Introduction. This entry, an opinion piece, has two parts. Part I looks at the problems with the 2003 Indiana Economic Development Corporation law (IEDC) that I pointed out last fall, and asks -- have they been corrected? Part II explores the authority, or lack of authority, the governor elected this fall will have over Indiana economic development, as the law now stands.
Part I. Have the problems with the 2003 Indiana Economic Development Corporation law been corrected?
What are the problems? Briefly, as I outline in my 2003 paper, "Maintaining the Balance of Power Between the Legislative and Executive Branches of Indiana State Government, Post 1941," available here, the Indiana constitution grants to the Governor both the power to execute the laws, and the appointing power for the executive branch of government. The general assembly may not take that power for itself, nor give it to another (including to another member of the executive branch such as the auditor or lieutenant governor), or to an outside entity, such as a university president. The article concludes:
The balance of power between the legislative branch and the executive branch has been an on-going debate in Indiana since at least the time of the landmark [Indiana supreme court decision, Tucker v. State,] in 1941. In the 2003 enactment of a statute creating the [Indiana Economic Development Corporation], the legislature has again attempted to exert additional influence over functions of the executive branch. Despite the general assembly’s desire to enhance economic development opportunities for the State, it appears that the statute is susceptible to constitutional challenge. The clear language of the Indiana constitution regarding the separation of powers, and the history of its interpretation by Indiana courts, suggest that the general assembly may need to consider another approach.As I outlined in the introduction to the paper:
Under article 3 of the Constitution of the State of Indiana, members of the legislative department of Indiana government may neither serve in the executive department, nor appoint others to do so. * * * Under article 5 of the Constitution of the State of Indiana, the executive power of the State is vested in the governor, who shall take care that the laws are faithfully executed. Yet the general assembly has in past years placed responsibility for the State’s economic development in another official in the executive branch, the lieutenant governor. And by its 2003 action, the general assembly has enacted legislation that will shift this executive authority once again, this time to a newly created entity outside state government, the Indiana economic development corporation (IEDC).What has been done to correct these problems? The Indiana Economic Development Corporation law was created by P.L. 224-2003, Sec. 260. The law may be accessed here. As discussed beginning on page 23 of my paper:The Indiana economic development corporation’s twenty-three member board will be appointed in large part by the general assembly. As a result, this newly-created entity may be subject to challenge on the basis of the separation of powers provision in the Indiana constitution. The Indiana supreme court’s historic 1941 ruling of Tucker v. State, and its progeny, define the role of the governor and prohibit the Indiana general assembly from encroaching upon the executive branch of state government by appointing its own members to perform executive functions or by enacting laws that dilute the powers of the governor.
The IEDC is to be governed by a twenty-three member board, “none of whom may be members of the general assembly.” However, a total of twelve of the members of the board are to be appointed by the leadership of the General Assembly. Seven of the members are to be appointed by the seven presidents of the seven state universities. Of the remaining four members, three are to be appointed by the governor. The other is to be the lieutenant governor, who is to serve as chairperson of the board, but has no other specified authority. * * *The general assembly did act, in the 2004 session, to correct the appointment problem. It enacted into law HEA 1438 (P.L. 63-2004, effective July 1, 2005), which amends IC 4-1.5-4-2 to increase the governor's "appointees" from the current 3 to 15, by moving the 12 appointments that currently are to be made by the leadership of the house and senate. (This change takes effect July 1, 2005.)In Book [v. State Office Bld'g Comm.], the court found unconstitutional the provision that legislative members serve on the state office building commission, saying that “no member of the legislature ... is eligible to serve as a member of the Commission.” Perhaps as a result, in its 2003 act the general assembly has specifically stated that none of the twenty-three members of the IEDC board, including the twelve members to be appointed by the general assembly, may be legislators. However, the court in Book also said that the legislative power is the power to make laws, “not to enforce them or appoint the agents charged with their enforcement.”
Despite the fact that quasi-public entities have been created by the general assembly in the past, none except Book has posed a challenge to the separation of powers approaching that presented by the new IEDC act. The governor does not have a seat on the IEDC board; the lieutenant governor is named in the act as the chair of the board, but is given no other authority.
Resolving the Constitutional Defects. The answers to the issues posed by the department of commerce law are straightforward. The constitution vests the executive power of the State in the governor, who has the obligation to see to the execution of the State’s laws. Certainly, a governor may elect to delegate certain responsibilities to the lieutenant governor, such as directing the department of commerce. But that is the governor’s prerogative, not that of the general assembly. Any laws to the contrary should be changed. * * *
[A]s in Book, the corporation here is charged with implementing the laws enacted by the general assembly, an executive function, not a legislative one. The general assembly does not have authority under the constitution either to make appointments in the executive branch or to authorize anyone other than the governor to do so. The resolution to the immediate problem posed by the IEDC legislation, therefore, would be to amend IEDC law to move the appointing authority from the General Assembly and the university presidents to the governor.
As amended, however, the IEDC continues to impose a number of restrictions upon the governor's appointment power. The revised law provides that: "The governor shall consider the recommendation of the speaker [house minority leader/president pro tempore/senate minority leader] when making" four of the twelve appointments previously made by the legislative leadership.
The language giving seven appointments to the seven heads of the seven state universities also has been changed. Now it reads: "Seven persons to be appointed by the governor who must be employed in or retired from the private or nonprofit sector or academia, on recommendation of the following: (A) the president of Indiana University. (B) ***." [emphasis added]
So the question now is, do these changes remove the constitutional defect, or do they continue to unconstitutionally limit or restrict the governor's appointing authority? What happens if the governor ignores the recommendations of the legislative leaders or university presidents?
Problems that were not addressed by the 2004 amendments. Unaddressed problems with the 2003 IEDC law include the following:
(1) IC 4-1.5-4-5 provides that the lieutenant governor shall serve as chairperson of the board. However, I would argue that designation of the chair should be the prerogative of the governor, not the general assembly.
(2) The current members of the board, appointed by the general assembly and the university presidents, are to continue in office under the law until July 1, 2005 (IC 4-1.5-4-4), six months into the term of governor elected in November of 2004.
(3) Appointees in the executive branch generally serve at the pleasure of the governor, or are removable for cause. Under the IEDC law the governor is not granted even the authority to remove members for cause -- see IC 4-1.5-4-4.
(4) The 2003 IEDC law, as now amended, may not be the optimal way to meet the general assembly's purpose:
The 2003 IEDC law was enacted because of dissatisfaction with the State’s progress in the economic arena. Creating a new entity to develop and execute statewide economic policy, “removed from the existing state bureaucracy and shielded from partisan political control” was the approach selected by the 2003 general assembly in order “to bring a new level of professionalism and sophistication to Indiana’s economic development activities. Oversight of the organization [is to] be provided by a twenty-three member, bi-partisan board designed on the principle of building a strategic alliance between the public, private, and academic realms.”Phrased another way, the law moved the economic development responsibility away from the elected governor, and away from state government as constitutionally structured, and gave it to a quasi-public authority, dissolving any direct lines of authority to the voter. Now that, through the efforts of the 2004 general assembly, the governor's appointment authority has been reinstated, perhaps the modifications could be completed by placing the department of commerce directly under the responsibility of the governor, as Tucker requires.
Part II. What authority will the governor elected this fall have over Indiana economic development, as the law now stands?
HEA 1001 of the 2003 session, at SECTION 263 (on page 238 of the bill), transfers the state department of commerce, except for energy policy, tourism and community development, to the Indiana economic development corporation, effective July 1, 2005. So where does all this change leave the newly elected governor?
As the law now stands, economic develpment is to be moved under the control of the IEDC, a quasi-governmental agency which is chaired by the lieutenant governor, and whose hold-over membership until at least July 1, 2005 consists of the appointees of the general assembly and the university presidents. The governor does not even have a seat on the board.
Although the newly elected lieutenant governor is also to head the department of commerce, a state agency, as of July 1, 2005 much of the agency will by law be transfered, lock, stock and barrel, outside of state government and to the new IEDC. Employees of the IEDC will NOT be state employees (not unlike the bureau of motor vehicles license branch system setup).
Interestingly, one candidate for governor appears to have signaled last week that he intends to pursue a different course than that outlined above. On Thursday (5/13/04), according to this story in the Louisville Courier-Journal, Mitch Daniels, Republican gubernatorial candidate, said:
that if elected, he would name a Fort Wayne businesswoman to fill a new post overseeing the key state agency trying to reverse Indiana's job losses.And here is a report from the Fort Wayne Journal Gazette:Patricia Miller, co-founder of a company that makes luggage, handbags and apparel, would become Indiana's first-ever secretary of commerce if Daniels defeats Democratic incumbent Joe Kernan in the November election, Daniels said yesterday.
The Department of Commerce is overseen by the lieutenant governor — currently Kernan's running mate, Kathy Davis — with day-to-day management falling to an appointed executive director, Tim Monger.
While overseeing policy for trade and economic development, the lieutenant governor also travels the state to attend jobs-creation announcements, serves as commissioner of agriculture and presides over the Senate in a mostly ceremonial role.
Daniels said he was still working out details of his plans for a secretary of commerce — including how much Miller would be paid — and said the change likely would involve modifying state law and seeking approval from the General Assembly.
The co-founder and president of Vera Bradley Designs has been tapped to market economic development for Indiana in a possible Mitch Daniels administration. * * * Daniels, the former White House budget director, won the Republican gubernatorial primary last week and will face Democratic Gov. Joe Kernan in the November general election. Daniels said Wednesday that if he's elected he will create a new Cabinet position, secretary of commerce, and name Vera Bradley co-owner Patricia Miller to the post.What legislative changes are needed? The constitutional responsibilities of the lieutenant governor are to preside over the senate and to be prepared to succeed the governor, if necessary. The governor is granted the executive authority, and the general assembly may not by law transfer this authority to other state officials, although the governor may delegate responsibilites. The IEDC law should be replaced with a law creating a new state department, under the governor. In addition to centralizing commerce and economic responsibilities within the executive, the law should get a handle over the many diverse laws and entities in this area (see here, for example) that have been created over the years. Posted by Marcia Oddi at May 17, 2004 08:15 AMMiller would be the highest-ranking person in Daniels' cabinet, he said, and the "chief operating officer of our economic development initiatives." "She can help me sell Indiana to business leaders across the country," Daniels said. "She can help existing companies to grow and inspire the formation of more new ventures."
Currently, the lieutenant governor is in charge of the state's economic development initiatives. Last August, Daniels told The Journal Gazette he would reassign that responsibility to the governor's office.
Kernan campaign spokesman Scott Downes said he doesn't understand why Daniels would first say he was taking over economic development himself and then create a new post to handle the issue. "It raises questions on how the structure would work and who's responsible for what," Downes said.
Phil Laux, president of the Greater Fort Wayne Chamber of Commerce, said shifting the economic development responsibilities to the governor would allow the lieutenant governor to focus on the chief executive's legislative agenda while presiding over the state Senate. "From a structural standpoint, I think it is a good move for the state, regardless of party affiliation," Laux said. "I think it's a bold move, but I think it's a good move."