Deficit proposal unveiled

INDIANAPOLIS -- Gov. Frank O'Bannon addressed Hoosiers by television Thursday from his office at the Statehouse. He unfolded his proposed tax plan, which he said would balance the budget if passed by the Indiana legislature. While Republican lawmakers agreed to work with the governor to achieve a balanced budget, their approach would be fundamentally different. \nThe speech responded to Indiana's growing deficit, the result of the nation's economic downturn. A press release from the governor's office reported that revenue during the first four months of this fiscal year was $209.4 million below what was expected.\nThe governor's office has already taken several steps to save money, O'Bannon said. It has reduced spending in state agencies by 7 percent, stopped raises for state employees, frozen hiring, delayed construction projects for both state agencies and higher education and looked for savings in Medicaid health care.\n"I didn't want to do these things," O'Bannon said. "I know they're painful, and these sacrifices still aren't enough."\nThe new tax plan would seek to achieve a balanced budget in three years. The most immediate changes would make permanent the 7 percent spending reduction, hold university spending for next year to its current level, use tobacco settlement funds and gaming revenues, increase the cigarette tax by 50 cents a pack and increase the gaming admissions tax by $2. Payments to school corporations, local government and higher education would also be delayed.\nLater changes would include rescinding individual and business income tax deductions. \nO'Bannon released his plan today and called on Hoosiers to contact their legislators and voice their support. If it didn't pass, he said, he would be forced to make cuts in spending for public schools and universities, public safety and health care.\nRepublican lawmakers said the state needed to control spending, not generate revenue by raising taxes. \n"The issue isn't from our perspective that Indiana hasn't taxed enough," he said. "It's that we've spent too much. The governor said we can't grow our way out of this problem, but we can't tax our way out of this problem either."\nIf the legislature had adopted the spending caps proposed by republicans in 1996, Brian C. Bosma (R-Marion County) said, the state would have a $1 billion surplus today.\nIn addition, Bosma said the state needed an economic development plan to replace the 37,000 manufacturing jobs that were lost in the last 20 months.\n"We would differ with the governor and say that we can grow our way out of this problem," Bosma said. "The problem is we haven't had planning for that growth over the last 10 years."\nSen. Steve Johnson (R-Kokomo) echoed Bosma's statement that less spending, not more taxes, would solve the state's economic problems. \n"When you look at the revenue forecasts that came in Wednesday, 60 percent of that is a loss of income tax revenue," he said. "That says the people are having to struggle. And in his plan he puts income tax on the table."\nTo solve the budget problem through controlling spending, Bosma called for an independent audit of state spending. \n"As businesses and families are looking for (ways to save), it's time for the state to do that as well," he said.