O’Bannon, Kernan roll out economic development job plan 10-year, $1.25 billion effort stresses technology in Indianna

Gov. Frank O’Bannon and Lt. Gov. Joe Kernan on Wednesday unveiled a sweeping, $1.25 billion economic development plan intended to draw the state out of recession by creating thousands of high-wage, high-skill jobs during the next decade.

Norm Heikens
Indianapolis Star News

The 10-year plan aims to create the jobs by boosting education and training from kindergarten through university levels to give Hoosiers skills to compete in the burgeoning global economy. It also would plow money into university research facilities and investment funds for entrepreneurial companies.

About two-thirds of the money would come from national tobacco settlement payments and proceeds of bonds secured by future payments, with the rest coming from federal money, bonds and state pension fund investments.

Much of the plan will require approval by the General Assembly.

O’Bannon said the administration chose to act rather than wring its hands over the recession, which has cost Indiana a higher percentage of jobs in the past two years than many other states.

"This is an ambitious undertaking, and it won’t be easy," O’Bannon said Wednesday. But "it is our goal to fire up this state’s economy."

Many business leaders have criticized the administration for neglecting the economy, and Republicans in recent months have blamed Kernan — the state’s top economic development official and a likely Democratic candidate for governor in 2004 — for jobs lost during the recession.

The state lost 6 percent of its employment base, or 183,300 jobs, from May 2000 to this January, when the job losses bottomed out. In recent months, rising factory production and business spending on capital goods have stabilized the economy and helped the state gain back nearly 69,000 of the lost jobs.

Business leaders attending the announcement at the Indiana State Museum said they were encouraged.

Indiana Chamber of Commerce President Kevin Brinegar said the administration appears to be listening to business organizations.

The plan is particularly strong, he said, considering the state’s projected budget shortfall.
"It’s bolder than you might expect," Brinegar said. "We’re looking forward to working with this."

David Goodrich, president of the Central Indiana Corporate Partnership, a group of chief executives of the largest employers in the region, hailed the plan as a broad, well-thought-out investment.

It goes beyond a short-term fix for the recession to lay out a viable strategy for the long haul, Goodrich said, though the state needs even more investment in public education.

"It’s a wonderful foundation to build from."

Asked whether it is sufficient to propel the economy in the coming decade, O’Bannon said, "We’re optimistic it will make a big difference."

Kernan said the plan was triggered by a $250,000 study completed early this year by an Atlanta consulting firm.

The study deemed Indiana an average competitor among Midwestern states, a status whose luster dims even more against the faster-growing South and Southeast.

The administration’s "Energize Indiana" plan hits several fronts:

• To diversify the economy away from traditional reliance on highly cyclical heavy industry, the state for the first time would concentrate on increasing specific sectors of the economy.

The favored sectors — advanced manufacturing, information technology, life sciences and advanced logistics — were pegged in a recent study for the Central Indiana Corporate Partnership as areas with the most potential for economic growth.

• Worker competitiveness would be upgraded on several levels.
Public schools would get a one-time shot of $200 million to help meet new education standards. College scholarships would help students pursuing studies in the four sectors and who stay in Indiana after graduation.

Workers also would receive help in assessing their skills to aid in deciding where they fit best in the key sectors.

• Universities and businesses would be encouraged to work together, particularly through universities handing off inventions to businesses. Business, in turn, could commercialize the products and create good jobs.

• Money would be set aside for universities to build laboratories and other research space.

• It would rejuvenate the 21st Century Research and Technology Fund.

The fund, which encourages universities and businesses to cooperate with technology transfer, was allocated $15 million both this year and next year.

Under the administration’s plan, it would receive $32 million in the initial year. The amount would taper to $18 million a year in the final year of the Energize Indiana plan.

Most of the funding would come from selling bonds to be repaid by part of the state’s future proceeds from the national tobacco settlement payments.

Under the settlement, 60 percent of the yearly tobacco allotment, which ranges from $132 million to $196 million, must be invested in health programs.

But the administration proposes to sell bonds on the remaining 40 percent. The state would receive only 94 cents on the dollar, but selling bonds would free money to invest in the economy immediately.

The balance of the $1.25 billion would come from tobacco settlement trust fund deposits, the federal economic stimulus package, state pension fund investments and debt issued by the Indiana Port Commission.

O’Bannon and Kernan said the plan is in the spirit of the tax restructuring the administration proposed for the last legislative session and the reorganization this summer of the Department of Commerce into 12 regions better suited to address local economic development needs.

Kernan said it’s the best that can be done without raising taxes.

"We’re not going to sit back," he said. "We’re going to go on the offense."