Statement from State Budget Solutions, written by Bryan Leonard:
State Budget Solutions would like to present the “Reality Check” award to Indiana for its impressive work on the state budget, education reforms, and the creation of health savings accounts for state workers. Indiana was far from insulated from the effects of the recent financial crash; its real unemployment rate has remained higher than most states due to heavy losses in the manufacturing sector, but the state’s finances have remained stronger than almost any other state and far exceeded the performance of neighboring states like Michigan and Illinois.
This year’s budget bill, HEA 1001, brings Indiana’s books into balance and paves the way for lasting fiscal security. The bill creates a structural balance for the current fiscal year, and is projected to secure over $1 billion in reserves by the end of the biennium. One of the chief causes of states’ current budget woes is that they allowed government to grow to unsustainable levels during the economic prosperity of the 1990s. HEA 1001 prevents this from happening again in Indiana with a provision which stipulates an automatic tax credit for Indiana residents whenever reserves exceed 10% of operating funds; half of the excess will be paid toward teachers’ pensions and the other half will go directly to taxpayers.
Though Indiana already boasted some of the nation’s highest test scores, Governor Mitch Daniels led legislatures to enact a set of reforms that bolsters performance measures and dramatically expands school choice. SEA 1 requires annual teach evaluations, makes performance a factor in hiring and firing decisions, and allows schools to partner with local businesses to increase operational efficiency. HEA 1002 aims to expand access to charter schools in Indiana by creating a statewide body to issue new charter schools, opening all charter schools to any Indiana student, allowing charter schools access to currently unused facilities. To provide still more options, HEA 1003 creates new scholarships for students to attend private schools.
Mitch Daniels has led the charge to expand health savings accounts (HSAs) for state employees in the past several years. Setting an example by being the first Indiana employee to sign up for an HSA, Daniels has successfully persuaded other state workers to switch to the cost-saving plan (70% of the state’s workers opted for the HSA option in 2010). Under the plan, the state deposits $2,750 per year in an account for each employee, who can then use the funds for their medical expenses. Employees keep the remaining balance at the end of the year, so they have a strong incentive to pursue affordable health options. HSAs sound good in theory and perform well in practice; Mercer Consulting estimates that the plans have lowered health costs by 11% in Indiana and that HSA users only spend $65 for every $100 spent by employees in the traditional plan.
State Budget Solutions is awarding Mitch Daniels the “Real Leader Award” for his hard work on Indiana’s budget and for leading by example with the state’s HSA health insurance option. Since taking office in 2005, Daniels has sought to run state government like a business by trimming whatever fat can be found. Many politicians tout major cuts as candidates for election and then fail to follow through once they take office, but Daniels has made the tough choices time and again. Newsweek describes his approach as “reality-based conservatism” that confronts the fiscal realities facing Indiana, however grim they may be. Daniels has more than halved the rate of government spending in Indiana over the last five years and lowered the property tax by an average of 30%. His efforts have solved Indiana’s budget crises today and laid the groundwork for prosperity in the future.