IFPI Blog

  • 24 Jan 2017 12:53 PM | John Ketzenberger (Administrator)

    Sen. Randy Head’s proposal to raise the salaries of the governor and other state executives is timely. It’s hard to see a path to enactment right now for Senate Bill 60, but Sen. Head can make a good case for it.


    There are few more loaded issues than pay for public officials. You can look no further than the failed attempt in the Indianapolis City-County Council earlier this month for evidence. The case on its merits was compelling: councilors here are paid less than their counterparts and have more responsibility, but the mechanism identified to pay for the raises was its political Achilles Heel.


    The case for the state executive pay raises is even more compelling, but first let’s look at Sen. Head’s bill. It proposes raises for the governor, lieutenant governor, secretary of state, auditor, treasurer, attorney general and superintendent of public instruction, commonly known as the statewide office holders. The bill proposes to make the governor’s salary equivalent to that of the Marion County Circuit Court judge and the other statewide officeholders would be paid 85 percent of that salary.


    Office

    Current Salary

    Proposed Salary

    % Change

    Effective Date

    Governor

    $121,233

    $141,311

    16.6

    1/11/2021

    Lieutenant Governor

    $89,996

    $120,114

    33.5

    1/1/2018

    Secretary of State

    $78,584

    $120,114

    52.8

    1/1/2018

    Auditor

    $78,584

    $120,114

    52.8

    1/1/2018

    Treasurer

    $78,584

    $120,114

    52.8

    1/1/2018

    Attorney General

    $94,538

    $120,114

    27.0

    1/1/2018

    Super. Of Public Inst.

    $94,538

    $120,114

    27.0

    1/1/2018

    Source: Legislative Services Agency


    At first glance, this looks like a most generous raise. Indeed, the percentage increases make the raises so politically difficult. In context, however, the raises look much more reasonable. Indiana’s governor is the lowest paid in the five-state region by a significant margin.


    State

    2016 Salary

    % of Nat’l Average

    Illinois

    $177,412

    129%

    Indiana

    $111,688

    82%

    Kentucky

    $140,070

    102%

    Michigan

    $159,300

    116%

    Ohio

    $148,886

    108%

     Source: The Council of State Governments


    Even with a raise in four years, Indiana’s governor still would lag all but Kentucky in pay.


    Here’s another way to look at it. The Indianapolis Business Journal (subscription required) recently identified 45 people who are considered among the governor’s key staff. About half of them, 23, are paid more than the governor (the salaries of two others are unknown). Even with a raise, the governor would make less than 10 of his key staff.


    Paying the statewide elected officials more wouldn’t be a big hit to the state’s treasury. The raises would cost about $250,000 more a year between fiscal years 2018-20 and then about $290,000 more in fiscal year 2021 and beyond, according to a fiscal analysis by the Legislative Services Agency. It’s equal to 0.0019 percent of the state’s total budget, or in other words, is a rounding error.


    Pay typically isn’t the motivating factor for people to run for statewide office, but it could be a deterrent. Also, there is a good argument for paying high-ranking elected officials an amount that reflects the responsibilities of their positions and is closer to par with similar positions in the private sector.


    Still it’s a hard sell politically. Wages for all Hoosiers rank just 38th nationally on a per capita basis and growth has been about 1 percent a year since the recession ended more than seven years ago. Since taxes they pay foot the bill for government, and there’s already a proposal to raise other taxes to pay for road and bridge construction, it’s likely lawmakers will hold off on Sen. Head’s bill.


    It’s telling the bill was assigned to the Civil Law Committee instead of one of the Senate’s two fiscal committees. It’s a good place for the bill to get the thorough hearing it deserves, and that will give Sen. Head and others more information to bring the bill back next session.


  • 23 Jan 2017 1:05 PM | John Ketzenberger (Administrator)

    A football coach who has pledged to forsake running the football on offense has severely limited his options for success. The same could be said for legislators who’ve signed onto the Americans for Tax Reform’s Taxpayer Protection Pledge.


    There are 27 legislators in Indiana, or nearly one-fifth of the General Assembly, who have signed and filed a document that pledges they “will oppose and vote against any and all efforts to increase taxes.” It is the key part of an effort spearheaded by Grover Norquist that dates to the Reagan administration.


    In the 30 years since the pledge was introduced it has helped harden sentiment against instituting new taxes or raising existing rates as a means to solve government problems. While this is understandably attractive from a political point of view, it’s limiting from a policy perspective, which makes it difficult for lawmakers to have full and frank discussions. In the end, public policy suffers when options are limited and lawmakers feel forced to hedge.


    The pledge could prove problematic for Indiana lawmakers scheduled to consider a comprehensive transportation measure, House Bill 1002, beginning Tuesday in a joint committee meeting. The bill includes a 10-cent per gallon increase in the state’s gasoline tax and other revenue increasing mechanisms that run afoul of the pledge. Norquist asserts the pledge is valid for as long as a lawmaker remains in office and has vowed to use the resources of Americans for Tax Reform to oppose anyone who violates the terms.


    There are 21 members of the House, all Republican, who have signed the pledge, including Ways and Means Committee Chair Rep. Tim Brown, R-Crawfordsville, and Vice Chair, Rep. Robert Cherry, R-Greenfield. Three other members of Ways and Means also signed the pledge: Rep. Steven Davisson, R-Salem, Rep. Todd Huston, R-Fishers, and Rep. Sharon Negele, R-Attica.


    When HB1002 was introduced during a news conference earlier this month, Indiana House Speaker Brian Bosma, R-Indianapolis, was asked about the pledge and its consequence for the transportation bill. “We have to work through that issue because we have some people who signed those many years ago, and it’s being held over their heads like a blood compact,” Bosma said.


    “I’ve had discussions with Mr. Norquist about both the advisability of the pledge and its efficacy—is it into perpetuity or is it for two years?” he added. “So, we’ll have to leave that to individual members to make a determination and we’ll work with them like we worked through that last year.”


    The General Assembly enacted a comprehensive measure last session to fund transportation improvements. The act shifted tax-revenue splits, such as redirecting local option income and sales tax proceeds, but it did not increase any tax rates to generate additional revenue. Last year all but one of the House members who signed the pledge were among the 91 who voted for the transportation funding bill. Only Rep. Wes Culver, R-Goshen, was one of five to vote against it.


    (NOTE: Rep. Cherry did not vote on the bill since he missed most of the session for health reasons.)


    It’s unclear the outcome of deliberations on HB1002 will be this year, but it’s likely to include at least one tax increase as lawmakers try to find about $1 billion in new annual funding for transportation needs. The bill could pass even if all 21 House members and six Senators who signed the pledge voted against it, but it would make the path to enactment much more tenuous.


    Aside from practical considerations, it’s worth noting that forsaking any tax increases before any deliberations severely limits the policy discussion. What may be effective on the campaign trail does not enhance the debate over policy later. Lawmakers should be free to consider—and ultimately adopt or reject for their own considered reasons—tax increases to fund the needs of government.


    Their options should not be limited by a pledge that does not consider the fiscal circumstances of the times. Otherwise lawmakers may win elections, but the state could lose.


  • 03 Jan 2017 11:48 AM | John Ketzenberger (Administrator)

    Members of the Indiana General Assembly will gather today at the Statehouse to begin the budget-writing long session, which is expected to end by April 30.


    The 50-member Senate will gather today to kick things off while the 100-member House of Representatives will convene Wednesday. The schedule is light this week as lawmakers file bills and organize committee meetings. 


    Gov.-elect Eric Holcomb is expected to unveil his budget priorities this week, possibly Thursday. Holcomb's inauguration is scheduled for Jan. 9 at the Indiana State Fairgrounds.


    Through Tuesday morning the only bills filed were in the Senate where about 105 pieces of legislation were in the hopper and only two carried fiscal policy implications. 


    Sen. Ron Grooms, R-Jeffersonville, submitted Senate Bill 53, which would create a sales tax holiday Aug. 4-6 this year on school clothes and supplies. The benefit was capped at $35 for clothes and $20 for school supplies--or $3.85 in sales tax savings for Hoosiers who bought these items. It would cost the state an estimated $5 million in sales tax revenue, according to the Legislative Services Agency, if taxes are collected from online sales, or $9 million if they are not collected. 


    Sen. Liz Brown, R-Fort Wayne, has introduced SB 85, which would allow redevelopment commissions outside Marion County to redirect a portion of property taxes collected in tax increment financing districts to either school transportation systems or public transit corporations. It would require a joint public hearing of the TIF's governing body, the redevelopment commission and the transportation agency's governing board and resolutions approving the redistribution before changes could occur. 


    The budget will begin in the House Ways and Means Committee, where testimony is likely to begin next week. It's likely the House will vote on its version of the budget by the last week of February or the first week of March, and then it will be considered by the Senate. If the typical schedule holds, reconciliation of the two budgets will begin in mid-April.  

  • 21 Dec 2016 1:51 PM | John Ketzenberger (Administrator)

    An Indiana Fiscal Policy Institute analysis of the task force report on transportation funding finds lawmakers have several options to generate the additional $1 billion a year needed to upgrade existing roads and bridges in addition to building new.


    The Funding Indiana's Roads for a Stronger, Safer Tomorrow Task Force released the results of its six-month investigation into the state's transportation system. It was part of a comprehensive state and local road funding package that cleared the 2016 General Assembly.


    Among the major findings, the report notes more than a quarter of the state's roads are in poor condition and about the same number of bridges are too. To remedy the situation, the task force recommends relying on taxes and fees paid by those who use the roads, including the 25 percent of drivers who are from other states. 


    To generate additional revenue the report suggests increasing the state's gasoline tax and motor carrier surcharge, the two major funding sources since neither has been raised since at least 2003. The report also recommends indexing the tax rates to inflation, which will relieves lawmakers from the political concerns related to raising the rates. For instance, the 18-cents per gallon gasoline tax was last increased in 2003. If it had risen with inflation it would be 23 cents per gallon now and generate more than $230 million a year in additional tax revenue.


    The task force adopted the report on a 10-1 vote with Rep. Greg Porter, D-Indianapolis, casting the dissenting vote. Porter explained he wanted to hear what incoming Gov. Eric Holcomb's plans were before recommending legislative remedies.


    Co-chairs, Sen. Luke Kenley, R-Noblesville, and Rep. Tim Brown, R-Crawfordsville, emphasized the report was only a set of recommendations and they anticipated lawmakers will explore other options during the session that begins Jan. 3, 2017.

  • 18 Dec 2016 3:37 PM | John Ketzenberger (Administrator)

    Members of the Funding Indiana's Roads for a Safer, Stronger Tomorrow Commission will meet Monday morning to hear the findings of the interim group's four meetings. 

    The FIRSST, which was part of a comprehensive transportation bill lawmaker's approved during the 2016 session, was charged with examining the state's transportation needs, assessing the funds available and prioritizing both projects and funding sources. 

    It's widely expected the commission will recommend increasing the state's gasoline tax, linking it to an economic indicator so future increases are automatic and a variety of other new funding means. 

    The Commission's recommendation will carry significant weight heading into the legislative session set to begin Jan. 3.

  • 18 Dec 2016 3:32 PM | John Ketzenberger (Administrator)

    Indiana's State Budget Committee got a dose of good news despite a revenue forecast revision downward by $300 million for the current fiscal year.

    While uncertainty remains when it comes to the economy, forecasters predict 2.9 percent growth in the Indiana's gross state product during 2017 and 3.9 percent growth will produce more than $1 billion in new tax revenue available for the next two-year budget. 

    An analysis by the Indiana Fiscal Policy Institute underscores the rationale behind the forecast and what it means for legislators as they prepare to formulate a new budget beginning in January. 

  • 26 Oct 2016 10:54 AM | John Ketzenberger (Administrator)

    Logansport Mayor Dave Kitchell cited a recent Indiana Fiscal Policy Institute report about the effect of property tax circuit breakers in a recent column.


    The report by IFPI Senior Fellow John Stafford examined how the circuit breakers have reduced the amount of property tax paid by the three classifications of owners—single-family homes, multi-family homes/agriculture and commercial—and the resulting loss of revenue to local government sectors.


    Kitchell noted the savings to taxpayers, but his column contends local government officials have struggled to make budgets due to the circuit breakers. The circuit breakers have cost his city, for instance, 26 percent of its property tax revenue and will forego 30 percent next year.


    “While circuit breakers have been a win for those concerned about how much property taxes had been escalating, the other shoe dropping in this fiscal policy debate is that cities, counties and schools are doing without, scaling back budgets by almost a decade,” Kitchell wrote in the Oct. 26 Journal Gazette newspaper in Fort Wayne.

     


  • 11 Oct 2016 1:49 PM | John Ketzenberger (Administrator)

    Fort Wayne’s City Council recently defeated an ordinance to eliminate Allen County’s tax on business personal property. The vote was 5-3.


    The vote points out the confluence of two important tax streams—local property tax and the effect of property tax caps across taxing districts. These issues were among those explored in February 2014 IFPI report.


    In Fort Wayne the mayor and the councilors who voted against eliminating the business personal property tax said the lost revenue would make it difficult to balance the budget and meet the city’s needs. This is a decision that can be made locally thanks to legislation passed during the 2014 session.


    Mayor Tom Henry also called for more cooperation among those who can take a slice of the local property tax revenue since the property tax caps affect distributions. If those with taxing authority act unilaterally, it can hurt the revenue generating ability of others under the caps. 


    It’s a realization taking hold across the state and an issue for additional study as the state begins to fully understand the changes wrought in 2008.


  • 21 Sep 2016 2:37 PM | John Ketzenberger (Administrator)

    Tune in at 7 p.m. Oct. 3 for the debate between Indiana's candidates for governor, Republican Eric Holcomb, Democrat John Gregg and Libertarian Rex Bell. Indiana Fiscal Policy Institute President John Ketzenberger will moderate the hour-long debate on the economy and jobs. 


    Tickets are available for free through the website of host University of Indianapolis for the debate at the school's Christel DeHaan Center. The public is welcome to also submit questions through the Indiana Debate Commission's site, www.indianadebatecommission.com. 

  • 20 Sep 2016 4:15 PM | John Ketzenberger (Administrator)

    Today the Republican candidate for governor, Eric Holcomb, issued his economic development plan for Indiana. His Democratic opponent, John Gregg, had previously issued his plan.


    Economic development is particularly important for Indiana’s fiscal well-being since nearly 91 percent of the state’s tax revenue derives from economically sensitive taxes on the sale of goods (49 percent), personal income (35 percent) and corporate income (7 percent).


    Indiana’s economic news is mixed and has been since the recession. Employment has surpassed pre-recession levels and the state’s unemployment rate has dipped to 4.5 percent, but household income remains stagnant with real per-capita personal income up 1.5 percent over three years putting Indiana 39th among states.


    The two plans vary in scope and specificity.


    Holcomb’s is called “Eric’s Economic Development Plan” and includes four points: Retain, Retrain and Recruit the Best and Brightest, Lead the Nation with Infrastructure Investment and Innovation, Keep Energy Costs Down for All Hoosiers and Maintain Our Fiscal Discipline. Holcomb’s plan contains between two and eight bullet points to explain his positions.


    Gregg’s is called “Restoring Indiana as an Economic Leader" and includes eight points: Accountability to Ensure Indiana Moves Forward on Jobs, Build and Retain a Skilled Hoosier Workforce, Grow Indiana Small Businesses & Startups, Support for Existing Hoosier Business, Streamline the State’s Economic Development Efforts, Leverage Private-Sector Research and Funding, Restore and Rebuild Indiana’s Reputation and A More Inclusive State Bidding Process. Each section contains footnoted paragraphs to explain his positions.


    Interestingly, the only direct agreement in the plans is to extend the state’s venture capital tax credit to investors outside the state. Otherwise, each candidate has differing views of the scope of economic development activity and the state’s direct involvement in the effort.


Indiana Fiscal Policy Institute

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Indianapolis, IN 46206
PH 317-366-2431


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