Niki Kelly, writing for the Fort Wayne Journal Gazette has an article on the fate of HB 1001 which was heard in the Senate Tax & Fiscal Policy Committee yesterday. The bill has some provisions that would provide some temporary relief from the, in some cases double digit, property tax increases local governments would need to impose as a result of the failure of the 2005 budget to provide adequate funding. (State legislators might disagree, but essentially the State “balanced” its budget on the backs of local government.)

Senator Kenley appears to have a philosophical disagreement with the short-term fix. He wants a more comprehensive approach to reduce local dependence on property tax revenue by allowing local governments to obtain revenue from food & beverage taxes, innkeepers taxes, and local income taxes. This more comprehensive approach is unlikely to get support from House members during an election year. Another source of irritation for Senator Kenley is the, frankly, irresponsible provision stuck into the bill by the House that purports to eliminate property taxes by 2009 but does not do the hard work of suggesting replacement sources of revenue or cuts in government services.

I came home from work early yesterday because of some illness or another I’ve picked up and been wrestling with since Friday. So, I was home when a nice young lady acting on behalf of the Citizen’s Action Coalition of Indiana knocked on the door asking for our support in opposing Sen. Hershman’s SB 245 and Rep. Murphy’s HB 1279 which would deregulate local telephone service in Indiana after 2009. The CAC characterizes these bills as “pro-industry telecommunications bills that would allow monopoly telephone companies like AT&T and Verizon to unilaterally raise rates for basic local telephone service.”

An earlier news release from the CAC is dated January 31 and addresses only HB 1279 but it is more detailed and I have no reason to believe that the details of the telephone deregulation bills changed significantly between January 31 and the present. The CAC characterizes the content as follows:

• Effective July 1, 2006, HB 1279 prohibits the Indiana Utility Regulatory Commission (IURC) from exercising jurisdiction over the price, terms and conditions of basic telecommunications service or any provider of basic telecommunications service in an exchange area where broadband services are available to at least 50% of households.

• Although HB 1279 allows the IURC to set service quality standards, it does not require the setting of standards or specify what those standards must include. A telecommunications provider can be fined for violating a service quality standard only if the IURC can show that the provider demonstrated a “willful disregard” for its obligation to comply. This would significantly limit the IURC’s current powers to regulate quality of service.

• As with basic telecommunications service, HB 1279 does not place any limits on rates or quality of service for broadband service, nor does it contain any build-out requirements to ensure that broadband is uniformly available to all customers, including rural households, in an exchange area.

• If an incumbent local exchange carrier continues to offer basic telecommunications service in an exchange area on June 30, 2006, it must offer a flat monthly rate with unlimited local calling for basic telecommunications service. Once again, however, HB 1279 does not place any limits on rates or quality of service for the flat monthly rate.

• HB 1279’s prohibition against local measured service does not prevent an incumbent local exchange carrier from charging unreasonable rates for basic telecommunications service, nor does it prevent a carrier from failing to ensure quality of service.

• HB 1279’s future requirement, that a telecommunications provider notify a residential customer about any regulatory pricing or service quality the customer would forego by switching to non-basic service, falls far short of protecting customers against unreasonably high rates and poor quality of service.

• HB 1279’s increase in eligibility for Indiana’s Lifeline Assistance Program to 150% of the Federal poverty level, while serving more households, does not go far enough in protecting low-income individuals from unreasonable rate increases, nor does it ensure quality of service.

• HB 1279’s video service franchise provisions essentially protect the status quo, making its passage unnecessary to ensure competition in the video market.

• After conducting a formal two-year investigation, the IURC held that the status of competition in the telecommunications industry in Indiana is unclear, particularly due to the recent mega-mergers of SBC/AT&T and Verizon/MCI. The IURC concluded that continued regulation of the telecommu-nications industry is essential, and has opened another investigation into the status of competition.

• Passage of HB 1279 will eliminate the IURC’s jurisdiction to protect consumers from unreasonable rates until such time as meaningful competition exists in the telecommunications market in Indiana.

On the issue of quality, The Indiana Law Blog had a recent entry revisiting the year 2000 where Ameritech apparently had to be goaded in a significant way to get its service quality up to snuff.

Meanwhile, Tracy Warner had a good column (which I found via the Indiana Law Blog) in the Fort Wayne Journal Gazette. A point Mr. Warner raises is that of cable franchises — the Senate Bill has a provision that would take negotiations for cable franchises away from local authorities and place it at the state level. The contention is that localities would still get the franchise fee, but once you put it at the state level, it’s inevitable that the folks at the State House will begin taking in a rake of the proceeds sooner or later.

The huge flaw in the bill as a whole is that it relies on competition for local phone service to keep those rates down in the absence of regulation. There isn’t any significant competition at the moment, particularly for poor people in rural markets. If, as a policy matter, Indiana still wants to guarantee poor citizens who happen to live in rural areas basic telephone service at a low rate, that service will have to be subsidized. Such subsidies will inhibit any real competition, either because the need for subsidies will inhibit new competitors from being interested in the low-profit areas, or because the presence of subsidies provides existing providers with an advantage in other areas. At the very least, the bill should specify standards of what constitutes adequate competition in a market area and, either not deregulate until those standards are met, or provide a date upon which regulation will return if those standards are not met.

Yesterday was the third reading deadline for the House and Senate. All the bills that didn’t clear their respective first House are not dead. But, as we know from last year’s Lazarus-like DST bill, dead is not dead. The living bills can become unwilling hosts for undead legislation. Rep. Heim did a good job of giving us a blow-by-blow in the House as it happened.

The Journal Gazette has stories on:

The Indiana Barrister has a post wondering why the House Democrats are making such a big deal out of the fact that the company being sold the rights to the Toll Road for the next 75 years is a foreign company. Personally I agree that the foreignness of the company is beside the point when we are debating whether the sale is good policy. I think the policy question is whether it is a good idea for the State to relinquish control of its transportation infrastructure to a private entity that has the interests of its shareholders as a priority rather than the interests of the citizens of Indiana for a long period of time in exchange for a short term infusion of cash.

However, I suspect that as a political matter, it is a big deal because during his campaign against Governor Kernan, Candidate Daniels made such a big deal about making sure that government contracts went to Indiana companies. I’m sure the Governor has explanations for this contract and all of the other contracts that have gone to outside companies. But, to explain himself, he will have to get into details and shades of grey; and often times it is hard to get the voting public to pay attention to such details long enough for them to sink in. In addition, I think Hoosiers in general are vaguely suspicious of outsiders.

The Fort Wayne Journal Gazette has a cunning editorial board. Far be it from them to argue in the abstract the evils of serial meetings designed to avoid Open Door laws. Nope, they bring out a big rhetorical gun in the form of Bobby Knight.

SB 89 is designed to prevent the practice of officials skirting the Open Door Laws by having less than a quorum meet first, then have a member or two from the first group meet with the next group of less than a quorum, discussing the public’s business and making public decisions behind closed doors.

The Journal Gazette reminds us that this is what happened in the case of the firing of Bobby Knight.

When Myles Brand wanted to fire Coach Bob Knight in September 2000, the Indiana University president called the university trustees to his home on the Bloomington campus. He met with four of the nine trustees in one room and four trustees in another room.

The embattled basketball coach was fired the next day.

A group of Knight supporters challenged the vote in a lawsuit, but a Clark County judge rightly ruled that state law was not violated. The trustees simply took advantage of a loophole in Indiana’s Open Door Law to do the public’s business behind closed doors.

The editorial mentions that the bill passed the Senate 48-2 and that the two “no” votes were Senators Wyss and Hershman. Senator Wyss said, “It just looks like you could work around it, so why bother?” I’d be interested to know what the work around is.

Anyway, good job by the Journal Gazette. Next time, I’d suggest they figure out a way to work class basketball into their editorial. That’s Hoosier gold.

A non-comprehensive list of Senate activity that struck me as interesting:

Theodore Kim has a story on yesterday’s second reading activity with respect to HB 1008 authorizing the sale of the Toll Road operating rights for the next 75 years. The amendment that appears to have most greased the skids is an amendment that would freeze toll rates for individuals who live near the toll road at their current level until 2016. It says, in pertinent part:

The user fees charged by the operator of the Indiana Toll Road under a public-private agreement for the use of the Indiana Toll Road by passenger motor vehicles that are owned or leased by individuals who reside in a county traversed by the Indiana Toll Road may not exceed the user fees for passenger motor vehicles that were in effect January 1, 2006.

I wonder if this somehow impairs the offer. Surely the calculations were based on being able to charge users at certain levels. Now you are holding those levels flat for a non-trivial number of toll road users. (Agreement documents here if anyone cares to check it out.) According to the article, Rep. Orentlicher questioned whether this would pose constitutional problems. My guess is not, but you are treating different citizens differently and treating Indiana residents differently than out-of-state residents on a major artery of interstate commerce, so there is at least an argument to be made.

The Toll Road legislation is coming up for a vote soon, which prompted me to do some more general thinking about the Toll Road. Some thoughts.

First, tolls charged to travel the road are taxes. They may be called something else, but they are taxes just as surely as are income taxes, sales taxes, and property taxes. It is money given to the government by its citizens to fund government functions. This proposal by Governor Daniels ensures that the tax will endure, double initially, and increase at the rate of 2% per year for at least the next 75 years.

Second, the creation and maintenance of roads are a core government function. Privatization of government services is not so troubling where the service being privatized is a function the government ought not be involved with in the first place. But I’m philosophically opposed to privatizing something at the core of why government exists in the first place. In this case, providing a transportation infrastructure.

My third thought is related to the first two thoughts. A good system of roads tie us all together, and make the state as a whole function better. As a general rule, highways ought to be paid for on a statewide basis. Obviously, a corollary of this rule would be that highways ought to be built to benefit the state generally — if taxes are taken from the state as a whole, they shouldn’t be used to build highways in and around one or a handful of cities (and vice versa.) Now, I recognize that toll roads may be a necessary evil. In some instances, the road may not be able to be built if tolls aren’t charged. If that happens, I believe that the tolls ought to be used to retire the bonds used to build the road and then eliminated or at least reduced to the bare minimum necessary to maintain the road. Taxes in the form of tolls should not be perpetual and should not be a profit-center for the State.

Just my two cents.