Working Indiana - Working for Democracy and Justice

In session since October 7, 1850, the Indiana Constitutional Convention was now well into its second month.  On a blustery Wednesday, November 20^th, the Reverend Mr. Steele opened the session with a prayer.  After taking up the fugitive slave problem, the session turned to consideration of a report returned by the committee on the State debt and public works on October 26^th.  The Secretary read the first section of the report: “The credit of the State shall never be given or loaned in aid of any person association, or corporation….” Whereupon Daniel Read, a Professor at Indiana University and a Jacksonian Democrat, rose to propose an amendment: “Nor shall the State hereafter become a joint owner, or stockholder in any corporation or association.”  Read continued, “the State, sir, I need hardly say, is an exceedingly bungling and unskillful manager of all business transactions.  It is ever liable to be cheated, and never upon capital makes the same returns as do individuals…let the State take the place of the merchant, the manufacturer, or the banker, or in any way become a partner with companies, no matter under what pretext done, it is sure in the final result to be the loser…”  Under its 1850 Constitution Indiana, like many other states stung by the panic of 1837, got out of the corporate chartering business, forswearing public debt and public/private partnerships in favor of the old fashioned business of representative government.  Despite bitter experience, the language of “business” continues to infect policy makers’ proposals for efficiency in government.  But government is not business and mixing metaphors sometimes creates a linguistic fog behind which policy makers can shelter personal perks.  Take, for example, Indiana’s law limiting compensation of School Board members to $2,000 per annum plus an approved per diem.  In an unpublished (i.e., having no precedential value) opinion, the Indiana Tax Court last year considered the complaint of Melanie and Lillie Mae Hubbard.  The Hubbards were upset to learn that the Union County/College Corner Joint School District’s 2006 budget included insurance benefits for three members at an annual cost of $6,280 per member.  Before reaching our Tax Court, the Hubbards concern was addressed—and dismissed—by the Department of Local Government Finance (DLGF) who reasoned that the School Corporation had the power to offer the benefits pursuant to other Indiana statutory law (I.C. 5-10-8-2.6, permitting a public employer to offer group health insurance benefits to its employees defined as including “an elected or appointed officer or official”).  The Hubbards’ concern was not whether the Corporation could offer the benefits, though, it was whether taxpayers should have to pay for them since “Compensation of governing body members” was not to exceed two thousand dollars per year according to I.C. 20-26-4-7, subject only to the per diem.  In a nutshell, the Hubbards reasoned that $2,000 in salary plus a fringe benefit of $6,288.00 exceeded the permissible limit.  The Tax Court realized that “compensation” is ordinarily a broad term, broad enough to sweep in “fringe benefits.”  However, the Court observed that the legislative meaning of the term was narrower, akin to “salary.”  It followed that the School Corporation was within its rights paying its Board total compensation in excess of some 300% more than an ordinary taxpayer (or businessperson) might anticipate. It is an offense (I.C. 35-44-1-3) to have a pecuniary interest or “derive a profit from” a contract or purchase connected with an action by the governmental entity served by a public servant and the Hubbard’s seemingly raised the issue that the Board Members (who were involved in negotiating the coverage) had a conflict of interest and had not filed appropriate statements but the Tax court did not reach that issue.