TERRE HAUTE — Buoyed by Republican control of Indiana’s legislature, Gov. Mitch Daniels expressed a lot of optimism for 2011 Monday afternoon.
But that optimism is silhouetted against a national economy still quite dark.
Daniels hosted a statewide teleconference with select media outlets Monday, fielding questions which ranged from higher education to the Interstate 69 project and the economy.
“First of all, we don’t wish for it,” Daniels said when asked about the potential impact and opportunities presented if neighboring states face bankruptcy. “We hope all of our neighbors and the other states do well.”
The prospect of multiple American states suffering financial collapse is one that has drawn considerable attention of late, and Daniels said some states in particular appear to be “headed for a seemingly impossible fiscal quarter,” one which might involve scenarios akin to bankruptcy.
Meanwhile, Indiana’s state finances are far from that, he said, although that solvency has come at the cost of frugality and budget cuts.
“We would argue vigorously against any bailouts for these other states,” he said.
He added it’s “truly unfair to ask our taxpayers to subsidize people who spent more recklessly.”
While Daniels expressed hope that all states do well, he noted that Hoosiers in particular have been making tough choices all along, and those efforts are paying off, he said.
According to the earliest reports from the 2010 U.S. Census, Indiana’s population has grown faster that that of any other state from Iowa to Maine, he said.
“That’s a good sign. You can’t grow an economy with a shrinking population,” he said, explaining that growth indicates strength.
Meanwhile, Daniels is supporting a bill sponsored by Sen. Ed Charbonneau (R-Valparaiso) which would allow local governments in Indiana to request a state takeover and subsequent declaration of bankruptcy.
The Times of Munster reports this bill would allow a local government to seek an “emergency manager” from the state with power to cut the budget, renegotiate labor contracts, and veto contracts and hiring.
The bill states that if the emergency manager can’t turn around the local government’s finances, the unit would be allowed to seek federal bankruptcy protection.
Daniels described the plan as “a useful precaution,” adding many states already have protocol established regarding Chapter 9, Title 11 of the United States Code detailing bankruptcy protection for municipalities.
“It only seems prudent that we have a mechanism in place if any of our cities get there or have that problem,” he said, adding later that he’s “very optimistic we will be able to continue managing our fiscal affairs successfully.”
Indiana has cut state spending by 25 percent in recent years, while other states have increased by that much or more. Yet more cost-cutting measures are in store for 2011, he said, pointing to proposed reforms in the criminal justice system regarding state prisons.
Still, the costs of a prolonged recession are telling, particularly in the insolvent unemployment insurance programs of Indiana and other states.
“This legislature will deal with it, I think successfully,” he said of the state’s debt to the federal government, now in the billions, to cover unemployment benefits.
Indiana, he said, offers the third highest such benefits in the country, while charging employers premiums which rank in the 30s. That situation can’t last forever, he said, describing the existing model as “poorly designed.”
Moderating this will ultimately require adjustments on both ends, he said, adding that wrangling might not require changes to the maximums offered. Current inequities in the system allow for two workers who make the same salary to receive vastly different benefit checks depending on their employer, he said. Issues of “unfairness” such as that need to be addressed, the governor said.
According to an Associated Press report, state workforce development commissioner Mark Everson predicted that if “correct changes are made, Indiana’s unemployment fund should be back in the black by 2020.”
Daniels said Monday that represents an outside date, given a very gradual process. He hopes to have the program back in the black by 2012 with payments going toward the debt beginning immediately thereafter.
Other areas where costs can be cut include a number of recommendations made in the Kernan-Shepard report. Daniels said only about seven of the report’s total recommendations have been acted upon because state senate Democrats killed them in committee.
Among the recommendations he hopes to see passed this year is the “conflict of interest” portion which would prevent government employees from “double-dipping” by serving on boards that govern the agency for which they work.
Another is the “nepotism recommendation” which would address the issue he described as being present in offices where officials and employees are related.
Daniels also hopes to convert county governments’ executive branches from the three-member system to a single-executive model. The current county commissioner model, he said, is the same one “that we’ve been living with since pioneer days.”
Daniels said that overall, the public is supportive of these reforms. The opposition has been relegated to a very narrow and vocal group who have vested interests or their own employment at stake, he said.
Likewise, the public has sent what he described as a surprisingly clear message about its support for financial reform in public schools. There is a “growing agreement” that the current funding formulas are flawed, he said, stating those models send more money per pupil to schools with shrinking enrollments at the expense of institutions which are thriving.
Given the amount of attention and public relations work focused on the topic by public school employees, Daniels said, he would have expected recent referendums to reflect those initiatives. But in vote after vote, he said the general public has expressed skepticism to the public schools’ requests for “more and more money.”
And state universities should keep on the track they’ve been taking in recent years, he added.
“I think they should do more of what they’ve done pretty well at in the last few years,” he said, stating that many university trustees and board members told him they “didn’t break a sweat” at the 6-percent cut from the state’s contributions to their overall budgets. Many trustees, he said, told him they could have handled more cuts. While cutting budgets doesn’t make anyone happy, Daniels said the boards recognize the need.
The invitation is standing for state universities to join Indiana’s state health care plan. If public schools K-12 and higher education alike came under the plan, a $455 million savings could be realized, he said.
“It would save a very large amount of money. Far more than they have experienced with the measures before,” he said.
Daniels said he has high hopes for a positive legislative session and bipartisan support in 2011. A self-described fan of local control and local options, he said agreement exists on all sides that there’s much work to be done this year.
Regarding the current Interstate 69 project, Daniels said, “It’s ahead of schedule. It’s under budget.”
Given the slowed construction business, contractors have been fighting for the work, with bids coming in as much as 28 percent under engineering estimates, he said, adding that the state hopes to be on its way to Bloomington by 2012.
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