Justin Mack, writing for the Indianapolis Star, has an article on the ballot question to amend the Indiana Constitution this year. The question has to do with requiring a balanced budget, but it’s not at all clear what functional impact, if any, this proposed change would have on the State government. The following is the text of the proposed amendment to Article 10, Section 5 of the Indiana Constitution, the bold text added.
The original text in subsection (a) above, I believe, was adopted as part of the 1851 Constitution. The debt provisions would have been important because the fallout from the Indiana Mammoth Internal Improvement Act and the Panic of 1837 was still relatively fresh in peoples’ minds.
By 1840, the disastrous financial consequences of the Panic of 1837 and the Internal Improvement financing was being fully felt in Indiana. The Whigs decided not to nominate Wallace, their sitting governor, and instead nominated Samuel Bigger who had no connection to the Mammoth Internal Improvement Act. The Democratic nominee, Tilghman Howard, had been in the General Assembly at the time of the Act and had voted for it. Bigger claimed to never have supported the Internal Improvement Act. (Given its general popularity at the time, this seems at least somewhat dubious.) Bigger was also aided by the fact that William Henry Harrison was on the ballot as the Whig Presidential candidate. Harrison’s reputation in the state had improved with the rose-colored glasses of hindsight, and he had become something of a folk hero. Despite the state’s financial struggles, the Whigs retained majorities in the legislature, and Bigger defeated Tilghman.
Bigger’s honeymoon didn’t last long. the State’s payment on its debt was double its revenues. The state soon defaulted on payments and, in an effort to come to grips with the situation, the State imposed a massive tax increase (apparently up to a 300% increase in some places). Efforts were made to complete the improvements, the Wabash & Erie in particular, in order to capture revenues from the improvements. However, those efforts did not make a sufficient dent in the debt.
The struggles with that debt continued through the 1840s:
Whitcomb’s first term was devoted to addressing the State’s financial situation. Measures taken during Bigger’s tenure, a somewhat improving economy, and Whitcomb’s cuts to state employee compensation helped improve the state government’s financial outlook. During his term, he advocated for the creation of the Indiana School for the Deaf and a state mental asylum. Both initiatives were successful, but funding would have to wait until further recovery of the state’s financial prospects.
The State had made some recovery on its finances at the time of Whitcomb’s re-election bid, and he defeated Whig Joseph Marshall and Liberty candidate Stephen Stevens. However, despite the improvement on the debt situation, discussions were underway with Charles Butler, a representative of eastern and foreign bondholders to whom Indiana remained indebted. Butler had successfully negotiated a restructuring in Michigan which had similar internal improvement financial problems — also exacerbated by the Panic of 1837 and also involving the sketchy Morris Canal and Banking Company. In 1845, Butler began negotiations. Prior to the legislative session in December of 1845, Morris gave a speech in Terre Haute where he proposed that a tax should be imposed dedicated to partial repayment of the bonds. The bondholders, in turn, would take the Wabash & Erie’s revenues for the other half. He persuaded Governor Whitcomb of his plan and, together, they lobbied local and legislative leaders.
For his part, Butler attempted to scold Indiana for paying local contractors before paying bondholders and cast the State’s debt repayment obligations in moral terms, making much of the “widows and orphans who held Indiana bonds and depended on regular interest payments.” After some rough and tumble debate (one Senator called Butler’s style of writing and thought as “frothy and bombastic”) the legislature passed a bill in early 1847 that provided for payment of half of the bond obligation and traded control and revenues of the Wabash & Erie for the remainder. The debt still consumed about half of the State’s revenues, but it was becoming more manageable.
When Indiana was drafting its Constitution of 1851, it had been wrestling with a disastrous debt situation for more than a decade. The current structure of our Constitution has been sufficient to keep us more or less out of similar disasters for 160+ years. So, what’s the need for this new language? Does it do something that hasn’t been getting done? I don’t know that I even oppose this as a policy matter, but I’m always against mucking around with our Constitution where we don’t have a good handle on the need or the consequences.
This will obviously pass because “balanced budget? Sounds good!” will likely be the general take by voters considering the question. But, for what it’s worth, I think the current language has served us well enough over the years and so I’ll vote “no.”
(Update): When I initially posted this, I had meant to mention that a rule of statutory construction could lead to consequences where maybe none was intended. Let’s say that lawmakers advocating for this provision don’t really want anything to change – they just want to be seen as fiscally conservative.
A basic principle of statutory interpretation is that courts should “give effect, if possible, to every clause and word of a statute, avoiding, if it may be, any construction which implies that the legislature was ignorant of the meaning of the language it employed.” The modern variant is that statutes should be construed “so as to avoid rendering superfluous” any statutory language: “A statute should be construed so that effect is given to all its provisions, so that no part will be inoperative or superfluous, void or insignificant….” A related principle applies to statutory amendments: there is a “general presumption” that, “when Congress alters the words of a statute, it must intend to change the statute’s meaning.”
So, it’s entirely possible that a court interpreting this new language could feel compelled to read this amendment as requiring change of some sort even if legislators didn’t really intent this amendment to have much of a substantive impact on State operations.
Correct me if I’m wrong where by section 5(d) seems a way to screw public employees.
Doug Masson says
Maybe current employees, but it’s probably beneficial to those receiving pensions and expecting to receive pensions.
I don’t know if current employees are in line for pension benefits, but if so, this will probably add pressure to do away with pensions.
I have a feeling the changes to the budget are well planned out by those in the Legislature, they’re just not sharing those details with the public as details of what would end up changing would make passage of the amendment more difficult.
It reminds me of the “right to hunt and fish” amendment which, IIRC, had another statutory meaning entirely.
Also, I’m still blocked from where I usually comment. I know it’s not malicious, just passing it on.
Larry DeBoer says
Hi Doug–So, you’re a lawyer. . . . Here’s what I don’t understand. I’d interpret the current article 10 section 5 as saying that at the end of the budget year, we can’t have debt. The budget must be balanced in the end. But the amendment says the budget “enacted” must be balanced. The budget must be balanced at the start. Most years we don’t adopt balanced budgets at the start, in the sense that budgeted appropriations exceed estimated revenues. We include balances as revenue, and expect reversions to reduce spending below appropriations. That makes the budget balance in the end. Will we have to stop doing that? That would be a pretty substantive change in the current process, I think.
Good point. My response is maybe! You’re right that the amendment doesn’t contemplate cash on hand at all nor does it make accommodations for appropriations that are not expended.