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Mitch Daniels’s Next Hurdle
Cutting Indiana’s budget even further will be hard, but a newly Republican legislature will help.


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Katrina Trinko

Right after the 2008 general election, in which Barack Obama became the first Democratic presidential candidate to win Indiana since Lyndon Johnson, Gov. Mitch Daniels decided it was the perfect time to stage a Republican comeback. His goal was to win a GOP majority in the state house of representatives, which had been Democrat-controlled since 2006.

On Election Day this year, Daniels succeeded: The GOP gained a majority in the house and picked up enough seats in the state senate to give Republicans a supermajority. The careful planning begun in 2008 and intensified in 2009 by Daniels and other Indiana Republican leaders had paid off.

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The importance of gaining a legislative majority is illustrated by the 2009 budget fight, one of the most contentious the state has had in recent years. Democrats and Republicans disagreed on many things, most notably how much to increase education spending and whether the state should use some of its reserve fund. When legislators were unable to pass a budget in the regular session, they went into special session. Ultimately, just hours before the state government would have had to shut down, they passed a budget that used $300 million of the state’s reserve fund and increased education spending more than Republicans would have liked.

The grueling experience made it clear that passing a truly conservative budget would require GOP majorities in both chambers. So Daniels and state Republicans chose their battles carefully. “[We] analyzed the Democrat-held districts where the governor had done well in 2008 or even McCain [had done well], and determined . . . target districts, and then went about to recruit candidates,” says Indiana Republican chairman Murray Clark.

Instead of automatically picking local political veterans, they looked for promising outsiders, including business leaders and other non-political types. “Most of them had never run for any office before,” says Clark, talking about the candidates backed by Daniels’s Aiming Higher PAC. “None of them, to my knowledge, have any desire to become a career politician.” Many of the possible nominees liked the governor and his policies but were unsure if they wanted to run for office. When that happened, Daniels often intervened, calling and speaking directly to the potential candidate. “He was a game changer. He was a difference maker,” adds Clark, saying that many reluctant novices went on to run — and win.

The 2009–10 Indiana house had 52 Democrats and 48 Republicans. The newly elected house has a much different composition: Assuming a Republican wins a recount as expected, it will have 60 Republicans and 40 Democrats. Some of the districts won by Republicans had been held by the Democrats for two or more decades.

“We essentially ran on a message of balance the budget, keep taxes low, and that’ll create more jobs,” says Brian McGrath, executive director of the Aiming Higher PAC. They also started early, with candidates going door-to-door and raising money as soon as the fall of 2009. Candidates were helped financially by the PAC, which handed out over $1 million.

Possibly even more important than the money was Daniels’s personal support for the candidates. “The governor’s got a 75 percent approval rating in the state, so his involvement was noticed,” says McGrath. Indiana political analyst Ed Feigenbaum agrees: “[Daniels] was able to help make a difference, particularly when you look at how close some of these races were, within 200 votes or so.”

#PAGE#Although Daniels is now armed with ample GOP majorities in both chambers, the upcoming legislative session will still present plenty of hurdles — most notably, developing the next state budget. According to the Indiana Fiscal Policy Institute, revenues are down to 2005 levels, and the state faces a $1.3 billion shortfall. Daniels’s ability to slash spending and balance budgets has been widely lauded, but after implementing so many cuts in recent years, finding new areas for savings will be difficult. “To 98 percent of Hoosiers, it’s the same picture of government as usual for them as it might have been three, five years ago,” says Feigenbaum, talking about how successful Daniels has been at finding spending cuts that aren’t very noticeable. That’s a feat that will be tricky to pull off again.

Another potentially toxic political problem will be how to handle the state’s unemployment fund, which went bankrupt in 2008. Indiana has borrowed about $2 billion from the federal government to keep the fund solvent, but legislators must now decide how to pay the federal government the interest on that loan, which is anticipated to be between $80 million and $100 million. They must also consider what solutions, such as cutting benefits and/or increasing businesses’ unemployment-insurance taxes, are feasible. With Indiana’s unemployment above the national average at 10.1 percent, it’s a fairly safe bet that no one will be entirely happy with the outcome.

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But Daniels does not appear daunted by these challenges. Two days after the election, he unveiled a legislative agenda that centers on passing a budget without any general tax increases, reforming local government, and accomplishing a fair redistricting. Another key focus is education. Daniels would like to improve the public-school system by introducing merit pay, ending automatic tenure for teachers, and making it easier for students to transfer to public schools in other districts. He also wants to reduce regulation, giving educators more freedom to use the teaching methods they think would work best.

None of this will be easy, although Daniels does have certain advantages. “The governor is just personally popular round the state, and the legislators understand that,” remarks Feigenbaum. “They know he has a bully pulpit and a reservoir of good will . . . that he is willing to use.”

Of course, as long as Daniels is considered a potential 2012 presidential candidate, his success — or lack of it — will garner attention this year. But Clark doesn’t think the spotlight will change Daniels’s behavior. “Mitch Daniels isn’t going to grandstand on these issues here,” he says. “Demagoguery will be on the Democrats’ side.”

McGrath talks about Daniels’s practical, forward-looking mindset. “The governor always says the elections are always just a means to an end, and the end is the kind of reforms he wants to see in [the] state,” he says. “It’s only worth winning if you do something with it.”

— Katrina Trinko writes for National Review Online ’s Battle ’10 blog.



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