O'Bannon proposes major economic development plan

INDIANAPOLIS -- Gov. Frank O'Bannon proposed a sweeping economic development and education plan Wednesday that would spend up to $1.25 billion over 10 years in hopes of creating jobs and boosting Indiana's lagging economy.\nThe proposal will be the centerpiece of the Democratic administration's legislative package, but passing most or even parts of it could prove daunting.\nThe plan would free up about $692 million by borrowing against a portion of the state's national tobacco settlement, tap another $195 million from a tobacco trust fund, and invest those and other dollars in business research, job training and schools.\nBusiness and research grants, college scholarships and other parts of the plan would be targeted to creating high-skill, high-wage jobs in four industry sectors -- advanced manufacturing, life sciences, information technology and distribution.\nAlthough some spending would occur over 10 years, the plan envisions using $200 million over the next two years to supplement funding for schools.\nO'Bannon and Lt. Gov. Joe Kernan called the proposal the "next logical step" to the tax-restructuring package passed during the special session in June, and said it would not cost any state taxpayer dollars.\nDespite passage of the tax-increase and tax-restructuring plan, Indiana still faces a $760 million budget deficit and has lost about 120,000 jobs to the recession -- worst in the nation on a percentage basis.\n"We have a choice: We can sit and wring our hands and bemoan a recession, or we can act assertively, decisively, deliberately so that when the economy turns Indiana will be ready to explode," O'Bannon said.\nNearly all elements will require approval by the General Assembly, and it will take bipartisan support to pass, since the House is controlled by Democrats 51-49 and the Senate is controlled by Republicans 32-18. Lawmakers convene the 2003 budget-writing session on Jan. 7.\nMany lawmakers and lobbyists welcomed the proposal, saying it was innovative and bold. House Minority Leader Brian Bosma, R-Indianapolis, called it "the best program I have seen brought forward in six years of the administration."\nHouse Speaker B. Patrick Bauer, D-South Bend, said it was so multi-faceted, several committees in his chamber would have to review it.\n"It's welcome because it's their duty to make proposals, but it's our duty to evaluate them and make them work within a balanced budget," Bauer said.\nBut some said the plan does little to immediately address the state's budget shortfall, and Bosma and some others are wary of the plan's most controversial plank -- borrowing against future tobacco settlement payments for a lesser, lump sum up front.\nSome social services advocates decried it as a raid on tobacco money that should be used for health purposes. Republican State Treasurer Tim Berry said it was simply bad business.\nInstead of borrowing against 40 percent of future tobacco settlement payments to get $692 million up front, as the plan calls for, the state could take in $1.6 billion over the next two decades, Berry said.\n"Essentially you are mortgaging your home to pay for this week's groceries, and then realizing that next week you still have to buy groceries and you have no funding source to do so," Berry said.\nO'Bannon and Kernan said 60 percent of tobacco-settlement payments would still be used for health programs such as prescription drug benefits for low-income seniors.\nThe other portion would be used to sell bonds and generate $692 million. Of that, $360 million would be spent over the next decade on research-and-development grants for companies and universities that help bring new technologies to market.\nOther money would be used to establish regional technology centers, boost rural-development efforts and build more university research buildings.\nThe plan would invest $135 million from a tobacco-settlement trust fund to provide scholarships to as many as 22,000 students who pursue studies in the four targeted areas of advanced manufacturing, life sciences, information technology and distribution.\nUnder the proposal, the students would have to serve internships and remain in Indiana after graduation at least one year for each year they received a scholarship. If they did not, they would have to repay the scholarships.\nThe plan also would use federal dollars for job-training programs, modernize the state's unemployment insurance system and extend unemployment benefits.\nKernan, who is widely expected to be the Democratic nominee for governor in 2004, said the plan would put Indiana on offense in addressing the state's economic woes.\n"The prevent defense doesn't work," he said. "All it does is prevent you from winning"