INDIANAPOLIS | Northwest Indiana will be looking to the Legislature to help protect region homes from future floods, keep buses running in poverty-stricken urban areas and allow public school budgets to stay on pace with rising costs.
And the Legislature may have little choice but to look away.
"We know a recession is coming," said David Bennett, an analyst for the nonpartisan Indiana Fiscal Policy Institute. "Indiana has a budget system that's heavily dependent upon revenue sources which are sensitive to economic conditions -- the sales tax and the income tax."
The state becomes even more reliant next year, when it takes over $1 billion in local welfare and school costs as part of a property tax overhaul that led to a penny sales tax hike, to 7 percent. The funding swap means state government now is fully responsible for providing schools with operating budget increases.
"We're preparing ourselves for no increase or a very modest one," Valparaiso School Board President James Bernard said. "I think the reality is they're just not going to collect as much money."
In 2006, the state's December forecast showed revenues growing by more than 4 percent a year, meaning lawmakers had more than $1 billion in "new" money to spend in the current two-year budget. Valparaiso Mayor Jon Costas, chairman of the Indiana Commission for Higher Education, said he has been told Indiana will be lucky if next month's forecast shows half that much available when budget negotiations begin in January.
Indiana ended the last fiscal year in June with $1.4 billion in rainy day funds, putting it on stronger financial footing than surrounding states. But Republican Gov. Mitch Daniels insists the state shouldn't touch those reserves, nor should it contemplate increasing taxes or delaying payments to local government.
That means living within reduced means is the lone option. Senate Republican leaders already have cautioned that one of their priorities will be to "protect" -- not necessarily increase -- school funding.
Schools received an average funding boost of 3.5 percent a year in the current budget, and Senate Minority Leader Vi Simpson, D-Ellettsville, argues education needs at least a 2 percent annual increase to manage inflationary costs such as health insurance, fuel and utilities.
"Obviously, schools need to see increases in funding from year to year," Merrillville schools Superintendent Tony Lux said. "We, of course, are not blind to the topic of discussion, in terms of the economy, and the Legislature is going to have some difficult decisions to make."
The Little Calumet River Basin Commission, widely maligned for September flooding that damaged hundreds of region homes, asked legislators for $8 million two years ago and got $2 million. It's not yet clear how much the panel will seek to complete the two-decade-old flood control work.
"I know Indiana is not as bad as other states, but I'm sure there's not going to be a lot of money thrown around in Indianapolis," said Jody Melton, the commission's executive director. "I'm thinking it's not going to be a good session. But everyone wants to get this project done."
Meanwhile, East Chicago, Gary and Hammond are considering ending or scaling back bus service in response to new state property tax caps that threaten to sap millions from municipal budgets. The hope is that the untested Regional Bus Authority can step in.
But RBA President Dennis Rittenmeyer said the agency would need at least $5 million a year to take over those municipal routes. In the past, downstate legislators have been unwilling to help because officials in Lake and Porter counties refuse to tap vehicle registration and restaurant sales taxes in use by dozens of other counties.
"The challenge has been, as they say in golfing, 'the skin in the game.' What are we putting in?" Rittenmeyer said. "The reluctance of government in Northwest Indiana to put money into transportation has been the sticking point, whether you talk about bus or rail."
