GOP legislative leaders back Pence's proposed balanced budget amendment, details still to come

Republican legislative leaders are backing Indiana Gov. Mike Pence's proposal to add a balanced budget amendment to the state constitution, even as details of how it would work are still being sorted out.

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Pence raised the proposal publicly for the first time during his State of the State speech Tuesday night. Wording for the amendment hasn't yet been proposed, and its impact is unclear since the constitution already largely prohibits the state from incurring debt.

The Legislature's top Republicans said following the speech that they support the concept, although they said it won't be a top priority.

Senate President Pro Tem David Long, R-Fort Wayne, said Indiana would be following most states in having a constitutional requirement for a balanced budget. He said lawmakers needed to be cautious in making the amendment flexible enough for state officials to respond to future recessions during its two-year budget cycles.

"It will be minimalistic, whatever we end up with," Long said. "Try to make sure you don't hamstring yourself in the future, but that you do require fiscal discipline for future generations."

The state has nearly $2 billion in cash reserves, or about 12 percent of annual spending. That reserve was largely built under former Gov. Mitch Daniels with a funding boost from President Barack Obama's 2009 federal stimulus program.

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The badly outnumbered legislative Democrats maintain that Pence is looking to fix a problem that doesn't exist and is actually trying to curry favor with out-of-state Republicans as he considers entering the 2016 presidential race.

"We know to manage our books, and we have legal mechanisms to ensure that happens," said House Minority Leader Scott Pelath, D-Michigan City. "The fact that he just added something in addition to that, well, it's nice to say, but it's not going to have any practical effect on the men and women and children of this state."

Questions surrounding the amendment include whether it would permit the spending of the state's reserves if tax revenues fall short of expectations and, if so, under what circumstances.

John Ketzenberger, president of the nonpartisan Indiana Fiscal Policy Institute, said a balanced budget amendment could limit the Legislature's budget options, which lawmakers now face with the statewide property tax caps that were added to the constitution in 2010.

"When it is in the constitution you just can't just pass a law, you have to find a way to deal with those questions," he said. "It would definitely affect how future General Assemblies approach the budget."

The proposed amendment would have to be approved by two separately elected Legislatures before going before voters in a statewide referendum, which would be 2018 at the earliest.

The subdued embrace of Pence's proposal from legislative Republicans somewhat echoes their response to major tax initiatives from the governor during his first two years in office.

Pence sought a 10 percent personal income tax rate cut in the 2013 session, which saw the Legislature approve a cut half that size to be phased in over several years. Last year, the governor sought to eliminate the property tax on business equipment, but lawmakers ultimately approved only giving counties the option to cut it after local officials complained about revenue losses.

Republican House Speaker Brian Bosma said he believed Pence talked about many more important issues in his speech to lawmakers and called the balanced budget proposal "more of a footnote."

"A balanced budget amendment is a great goal," he said. "I wouldn't call it the focal point of the legislative session."