Republican Leaders Will Have to Say No — And Mean It

December 4, 2005

Andrea Neal column for Nov. 30 and thereafter
730 words

INDIANAPOLIS – As lawmakers gear up for the 2005 session, they’d be wise to pick up the following self-help title: "Don’t Say Yes When You Want to Say No."

As much as Republicans might like to use their new majority status to fund preferred budget items or pork barrel projects, the coming session must be an exercise in self-restraint. If the Indiana General Assembly is to balance the budget without raising taxes — the stated goal of virtually all GOP leaders — it will have to say "no" routinely to a lot of well-intended people with outstretched hands.

"The word that I’m hearing is flat-line, flat-line, flat-line," says Prof. Cecil Bohanon of the Ball State University Economics Department speculating about the contents of the 2006-07 biennial budget.

That doesn’t mean take this year’s budget and add 2 or 3 percent for inflation. It means no additional spending for the next few years. "They’re going to have to make some special interest groups unhappy."

For the past five sessions, the legislature hasn’t been willing to do that. Instead of making hard choices and painful cuts when the 2001 recession hit, lawmakers opted for temporary fixes, such as raiding reserve funds or delaying payments to schools and local government to move red ink off the books.

Even a sales tax increase in 2002, from 5 to 6 percent, didn’t help much. As lawmakers gather in January to craft the budget, they will face an $824 million deficit.

It’s what economists call a structural deficit: a built-in shortfall that exists because the state doesn’t bring in enough money to cover expenses.

It’s been a decade in the making. Over the 10-year period from 1994 to 2004, state appropriations ballooned from $6.6 billion a year to $11.3 billion, an annual average increase of 5.5 percent. During the same period, the 12-month inflation rate never exceeded 3.75 percent.

Even after tax collections dropped in 2001, the legislature kept spending. Appropriations for 2002, 2003 and 2004 rose by 2 percent, 8 percent and 2 percent respectively, even though lawmakers knew the money wouldn’t be there.

As the Government Efficiency Commission noted in its recent report, "Our state’s financial problems are severe enough to require the immediate attention of all of us. An alert must be sounded for the citizens of Indiana, too. Hoosiers can solve their tax and revenue problems only if we have the collective will to do so."

Therein lies the challenge. What agencies, what government programs, are willing to live within the same budget next year as this year? Which agencies would accept a 4 or 5 percent cut so that others might spend more? Already, the queue for new money is growing. Indiana needs more child protection caseworkers, more home health care for seniors, new drug benefits, modern voting machines, better teachers. Which of the lobbyists who biennially trek to the legislature with wish lists would be willing to first suggest what their clients can live without?

Earlier hopes that we would grow our way out of this mess have faded. Two and a half years after the recession ended, the 50 states combined face a $36 billion budget shortfall this year, according to the National Conference of State Legislatures. A recent Harvard University report suggests that states have permanently signed on to higher per capita education and health care spending (demanded by the public and in some cases by the federal government) so the range of acceptable deficit remedies will consist only of tax hikes, steep budget cuts in other areas or shifting of resources from the feds to the states. To date, Congress has shown no interest in sending tax dollars back home.

Gov.-Elect Mitch Daniels "is going to have to be juggling lots of books and lots of revenue streams to keep the state from going bankrupt," says Bohanon. "I don’t think the Republican legislature would want to raise taxes."

In coming days, Daniels will present his deficit plan to the legislature. It will no doubt reflect hard choices and sacrifice. In turn, legislators must exert unprecedented discipline and say "no" to funding requests that would be welcomed under different circumstances. As for the rest of us, at least for this one legislative session, we need to stop asking for more.

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