The Legislature Must Watch The Economy Carefully
Brian Burton is president and CEO of the Indiana Manufacturers Association.
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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowAs the Indiana General Assembly reconvenes, many important issues will be on the table. This is a short session that must end by March 14. Short sessions were designed to handle emergency budgetary issues in non-budget years. Unfortunately, there will be more than 1,500 "emergency" pieces of legislation introduced this year.
The largest price-tag issue this year will be transportation infrastructure funding. The governor has proposed a $1 billion funding plan, which will be countered by alternative plans in both the House and Senate. Everyone agrees that additional investment is required for Indiana’s roads and bridges. Everyone does not agree on the funding mechanisms.
Many additional and important issues will also arise. The revamping or replacement of Indiana’s ISTEP exams is now considered a priority, after multiple failures to adequately administer and score the exams. Workforce Development issues will remain in the forefront as Indiana struggles with a workforce that is lacking the skills required in today’s economy.
But as we discuss these important issues and the price tags that go along with them, we must be acutely aware of movements in the global, U.S. and Indiana economies. Indiana’s revenue forecast was released on December 17. The revenue forecast for fiscal years 2016 and 2017 remains fairly flat. Growth in the state’s general fund revenues is estimated to be .2% in 2016 and 2.8% in 2017. These forecasts are based upon moderate growth in both the U.S. and Indiana’s economy in the near future.
It is estimated that the U.S. economy will experience GDP growth of 2.7% in 2016, which is up from the 2.5% we are experiencing this year. Consumer spending will soon be supported by solid gains in employment, real disposable income, and housing asset values. Housing construction will steadily recover. Business investment in equipment, software, and commercial structures will post robust growth. Additionally, interest rates will gradually increase from late 2015 through 2018.
The bottom line for Indiana’s economy is that near-term economic growth will continue to be favorable. Manufacturing, especially related to the transportation sector, has spurred Indiana’s economic recovery over the past five years. Indiana manufacturing still provides 17% of the state’s employment, which ranks first in the nation. The national average is only 9%.
The sale of automobiles and light trucks has been a major factor in Indiana’s recovery. However, the strong dollar has reduced our competitiveness. Also, slow population growth will be a potential drag on the economy as tight labor markets become even tighter.
Therefore, as the Indiana General Assembly reconvenes and legislators start considering and discussing a wide array of proposed legislation, we urge them to first ask these important questions: How do these words affect our overall economy and Indiana’s economy? Specifically, what is the impact on manufacturing – the driver of Indiana’s economy? They must remember–what Indiana makes, makes Indiana.
Brian Burton is president and CEO of the Indiana Manufacturers Association.