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Indiana

Frank O'Bannon, Democrat

Legislature: Divided

Took Office: 1/97

Grade: B

Frank O'Bannon defeated Indianapolis's Republican mayor

Stephen Goldsmith by a 52-47 margin.  O'Bannon's campaign

focused on continuing the policies of his popular predeces-

sor Evan Bayh, one of the most fiscally conservative Demo-

cratic governors of the 1990s, under whom he had served as

lieutenant governor.  In his first year O'Bannon signed a

biennial budget that included $300 million in tax cuts over

the two years but conspicuously failed to cut tax rates.

That budget was expected to leave the state with a $1.1 bil-

lion surplus, or about 12 percent of state revenues.  By De-

cember 1997 the midyear revenue estimates indicated that be-

cause of faster economic growth the state would bring in

nearly $500 million more over the biennium than had been

initially projected.  With a surplus that had already been

projected at over $1 billion, Republicans in the legislature

called for returning that windfall to the taxpayers through

permanent tax cuts.  O'Bannon did not propose a tax cut at

all.  He wanted to delay any consideration of permanent tax

reform until the 1999 session, after his much publicized tax

reform commission will have issued its report.  O'Bannon

staunchly opposed any permanent reductions and gave only

lukewarm support to a Democratic plan to provide one-time

tax rebates.  In the end, O'Bannon won.  Indianapolis will

continue to sit on one of the largest state surpluses in the

nation.  While most other states are at least returning a

portion of their growing revenue surpluses, Indiana's tax-

payers must wait at least another year for tax relief.

O'Bannon claims to be a fiscal conservative, but so far he

hasn't completely lived up to that billing.

Score Grade Rank

Overall Fiscal Policy Score

51

B

18

Spending Score

38

C

36

Revenue and Tax Rate Score

55

B

9

Amount

0.8%

Average Annual Recommended Change in Real Per Capita General Fund Spending through 1999

1.4%

Average Annual Change in General Fund Spending Per $1,000 Personal Income 1996-98

-0.8%

Average Annual Recommended Change in General Fund Revenue Per $1,000 Personal Income through 1999

-1.4%

Average Annual Change in Real Per Capita General Fund Revenue 1996-98

-0.4%

Average Annual Recommended Tax Changes as % of Prior Year's Spending through 1999

0.0

Change in Top Personal Income Tax Rate, proposed and/or enacted (% points)

0.0

Change in Top Corporate Income Tax Rate, proposed and/or enacted (% points)

11.3

1998 Combined Top Income Tax Rates (Personal plus Corporate) (*0.5)

0.0

Change in Sales Tax Rate, proposed and/or enacted (% points)

0.0

Change in Gas Tax Rate, proposed and/or enacted (cents per gallon) (*0.5)