Strapped Local Government? Try Setting Priorities

December 6, 2013

Did you hear the howls of pain throughout Indiana from local officials on announcement that the Pence administration would phase out their golden goose, the business personal-property tax? The governor thinks it will level the playing field, attract investment and create jobs.

The anguish is genuine. The amount of revenue to be lost — about a billion a year statewide — means that county and city officeholders won’t be able to finesse this. They may have to set priorities; they may have to decide what local government should and should not be doing — and then explain their determination to a constituency.

If you trust that your representative is doing this already, you may want to double-check. In my county, public officials have reduced responsibility to a scheme: 1) a budget crisis is spotted on the horizon; 2) the political and fiscal costs are carefully tallied; then 3) everybody sits tight until the only option remaining is to raise taxes.

Legislators, alas, are in on it. Even the Republicans operate on a “revenue-neutral” basis, meaning government must be compensated for every lost tax dollar.

Even before the governor could make his announcement, Sen. Brandt Hershman, R-Buck Creek, the chairman of the Senate Tax and Fiscal Policy committee, issued a warning: “Absent finding a replacement revenue source that mitigates the impact (of cutting the tax), we have to be cautious.”

Instead of guarding his revenue stream, Mr. Hershman might introduce “core functions” legislation. It is being considered in several states as a way to organize the discussion around a critical question, “What, exactly, is the job of local government?”

Oregon state Rep. Kim Thatcher began a campaign to identify core functions there with nothing more than loose bipartisan agreement that government “can’t and shouldn’t do everything.”

“Our system of budgeting wasn’t working,” she told the American Legislative Exchange Council. “Instead of agencies pestering lawmakers for more and more money, we first needed to establish what the core functions of government were and then decide how to divvy up the available funds.”

Ryan Cummins, an adjunct of the Indiana Policy Review Foundation, already has a list of core functions for Indiana. As a former Terre Haute councilman and finance chairman, Cummins travels the state asking citizens if they truly want their government to own cemeteries, swimming pools, parks and golf courses. And do they care whether the emergency personnel who answer their 911 calls are municipal union firefighters, or comparably trained and equipped private contractors?

Finally, Indiana needs a new model of public official, one who does not reflexively seek to enlarge government and test budgets to the breaking point. A nominee would be Judge Dan Heath of the Allen County Superior Court.

About the same time the governor was proofreading his press release, Judge Heath was going over details of a contract to privatize food service at his county’s juvenile center. Heath and his staff spent months negotiating the price points on the contract as well as squaring it with a stack of federal and state regulations.

In the end, he expects to see savings for his county’s taxpayers in excess of $50,000 a year. And that figure does not include the fact that they will no longer pay related taxpayer-funded pensions years into the future.

These are at least a few ways that Republicans can help their governor make good on his pledge that his tax cut need not “unduly harm local government’s abilities to meet obligations.” Democrats will have to set their own priorities, of course, if they can find any.



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