INDIANAPOLIS | Gov. Mitch Daniels' final legislative session will be dominated by the right-to-work fight, but he laid out a legislative agenda Friday that could transform Indiana even more than the proposed labor policy change.

The term-limited Republican will urge lawmakers when they return Jan. 4 to the Statehouse to pass stalled local government reforms, enact a statewide smoking ban, collect sales tax on Internet purchases, make college more affordable and permit voters to decide whether to increase taxes for mass transit systems.

Daniels repeatedly has championed the 27 recommendations of the 2007 Kernan-Shepard report to restructure local government only to see most of them fail in the Legislature.

This session, Daniels said he will focus on eliminating township boards, reducing nepotism, barring local government employees from serving as elected officials of the governments for which they work and giving counties the option to replace their three commissioners with a single executive.

"I'm very hopeful this year about action in these four areas," Daniels said.

On other issues, the governor said he will work with state Rep. Charlie Brown, D-Gary, to enact a smoking ban with as few exemptions as possible.

Daniels' 2012 agenda does not include criminal sentencing reform, a measure he previously supported to reduce incarceration rates and save money by housing low-level offenders in county jails or community corrections programs. Prosecutors persuaded lawmakers to kill the proposal last session.

"I'd be eager to pursue it, but I'm not as optimistic as I am about those other items," Daniels said. "Complete agreement has proved elusive."

House Democratic Leader Patrick Bauer, of South Bend, said Daniels' agenda should be solely focused on creating jobs for Hoosiers. The governor's support of a right-to-work law isn't enough because right-to-work doesn't create jobs, Bauer said.

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