Indianapolis — In his final year in office, Indiana Gov. Mitch Daniels plans to make one more push for local government reform, but he’s given up hope for the sweeping criminal sentencing reforms he backed in the last legislative session.

The term-limited governor revealed his legislative priorities Friday, before a friendly crowd attending a Kiwanis Club luncheon in Indianapolis.

His wish list for legislators who return to the Statehouse on Jan. 4, for the 10-week session includes a statewide smoking ban, tougher penalties for sex-trafficking, more money for victims of the State Fair stage collapse, a mass transit referendum, a crackdown on escalating college costs, and an online sales-tax collection bill.

His call for a statewide smoking ban earned him a round of applause from the audience but he got little reaction to what may be his most controversial priority: Making Indiana a right-to-work state by banning employers from entering into labor agreements that require all workers to pay union dues or fees.

Daniels saved the right-to-work measure for last — but not least — on his list, and prefaced it by saying, “I know this last issue is going to be hotly debated and divisive.”

Statehouse Democrats and labor have already come in fierce opposition to right-to-work legislation; Republican leaders in the House and Senate have dubbed it their number one priority. House Minority Leader Pat Bauer called it the “most detrimental bill for workers in Indiana.”

Noticeably absent from his 2012 priority list was the criminal sentencing reform legislation that he pushed in the 2011 session, but that was later killed. The 2011 bill sought to slow rising prison costs by reducing the number of Class D felons in Indiana prisons by shifting them into community-based corrections programs. It would have also reduced severity of sentences for drug and theft crimes. Daniels said the efforts would have saved the state more than $1 billion in new prison costs.

When questioned by reporters as to why sentencing reform was no longer a priority, Daniels said there was a lack of legislative will to pursue it.

“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.”

Members of the legislative Indiana Criminal Code Commission, who met Friday after Daniels released his list, acknowledged they’d fallen short in a task they’d been given this summer to build support for some critical parts of the sentencing reform bill that died.

Larry Landis, executive director of the Indiana Public Defenders Council, and one of the non-legislators on the commission, said the Legislature’s failure to deal with sentencing reform means prison numbers and costs will continue to rise.

“If they get too crowded, we’re going to end up with people rioting, with people getting hurt and with a court order forcing a mass release of prisoners,” Landis said. “We shouldn’t be making decisions about who to release based on overcrowding.”

While sentencing reform is off the list, Daniels is likely to have his hands full anyway.

He’s met resistance in the past with his push for local government reform, including eliminating township government and reducing the size of county government.

Daniels said Friday he’ll push for a scaled-back version with four main pieces: allowing counties to switch their executive structure from three-member groups of commissioners to a single county commissioner; abolishing township advisory boards and moving their fiscal oversight duties to county councils; eliminating nepotism at the local government level; and reducing conflicts of interest, by barring police, firefighters, and other public employees from serving on the councils that set their budgets.

“I think if we could get action on two, three, four fronts like those, this would be good. Those are some important reforms. I’ve always believed that we wouldn’t do this in one or two big gulps; it would have to be an incremental process, and this would get the process moving forward,” Daniels said.

Some details on other items on his legislative agenda wish-list:

• Smoking ban: Daniels supports passage of a statewide smoking ban, citing past failed attempts. “I think the public support has grown,” he said.

• State Fair: Daniels said he’d support a one-time increase of the state’s $5 million tort claim cap, so there would be more money for families of the seven people who were killed and dozens more who were injured in the August stage collapse at the Indiana State Fair.

• Sex-trafficking: The governor plans to fast-track a bill aimed at expanding penalties for people who profit from the commercial sex industry. Aimed at cracking down on prostitution, Daniels said the bill needed to be signed before the 2012 Super Bowl is played in Indianapolis in February. “The number one destination for criminals exploiting young girls is that event — large sporting events, and that’s the largest one,” Daniels said.

• College credits: Daniels said he wants the Legislature to stop “credit creep” — the increasing number of credit hours that college students must complete to obtain a degree. Daniels said the state’s universities operate on a poor business model that includes high administrative costs, and increasing customer dissatisfaction.

• Mass transit: The governor said the bill would allow local communities to hold a referendum vote on raising local taxes to pay for mass transit.

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