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Pence’s balanced budget amendment advancing in Legislature

INDIANAPOLIS (AP) – Republican legislative leaders are quietly heeding Gov. Mike Pence’s call for adding a balanced budget amendment to the Indiana Constitution, even as some minority Democrats argue it would have little impact and doesn’t address a lack of transparency in state spending.

The proposal cleared the state Senate by a wide margin last month and is awaiting action in the House. It would prohibit the General Assembly from adopting a budget that spends more than the state’s anticipated tax collections – although lawmakers could “suspend” that requirement with two-thirds approval from both chambers.

Pence first asked for the constitutional amendment during January’s State of the State speech. He’s said it would ensure responsible spending and catch Indiana up with many other states that have a similar requirement.

Its potential impact is unclear, given the state’s 1851 constitution already largely bans the state from incurring debt, except for in times of war. Senate Majority Leader Brandt Hershman, R-Lafayette, said that while the Legislature has balanced spending in recent years, the debt prohibition language hasn’t stopped unbalanced budgets at times in the state’s history.

Hershman said the proposed amendment would forbid the use of pension fund money or taking out loans to cover state spending, while the two-thirds vote provides an “escape hatch” in times of emergency.

“It provides guardrails for our behavior, yet allows us sufficient flexibility to exert our will,” Hershman said.

Outnumbered Democrats have maintained that Pence is looking to fix a problem that doesn’t exist and also trying to curry favor with out-of-state Republicans as he considers entering the 2016 GOP presidential race.

“That is purely an Iowa talking point in Governor Pence’s ‘just-in-case file’ that he keeps in his desk drawer,” said House Minority Leader Scott Pelath, D-Michigan City.

The proposed amendment establishes budgeting rules and other limits, such as what spending state courts could order. If lawmakers endorse the amendment this year, the same language would have to be approved by the General Assembly elected in 2016 in order for it to go before voters in a statewide referendum on the November 2018 ballot.

House Ways and Means Committee Chairman Tim Brown, who is sponsoring the amendment in the House, said he was still considering whether to seek changes to the Senate proposal, but supported the suspension clause.

“I think you have to have that,” said Brown, R-Crawfordsville. “I mean, when is the next 2009 coming?”

Indiana saw sizeable drops in tax collections during the recession, leading then-Gov. Mitch Daniels to order hundreds of millions of dollars in cuts for school funding and other state spending.

Republicans have turned aside proposals that Democrats say would increase transparency in the state budget, such as specifying how much money is going toward traditional public schools, charter schools and the private school voucher program. Democrats have also called for limits on changes that Pence could make to the budget without legislative approval.

“You know very well that the governor is going to withhold and transfer and cut to get whatever surplus number he thinks is fun to say,” Pelath said.

A governor’s ability to make spending cuts during economic downturns has been a key reason for the state’s fiscal health, such as the nearly $2 billion in cash reserves, said Senate Appropriations Committee Chairman Luke Kenley, R-Noblesville. He noted that he could see some limits placed on that authority.

“I’m more concerned about the governor reverting money from some areas and then using it to establish new or other types of programs,” he said.