Comments on economics, mystery fiction, drama, and art.

Monday, April 25, 2005

Why worry about a budget crisis when you can build a football stadium?

That is perhaps the question facing the governor, legislators, and the citizens of Indiana right now, as the state moves toward passing a budget and paying for a new pleasure dome.

The state currently projects a $600 million budget deficit in a state government budget that totals about $24 billion for the next two years. Constitutionally, the state must adopt a (planned) balanced budget. The governor (Mitch Daniels) proposed a surcharge of one percentage point on the state's 3.4% gross income tax, a proposal that has been rejected by the state legislature, Republicans and Democrats alike. The Democrats have proposed raising the cigarette tax (by $0.19 per pack) and capturing $70 million in casino revenue that currently goes to local governments. The Republicans in the legislature oppose any tax inxreases.

The governor and the Republicans in the legislature plan to reduce spending by, in part, not paying $750 million in state financing for local governments and for elementary, secondary, and higher education that was not released in this budget cycle and by reducing Medicaid spending. The Democarat want to pay about half of that.

The Republicans control both houses of the legislature, so their proposal is the one most likely to be enacted.

But just so you don't think that fiscal sanity has been restored, the state has moved to take control over a plan to build a new, $900 million stadium for the Indianapolis Colts (NFL), a team which, despite strong performances the last few years (including Peyton Manning's record-setting year in2004) has not been able consistently to sell out its existing facility. The stadium will be financed by a small contribution from the team (apparently about $50 million, net) and from increases in local-option taxes on sales of reataurant (and other prepared) food and sales of alcoholic beverages.

So we can raise taxes to provide huge benefits to a private, for-profit firm that apparently can't do well on its own, but reduce spending (on education, Medicaid, and other state government services) rather than raise taxes.

Who says that Indiana doesn't have its priorities straight?


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