Indiana General Assembly
House of Representatives

Indiana House Republican Caucus
Room 401-6, Statehouse
Indianapolis, IN 46204
Contact: Tony Samuel
(317) 232-9887 or 1-800-382-9841

Wednesday, September 18, 2002

House Republicans to Put Indiana
Back on The Right Track

(STATEHOUSE) Sept. 18, 2002 House Republicans joined by State Auditor Connie Nass today began a public awareness effort to promote needed changes in the way Indiana government operates. The Right Track Indiana plan presents a vision for opportunity, prosperity, and security for Hoosiers. These reform measures, to be released in advance of the 2003 legislative session, will begin a dialogue with the public in preparation for developing a final legislative agenda.

"Our state has suffered from a Decade of Neglect," said House Republican Leader, Brian Bosma. "It's time to get Indiana's fiscal house in order. For too long Hoosiers have suffered from the failed policies of deficit spending, mismanagement, and questionable accounting practices. It's time to get our state back on the Right Track, especially in the area of fiscal management and job creation.

The first installment of the Right Track Indiana plan was released today to address the state's budget problems and overall fiscal mismanagement. The four-part proposal will provide solutions to many of Indiana's most pressing problems and serve as the starting point of a legislative agenda that promotes job creation and fiscal responsibility. A new installment of the plan will be announced over each of the next four weeks.

The following solutions were offered today by the House Republicans and Auditor Nass. These proposed solutions focus on putting the state's Budget on the Right Track and addressing the fiscal mismanagement that has plagued Indiana over the last decade:

Over the past six years, State spending has grown at a rate of 6.8% per year, while revenues have risen at only a 4.2% rate and inflation averaged only 1.8% annually. Over the past decade, only when Republicans have controlled both the House and the Senate, has a balanced budget been enacted. The Governor allowed the current budget to become law, knowing it was $800 million out of balance. Not one House Republican voted for this budget.

Representative P. Eric Turner, (R)-Marion explained the need for a 99% spending limitation law, "Indiana's current fiscal crisis stems from unrestrained spending during the 'good times' of the late 90s," said Turner. "To serve our constituents with honesty and integrity, we must not spend their hard-earned tax dollars frivolously. The result of our overspending is being felt now in the tax increases that the Governor called for during this year's legislative session."

House Republicans propose a law to prevent budgeting more than 99% of expected revenues. The goal of this measure is to improve cash management and enhance budget stability. Currently, five other states have successfully enacted similar appropriation limits to avert budget shortfalls and ensure a balanced budget. Those states are Delaware, Iowa, Mississippi, Oklahoma, and Rhode Island.

In addition to limiting state spending, the Republicans called for changes in governmental accounting methods in order to ensure that clear and honest financial information is available to Hoosier taxpayers. A report issued earlier this year by the Indiana Fiscal Policy Institute likens the State's financial picture to a moving target. It contends that recent documentation of the State's fiscal condition has been confusing due to the manner or format of reporting and that this produced uncertainty in understanding of the State's true fiscal health.

"To have long-term economic growth and accurately track spending, Indiana must convert to the GAAP standards to produce a true financial picture," said Nass.

Currently, as required by statute, Indiana uses cash method accounting. Unfortunately, this accounting method often does not provide a complete and accurate financial picture. GAAP requires accrual method accounting because it produces a more accurate view of an entity's financial status. All major, private sector, public companies must comply with GAAP standards.

Although the State Auditor's office currently produces the CAFR (Comprehensive Annual Financial Report) using accrual methods in accordance with GAAP rules, it does so by converting from cash method accounting numbers. The state would have far more accurate and reliable financial data if it were to convert all accounting transactions to accrual method GAAP standards. Auditor Nass and House Republicans stated that this should be a long-range goal for the State to provide more accurate financial data.

"In the meantime, we need to require state agencies to provide the Auditor of State with financial data it needs to prepare the year-end CAFR on a GAAP basis," said Nass. "State government should be as accountable to its citizens as we want public corporations to be to their shareholders."

In addition to supporting strict governmental accounting standards, House Republicans called for a fundamental review
of state programs and spending priorities to eliminate waste, duplication and mismanagement in Indiana State government. Bosma called for establishment of a "Grace" Commission to help make State government more efficient. The proposal would call for leaders from the private sector, labor, and government to form a commission to examine government operations and identify opportunities for program improvement.

"Examples abound of waste and mismanagement in the State government today. We need to take a fundamental look at how state government delivers services and prioritizes its spending. A review of this magnitude has not occurred in more than a decade and is desperately needed today," said Bosma. "The long laundry list of waste and mismanagement which we read about in the daily headlines is more than sufficient evidence that this type of commission is needed."

In 1982, President Ronald Reagan established the federal Private Sector Survey on Cost Control, led by the industrialist, J. Peter Grace. The commission, quickly dubbed the "Grace Commission" made up of community and business leaders, led an army of volunteers to hunt for waste throughout federal government. The Commission made nearly 2500 recommendations that, if implemented, would save over $400 billion over three years.

"Underlying all of the solutions designed to control spending , improve reporting, and eliminate waste is the need to reverse the terrible economic collapse that has ravaged both family budgets and the State Treasury," said House Fiscal Leader, Jeff Espich. "The lack of attention to economic development and job creation by the O'Bannon/Kernan Administration, over the past six years, has left Indiana more vulnerable to the recent national recession than any other Midwestern states. As a result, many Hoosier families have suffered far more than necessary. While not the sole solution, state tax policy must be structured for job growth and economic security for Hoosier families."

To address this problem, the first solution that House Republicans have proposed is to protect the economic growth incentives recently enacted by the General Assembly. "The risks remain high that interests opposed to pro-growth, pro-investment government initiatives will seek to reverse some or all of the recent accomplishments: 1) elimination of the property tax addback; 2) elimination of the inventory tax; 3) elimination of the corporate gross income tax; and 4) creation of the new Research & Development Tax Credit," continued Espich. "Not only must we preserve these pro-growth tax reforms, we must do more to revitalize Indiana's staggering economy by continuing efforts to reduce taxes which hamper economic growth."

House Republicans will announce additional economic growth initiatives in the weeks ahead. But, keeping promises already made must be the top economic development priority. Without stability in tax policy, we cannot expect business to direct new investments to Indiana.

The House Republican caucus will continue to roll out the Right Track Indiana plan over the next four weeks and leading towards the 2003 General Assembly. A second phase of the plan will entail a more detailed discussion with Hoosiers around the state. Finally, the third stage of the plan will be released in the weeks leading up to the session with items being crafted into a final legislative program.

"Throughout this year's legislative session and special session we sought to muster change from a back bench position. Often we found that our efforts came too late in the game. If we are to have any hope of improving Indiana in the immediate future, we must make our case well before the next session is underway," said Rep. Jeff Espich. "The mismanagement in our state government has led to a fiscal and economic mess. Our Right Track Indiana agenda is a plan to clean up the mess and bring about the appropriate changes."