 4 percent for a couple of years. It wasn’t easy, but it wasn’t impossible. There will be a Distressed Unit Board that will deal with the biggest ‘taxers and spenders.’
“But don’t come to the Distressed Unit Board and say, ‘This is just too hard. We want all the money we’ve been spending.’” Daniels warned. “That won’t work.”
Carroll County is in deep distress right now. It has laid off six emergency medical technicians and two deputies and eliminated an ambulance. Should that county now be looking at, say, a merger with White County?
“I don't know,” the governor said. “How many fire departments? How many townships? How many school districts? Here’s to me the important point that some folks skip over: I see no evidence that a county can tax its way to better days and prosperity. We’re a mobile society. Some of our cities, for instance, or school districts raise the alarm that what is needed is continued increases. Their biggest problem is people leaving.”
Then there are the exempted counties of Lake and St. Joseph. What’s that all about?
“I've learned some things,” Daniels said. “It was clear from the get-go that some places, and it came down to Lake and St. Joseph, had taxed and spent so much, for so long, that you just couldn’t go to the new era in one or two years. I keep pointing out to people, every time a politician says ‘We will lose,’ you as a taxpayer will get to keep. The money doesn’t leave the county. It doesn’t go to the state. The taxpayer keeps it because they reached their cap. That’s what we set out to do. There’s a $1.72 by our count saved for every dollar in new taxes.
“If counties out there exercise the local income tax, that will come down some,” Daniels said. “But it will always be over a dollar. On an Evansville TV station last night, some of the politicians said it’s just a shift. And the second question was, this is going to cost units a lot of money and I said, ‘There’s the answer to question 1.’ If it were just a shift, they’d have the same amount of money but they won’t. To me, that’s a very pro-taxpayer outlook.”
If you’re a government official, a new era has commenced. If you look at things the same way you did one or 10 years ago, you’re going to be challenged. The governor is hoping the other shoe — the next wave of reforms — comes from the bottom up, instead of the top down.
Brian Howey, a Peru native, is the publisher of The Howey Political Report. He can be reached at www.howeypolitics.com
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Brian Howey