As legislators leave town after a very positive and productive 2017 session, they also leave Indiana in a much stronger competitive position far beyond the next biennium. This General Assembly will be remembered for the passage of forward-looking, strategic investments in the Hoosier economy.
As usual, the road towards sine die featured a few detours, and there was plenty of last-minute bargaining as the clock ticked towards midnight on April 21st. But as the legislature completed its statutory duty by passing a two-year, $32.3B state budget, it’s clear that the business community scored a number of important wins.
This was the first session of our third century as a state, 130 years after the final stones were laid to complete the Statehouse, so it’s appropriate that lawmakers did much to build a lasting legacy for generations to come: Their efforts over the last few months strike a balance among efficient, accountable government, stoking regional growth and addressing statewide challenges – let’s review the highlights compared to our Indy Chamber Legislative Agenda.
- On Early Childhood Education, advocates fell short of a more ambitious statewide program, but pulled the debate in the right direction – pre-K funding will double in the next biennium, allowing more communities to participate while protecting progress in existing pilot counties like Marion.
- The final infrastructure funding deal meets our fundamental principles – increased appropriations for transportation needs (balanced between state and local priorities), with a sustainable revenue strategy that builds long-term confidence in our growth potential and position as the Crossroads of America.
- While most of the mass transit action unfolded at the City-County Building, legislators expanded the regional transit statute to include adjacent townships in Hendricks County (where temporary connector routes already show the need to bring workers to the area’s thriving logistics industry), increased funding for the Public Mass Transportation Fund (PMTF) and supported projects like the South Shore and Hoosier State Line (setting policy precedents that could advance Indy’s transit plans in the future).
- Sometimes, success is the status quo: The Indiana Competes coalition played defense on diversity, avoiding damage to Indiana’s reputation as an inclusive, welcoming state for new talent and progressive employers, preserving local anti-discrimination ordinances in the process; a push for bias crimes legislation stalled, but has positive momentum looking towards 2018.
- The Indy Chamber continues to lay the groundwork for a more equitable system of local government funding, analyzing potential solutions through our work with the Brookings Institution and encouraging regionalism by engaging with agencies and organizations like Indy’s Metropolitan Planning Organization and the Central Indiana Council of Elected Officials (CICEO).
State and Local Economic Development
Throughout the state budget and successful bills like SB507 (Indiana Economic Development Corporation – IEDC), HB1601 (Certified Tech Parks), SB514 (Entrepreneur/Enterprise Districts) and others, lawmakers generally embraced opportunities to strengthen business-friendly incentives, support innovation and entrepreneurship, and put resources towards pro-growth programs.
We might have aimed higher on certain appropriations or argued a slightly different approach on some issues, but can say without reservation that the 2017 session was a good one for the Indy Chamber economic development agenda – highlights include:
- Preserving local Tax Increment Financing (TIF) flexibility; the Indy Chamber worked with a coalition of local officials, neighborhoods and employers on the west side to protect the Indianapolis Airport TIF (allowing the Airport Authority to make long-term land use and economic development investments);
- Passing HB1144 also opens the door to transit corridor TIFs to spur transit-oriented development (see ‘Transportation’);
- Further supporting air travel connectivity and other regional economic initiatives through a $30M Business Promotion & Innovation Fund, which can be used to support direct flights, local business development and entrepreneurship programs, etc.;
- Creating a Next Level Indiana Innovation & Entrepreneurship Fund, which could provide up to $250M via (voluntary) investments from public employee retirement plans to spur promising new technologies, start-up companies and boost venture capital investment;
- Making the 21st Century Fund permanent – with funding at $20M – to support industry-driven R&D and entrepreneurship;
- Another $20M for the Indiana Bioscience Research Institute (IBRI), the public-private biotech R&D center that is the anchor tenant of the 16 Tech innovation district in Indianapolis;
- Establishing transparency and performance metrics for certified tech parks, positioning high-potential districts like 16 Tech to make a compelling case for continued support as economic catalysts for high-tech growth;
- Creating a pilot program for local Entrepreneurship & Enterprise Districts to explore the impact of city-led innovation zones, along with new tools to support distressed urban areas (including Indianapolis) (SB514);
- To further promote high-tech, advanced industry growth, removing sunset provisions in the state’s venture capital and Hoosier Business Investment tax credits, as well as providing $25M for the Skill Enhancement Fund, a workforce incentive that recognizes talent as a top economic development priority.
Community Redevelopment & Investment
Competitive incentives and business development programs are important, but the ability of Indiana communities to attract and retain skilled workers will predict their ultimate success and prosperity. Because 21st century economic development has more to do with “talent” than “transactions,” (as urbanist Richard Florida noted in remarks to the Indy Chamber Annual Event) civic vitality and quality of life matter:
- Continued funding for the Regional Cities Initiative ($4M for the biennium), with more efficient administration of the program under the IEDC (via SB507);
- $2M for Historic Preservation grants (to maintain the unique character of Indiana cities and towns), and the continuation of the Stellar Communities program;
- A new Land Bank authority (SB310) gives cities and counties fiscal and organizational tools to acquire and transfer distressed properties to support neighborhood revitalization efforts;
- Strengthening Regional Development Authorities (RDAs, in HB1286), to encourage local governments to collaborate on quality of life and business climate priorities across political boundaries;
- Of regional interest, $12M is appropriated to the White River State Park Commission for redevelopment efforts that could help accelerate plans for the former GM Stamping Plant property to the south;
- Productive reuse of former industrial sites like the GM plant continue to present a challenge and opportunity for Indianapolis and other urban areas; there was no action this session on specific brownfield redevelopment incentives, though SB514 supports the study of such policies, and a stronger push may gain traction in ’18;
- Also particularly relevant to Indianapolis is the passage of SB515, which supports local sports corporations (here and elsewhere) to their efforts to drive sports- and hospitality-related investment in Indiana; the bill also clears the way for the city’s pursuit of an NBA All-Star game and includes motorsports development provisions, building on the amateur and professional sports strategy that’s fueled growth in Indianapolis for more than a generation.
Transportation, Infrastructure & Environment
Infrastructure is perhaps the defining issue of the 2017 session; the private sector rallied to urge passage of a long-term, fully-funded approach to expanding, repairing and maintaining these physical building blocks of Indiana’s economy. The final version of HB1002 meets the key litmus tests for a sustainable solution; the General Assembly also recognized that ‘infrastructure’ means more than roads and bridges.
Avoiding Potholes, Building a Plan:
There were potholes along the path to a final infrastructure deal – attempts to exploit anti-tax sentiment, disbelief among some lawmakers about the scale of transportation funding needs, a last-minute provision that would have shortchanged local roads in growing communities – but the final bill is a good one:
- Delivers increased revenues to close the persistent deficit in infrastructure funding - $617M in new revenue for 2018, growing to $1.2B by 2024 (consistent with needs identified by INDOT experts and representatives of private industry consulted by state transportation officials);
- New revenues come from a 10-cent increase in the gas tax, along with special fuel and motor carrier taxes, and thereafter applies an indexed formula to these taxes so collections can grow with construction and labor costs;
- The plan also levies a new $15 fee on passenger vehicles, a $150 fee on electric vehicles (which use the roads without contributing via fuel taxes) and increases truck fees by 25%;
- In a key compromise, tax collections from the gasoline sales tax will be shifted to road construction – a concession by Senate leaders – but more gradually than envisioned by the House, and with a “fiscal fail-safe” authority given to the Governor to reverse the policy to avoid any dramatic blow to the general fund (a cigarette tax increase, proposed in part to fill this gap, failed to move past the House);
- INDOT is also required to study tolling options and lobby for federal approval to toll existing roads based on their findings;
- With a diverse mix of revenue sources, the deal should provide a long-term, sustainable plan that supports state and local needs (funding is split roughly 60/40 between state and local, from a significantly larger ‘pot’) – scuttling a last-minute move to tie local funds to inflation, a potentially punishing blow to high-growth regions like Indianapolis.
Ultimately, this pro-investment infrastructure plan supports continued population and economic growth, particularly in the manufacturing and logistics industries – but provides a measure of long-term confidence for any employer eyeing location or expansion here at the Crossroads of America.
- Sometimes, lack of action can itself be progress – amid the infrastructure debate, there was no move to resurrect Indiana Commerce Connector (already omitted from INDOT plans), which would have enabled expensive sprawl, hurried land use decisions and drawn investment away from the metro region;
- The Community Crossing Grant Program encourages local units of government to collaborate on shared infrastructure needs; this positions Indianapolis/Marion County and its ‘excluded cities’ to easily pursue funding for projects like the Fall Creek bridge improvement project.
- As part of the infrastructure plan described above, aviation fuel taxes were also increased $0.10/gallon to support airport capital improvement;
- Supporting mass transit options, the budget increases the Public Mass Transportation Fund (PMTF) to $44M in 2017-18, and $45M in 2018-19 along with $6M for the Hoosier State Line;
- HB1144 allows tax increment financing (TIF) districts along the South Shore line in Northwest Indiana to reinvest in maintenance and development around the rail corridor; this could open the door to similar opportunities around the bus rapid transit routes (starting with the Red Line) in the Marion County Transit Plan – a potential boon to neighborhood redevelopment;
- As noted earlier, HB1129 allows townships in Hendricks County to participate (following a referendum process) in a regional transit system as Marion County begins implementation of its expanded network;
- HB1174 creates an Indiana Bicycle Task Force to plan (with budget projections) for increased bicycle-friendly infrastructure and improve connectivity among existing bike trails.
HB1211 creates the Transborder Water Resources Authority to foster cooperative planning and coordinated management of critical water resources across political boundaries, to support regional and statewide growth and represent Indiana’s interests on supply and conversation policy at the federal level as well.
Local Government Finance & Government Modernization
- The eventual passage of HB1005, which turns the Superintendent of Public Instruction into a Governor-appointed Secretary of Education after January 10, 2025, is mentioned in ‘Education’ – but also represents progress on a key principle of government reform: The election of policymaking roles and the appointment of administrative offices, to create clarity of vision and a clear choice for voters on important issues;
- HB1036 puts the justice system largely above politics by providing a non-partisan, merit-based selection process for Marion County judges, with an expert selection committee that also includes elected officials to reflect public opinion and community diversity (and retention votes for sitting judges);
- Efforts at redistricting reform fell short this session, but will continue to be a part of our agenda going forward.
Accountability & Innovation:
- HB1470 supported ‘open data’ transparency standards, a positive move for government accountability that also allows the public sector to better harness the expertise and creativity of our tech community to help government ‘work smarter’ through technological innovation;
- The associated Management & Performance Hub is funded in the budget at $12M, providing a central repository and ongoing system to measure outcomes from these high-tech, ‘evidence-based’ government initiatives;
- SB213 gives telecommunications companies more flexibility to upgrade network infrastructure across the state, potentially improving access to high-speed internet and other digital services.
The successful push towards an appointed State Superintendent of Public Instruction was a triumph for common-sense government reform (as noted above) but also strengthens accountability for continued progress in education: After 2024, the Governor will lead the education agenda – working with the General Assembly, with the support of a professional administrator for the Department of Education.
By 2024, we also hope that a statewide system of accessible, affordable pre-K programs will be available to Hoosier families. By then, today’s 3-4 year-olds will be entering the 5th or 6th grade – a point where students will either have a strong grasp of reading, math, or be slipping further behind their peers with little chance of catching up. The foundation for educational achievement starts before kindergarten, with high-quality pre-K.
While the final pre-K plan (HB1004, with funding included in HB1001) fell short of the $50M statewide expansion that ‘All IN for Pre-K’ advocates sought, it represents positive forward progress (and a turnaround from a more austere proposal in the waning days of the session):
- A total allocation of $44M, or $22M per year with $1M allocated for a ‘remote learning’ iPad pilot program if approved by state administrators (primarily for implementation in counties without quality classroom-based programs);
- This represents a doubling of the existing pilot (in funding, if not total enrollment), while expanding the number of counties eligible to participate;
- However, the bill maintains at least current level of funding for original pilot counties (protecting existing programs in Marion County – and positioning local programs with a “head start” to compete for additional funds);
- When reaching capacity of students at 127% of the federal poverty line, Indianapolis (and other current pilot counties) can expand to 185% to enroll more moderate-income children;
- The philanthropic match was also cut in half (10% to 5%), and 20% of funding can be used for capacity-building (teacher recruitment, helping programs qualify under ‘Pathways to Quality,’ implementing family outreach and support services);
- The plan also calls for coordination of federal child development funding – through the Family & Social Services Administration – to support quality child care programs consistent with the pre-K initiative.
In short, despite an abundance of caution from fiscal leaders towards growing a relatively-new pilot program, this session represents a significant interim step towards a statewide program that broadly invests in the success (in school, career and life) of future generations of Hoosiers.
Building a strong pipeline of science, engineering, technology and math (STEM) talent is another long-term priority for growing Indy’s ‘advanced industry’ economy, starting with a solid educational foundation in K-12:
- The budget includes $2M to analyze and align STEM programs for the most effective classroom impact;
- It also appropriates $10M for a STEM Teacher Recruitment Fund to attract and retain the best STEM educators to prepare future generations of high-skill workers.
Other K-12 Issues
- The much-maligned ISTEP test will be phased out in favor of the new IREAD, starting in 2019 – giving the Indiana Department of Education (DOE) a year to develop the new assessment tool.
- The budget includes modest increases in higher education funding, reflecting our position that adequate resources for Indiana colleges and universities are sound investments in workforce readiness and recognizing the role of research campuses in innovation and industry collaboration;
- $500,000 for the Indiana INTERNet program will help match Hoosier collegians with internships in Hoosier companies – providing valuable experiential learning opportunities and increasing the odds that these students stay in Indiana after graduation to start their careers;
- Funding for the 21st Century Scholars program sees a dip over the next two years, which higher ed insiders attribute to a projected decrease in eligible applicants and participants.
The catchphrases driving the discussion on workforce policy this session are “coordinated” and “employer-driven” – lawmakers were eager to restructure the state’s billion-dollar workforce and vocational training system spread across multiple agencies and institutions into a more efficient, effective system that functions according to a fundamental goal: Preparing Hoosiers for high-demand (high-wage) positions that are most sought-after by expanding businesses in growing industries.
- HB1008 creates a more streamlined, strategic approach to workforce programs under the Department of Workforce Development, supporting a long-term workforce plan (in collaboration with the Governor’s Office and IEDC) and requiring the agency to provide consistently updated, data-driven analysis to the Commission on Higher Education (CHE), Ivy Tech and the DOE on certificates, skill and demand for high-wage jobs (adjusting programs based on skill demands, wage data, etc., and creating pilot initiatives to help students explore promising careers);
- Under this approach, Career and Technical Education (CTE) funding remains with DOE, but its allocation should be driven by DWD-supplied employment trend data;
- The budget also funds $4M in ‘Workforce Ready’ grants to help incumbent workers enrolled in high-demand job training program (an approach the legislature favored over a tax credit-driven system that encouraged employer-based training and employee assistance programs);
- As noted before, the IEDC’s Skill Enhancement Fund also earned a $25M budget appropriation, to similarly offset education and training expenses associated with new job creation projects brokered by the economic development agency.
The General Assembly also passed several measures to help those facing unique challenges enter the workforce and successfully make the transition to well-paid, productive employees – and taxpayers:
- SB312 (Use of Criminal History Information) was amended in a noteworthy victory for the Indy Chamber agenda, giving employers reasonable protection from civil liability in hiring ex-offenders, encouraging businesses to give second chances instead of shutting the door to opportunities (and increasing poverty or recidivism, or both);
- To further aid ex-offender re-entry, the HIRE (Hoosier Initiative for Re-Entry) program was funded at roughly $1.3M – this DWD effort provides screening, consulting and other assistance to businesses that hire ex-offenders;
- Veterans need opportunities to demonstrate how skills earned in the military translate to the job market, and their service to our country deserves special consideration as they return to the civilian workforce; SB307 directs DWD to give veterans (and their spouses) priority for placement in federal or state training programs to accelerate their readiness for new careers.
Finally, it’s worth noting in this area that the budget provides a modest increase for tobacco prevention and cessation programs (a two-year total of $15M); given the billions of dollars lost each year to smoking-related absences and ailments, these initiatives will ultimately contribute to a more productive workforce and a healthier economy (and Hoosiers).