As you may have heard by now, Indiana Secretary of State Connie Lawson announced on Tuesday that her office had finalized a settlement of a federal securities fraud lawsuit. The $14 million lawsuit accused the Indiana State Teachers Association (ISTA) and the National Education Association (NEA) of defrauding Hoosier schools out of over $27 million

This announcement is a partial victory for schools across Indiana including one of our own, the Warrick County School Corporation, which will be receiving $376, 585. 22. This total equates to about 50 cents for every dollar they lost. The ISTA and NEA have ten days from Tuesday to pay this money to the Secretary of State’s office who will then distribute it to the schools in a manner we have been assured will be expeditious. This took almost four years to litigate, and it is important that the public knows not only the end result, but also how and where the problem started.

Almost 30 years ago, the ISTA Financial Services Corporation created the ISTA Insurance Trust to manage health care and disability liabilities. In this case, the ISTA and NEA were accused of selling healthcare plans with benefits, which were unregistered securities, to 27 school corporations in Indiana. With certain exceptions, selling unregistered securities is considered a felony offense.

The ISTA and NEA then used the money from the health plans for their own benefit to cover funding shortfalls in their long-term disability plan. This meant the money was never invested on the school’s behalf to offset future health care costs as was promised. It was also alleged that ISTA continuously issued phony financial statements to schools misrepresenting investment fund balances.

Because our Secretary of State’s office only has the authority to file civil suits and cannot file a criminal suit, she turned this issue over to the United States’ Attorney General’s office as well as the FBI; however, the U.S. Attorney General declined to take up the case. As a result, the issue was never allowed to play out through the criminal justice system, and we will never fully know if a criminal act was committed or by whom. In essence, no one is being held accountable for this deliberate mismanagement of funds, and I find that troubling.

I commend Secretary of State Connie Lawson and former Secretary of State Todd Rokita, now Congressman, for their due diligence on this issue, which has enabled our school system to recover a portion of the money they are owed. This settlement has been a long time coming.

With this now settled, I still firmly believe that the ISTA and NEA should pay every penny that they mismanaged back to the school corporations and teachers. It’s simply the right thing to do, especially from organizations that have pledged to do work in their best interest.

The most important thing moving forward is to work towards a more permanent solution that ensures this does not happen again – our teachers deserve as much. I am a firm believer in our state’s education system and that we need to be doing everything we can to culture the best learning environment. This takes an all-in effort from administrators, teachers, students, parents, local communities and statewide organizations. This is why I plan to look into what we can do legislatively to make sure that this doesn’t happen again, and so that Hoosier students can realize and create a better future for our state.

By Abdul Hakim-Shabazz
IndyPoltics.Org 

This may surprise some of you who have been following me for a while, but as anti-tax as I am, I believe local governments should be allowed to raise taxes as much as they want.  I’ll give you a few minutes to digest that statement.

Welcome back.

Allow me to explain my logic.  The town of Fishers, one of if not the fastest growing city in Indiana, is in the middle of a debate over whether to

Abdul Hakim-Shabazz is an attorney and the editor and publisher of IndyPoltics.Org.

raise its food and beverage tax.  State lawmakers gave the town the authority to levy the tax this past legislative session.  It basically would increase the tax 1 percent on items purchased in restaurants, bars and taverns.  Currently, Fishers residents pay a total tax of 8 percent on food and beverages, of which 7 percent is the state sales tax and another 1 percent is the county tax.  Revenue from the tax can be used for either economic development or to reduce property taxes.

I tend to view food and beverage taxes like user fees, they are completely voluntary.  Unlike income taxes which you have to pay or sales taxes on any purchase (which you have to do unless you are completely self-sufficient) you choose whether to dine out or head over to a bar and have a cocktail or two.

The broader issue though is local governments have to go to the state of Indiana and basically beg for permission to levy taxes and raise the revenue they need to operate.  I wish they had more autonomy to raise taxes without having to go to the legislature.  They should have the power to raise taxes as much as they want, as long as it is set by a certain date in the prior fiscal year so people can plan ahead.

Now some of my lawmaker friends will freak out at this notion, saying they need to act as guardians of the taxpayers’ wallets and giving local governments that much authority would not be a good idea.  I don’t think that’s as necessary as it might have been five, 10 or maybe 20 years ago.

I believe the taxpayer has the most powerful weapons in his or her arsenal to keep their local governments in check. First of all, they have the right to voice their opinions.  They can show up at council meetings, call or e-mail their local officials and do everything short of storming the Bastille.   Their second option is to vote the you-know-whats out.    If they don’t like what the locals are doing they can get of their rear ends and vote them out of office.  Of course the response to that is they would have to wait until the next election.  Well, that’s where the second arrow in the taxpayers’ quiver comes in. If they can’t wait until the next election to vote, they can use their feet and vote right away, i.e. move.

There is nothing to stop someone who is sick and tired of the high taxes in one city or county, from packing up the family and moving a mile or two into a municipality or area that has lower/more reasonable taxes.  Responsible, low-tax cities will be rewarded and high-tax, inefficient cities and towns will be punished.  Think of it as Darwinism operating at the municipal level.   The strong, smart and fiscally sound will thrive.  The bad will eventually wither up and die.  And all those decisions will have been made at the local level.

By the way, the Fishers Town Council took a vote Monday night to postpone raising the food and beverage tax.  They have until Dec. 31 to make a decision.  I guess we’ll see by then if the first part of my theory can hold water.

Abdul is an attorney and the editor and publisher of IndyPoltics.Org. He is also a frequent contributor to numerous Indiana media outlets. He can be reached at abdul@indypolitics.org.

By Lesley Weidenbener

TheStatehouseFile.com

INDIANAPOLIS – Gov. Mike Pence will ask lawmakers in 2014 to cut more than $1 billion in taxes for businesses, parents and individuals and spend hundreds of millions more on roads, workforce development and preschool for poor Hoosier children.

Republican Gov. Mike Pence announced Thursday that his legislative agenda includes plans to phase out the property tax on business equipment and to create a preschool voucher program for poor Hoosier children. Photo by Lesley Weidenbener, TheStatehouseFile.com

But in an address at the BGD Legislative Conference in Indianapolis Thursday, the governor steered clear of any details – including how he would pay for his proposals – saying he’ll provide more specifics in the coming weeks. His speech came just after some legislative fiscal leaders had expressed skepticism about too much new spending.

“Our intention today was to lay out a very bold agenda for the upcoming session of the General Assembly,” Pence said. The goal was to begin “with policies that will increase employment in Indiana and also increase private sector investment.”

“I hope this gives you all something to think about and something to talk about,” he said during the conference, where lawmakers and lobbyists were gathered for a pre-session event.

The day included sessions with legislative leaders and fiscal experts, some of whom had warned they were unlikely to spend much new money in 2014, a so-called short session. The state’s two-year budgets are created during long-sessions, which will next take place in 2015.

House Ways and Means Chairman Tim Brown, R-Crawfordsville, said his mantra for the session has been “don’t open the budget.” House Minority Leader Scott Pelath, D-Michigan City, said, “As I look at the scope of these proposals, I wonder how he plans to reconcile new spending with his own reputation as a rabid fiscal conservative.”

And Sen. Ryan Mishler, a Bremen Republican who serves on both tax and appropriations committees, said the state should probably have even more in the bank than the $2 billion cash surplus it currently boasts.

But Pence said lawmakers should act now.

The Republican said phasing out the personal property tax – a tax on business equipment – will be a key part of his agenda. But he provided no details about how local governments would deal with $1 billion in lost revenue, which is used to fund cities, counties, schools, libraries and other local services.

From left, House Speaker Brian Bosma, R-Indianapolis; Senate Minority Leader Tim Lanane, D-Anderson; and House Minority Leader Scott Pelath, D-Michigan City, speak at a legislative preview conference Thursday in Indianapolis. The General Assembly convenes in January. Photo by Lesley Weidenbener, TheStatehouseFile.com

The governor said he will seek to “ensure that this reform does not unduly harm local government.” And he said lawmakers could approve a phase out of the tax and decide in future years how to replace the lost revenue, something he said would be more of a “tax reform” than a tax increase.

But Sen. Brandt Hershman, R-Buck Creek, said that absent identifying a revenue source for local government, “we’ve got to be cautious” about eliminating the personal property tax.

House Speaker Brian Bosma, R-Indianapolis, said his caucus will also propose cuts in the personal property tax but he said the plan will likely give local officials some discretion. He said the plan’s details are yet to be worked out but lawmakers could approach the issue like they did the elimination of the inventory tax.

In that case, lawmakers launched a phase out the inventory tax but also gave local officials the opportunity to eliminate it more quickly. That law also let local raise income taxes to help make up the lost revenue.

Pelath called the personal property tax plan a “corporate giveaways” that “is going to end up hurting families.”

Pence also said he will ask lawmakers to create a voucher program to help needy Hoosier children go to preschool, although he did not say how it would be funded.

“The time has come for Indiana to provide access to pre-kindergarten for all the disadvantaged children in our state,” Pence said. “It’s time for us to give our most disadvantaged kids a better chance at success.”

His plan would make vouchers available to children in families with household incomes of up to 185 percent of the federal poverty level, which is currently $43,567 for a family of four. Children could use those vouchers to attend a private or public preschool program that met state standards, he said.

Pence did not say how much the plan voucher plan would cost or how it would be funded.

Preschool is expected to be a priority for some Republicans and Democrats as well, although fiscal leaders in the House and Senate have expressed concern about the costs.

Brown said Thursday that lawmakers could put a preschool structure in place that determines who qualifies for the program. Then, he said, “it can be funded in a budget year.” That would be 2015.

Pence said he will also ask lawmakers to:

-       Release $400 million in transportation money the General Assembly set aside last year for future road projects.

-       Index the state’s $1,000 personal exemption and $1,500 dependent child exemptions to inflation, meaning they would increase over time to save individuals and parents more money.

-       Streamline adoptions in Indiana.

-       Develop a plan to raise public and private sector money to boost development in the state’s cities.

-       Create an Indiana Teacher Innovation Fund to promote classroom innovation.

Pence said the changes are necessary to keep the state competitive in the race for economic development and job growth.

“ We will rise to this challenge because the people of Indiana are the best people on earth,” Pence said. “They deserve nothing less.”

Lesley Weidenbener is executive editor of TheStatehouseFile.com, a news website powered by Franklin College journalism students.