The State of Indiana Manufacturing and

2016 Session Preview

Indiana Manufacturers AssociationJanuary 2016

Alabam

a

Arizona

California

Connecticu

t DC

Georgi

aIdah

o

Indiana

Kansas

Louisiana

Marylan

d

Michiga

n

Mississ

ippi

Montana

Nevada

New Je

rsey

New Yo

rk

North Dako

ta

Oklahoma

Pennsyl

vania

South Caro

lina

Tenness

eeUtah

Virginia

West Virg

inia

Wyoming

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

13.36%

29.45%

19.19%20.08%

16.92%

25.87%

18.80%

2014 Manufacturing as Percent of State GDP

Indiana Has the Most Manufacturing Dependent Economy in Nation

Indiana 2014 GDP Share by Industry

Manufac

turing

Finan

ce, ins.,

real esta

te, e

tc.

Government (F

ederal, St

ate & Lo

cal)

Educati

on, healt

h care, an

d socia

l serv.

Professional &

business

Retail tr

ade

Wholesale tr

ade

Constructi

on

Transporta

tion and w

arehousin

g

A&E, recre

ation, lo

dging, f

ood servi

ces

Other servi

ces, exce

pt gove

rnment

Informati

on

Ag., forestr

y, fishing, h

unting

Utilities

Mining0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00% 29.45% - $93.6 billion

14.84%

9.19% 8.68% 8.09%

5.83% 5.37%3.54% 3.42% 3.37%

2.24%

1.88% - $5.9 billion

2.02% 1.71%0.36%

2014 GDP by Industry in Indiana

Publically Funded

Indiana Employment by Private Sector IndustryJune 2015

Manufac

turing

Educati

on and healt

h servi

ces

Professional a

nd business

services

Retail tr

ade

Leisure an

d hospitality

Constructi

on

Finan

cial ac

tivities

Wholesale tr

ade

Transporta

tion and w

arehousin

g

Other servi

ces

Informati

on

Agricultu

re, forestr

y, fishing a

nd hunting

Utilities

Mining

Unclassi

fied0

100,000

200,000

300,000

400,000

500,000

600,000523,439

Average Indiana Weekly Wage by Sector June 2015

Manufac

turing

Finan

cial ac

tivities

Informati

on

Constructi

on

Professional a

nd business

services

Natural

resource

s and m

ining

Educati

on and healt

h servi

ces

Trade, tr

ansporta

tion, and utiliti

es

Other servi

ces

Unclassi

fied

Leisure an

d hospitality

$0

$200

$400

$600

$800

$1,000

$1,200 $1,101

Indiana Manufacturing Establishment by Type June 2015

1,754

859

647

616

613

536

508

504

498

423

323

225

217

171

154 149 140

52 38 23 15

Fabricated Metal Product

Machinery

Printing and Related Support Activities

Transportation Equipment

Miscellaneous

Food

Furniture and Related Product

Plastics and Rubber Products

Wood Product

Nonmetallic Mineral Product

Chemical

Computer and Electronic Product

Primary Metal

Textile Product Mills

Paper

Electrical Equipment, Appliance, and Component

Beverage and Tobacco Product

Petroleum and Coal Products

Apparel

Textile Mills

Leather and Allied Product

Indiana Manufacturing Employment by Type June 2015

123,878

59,931

44,154

44,054

38,736

37,473

31,268

28,911

24,024

15,500

15,150

14,092

13,942

9,929 8,778 4,890 3,573 3,099 754 741 562

Transportation Equipment

Fabricated Metal Product

Machinery

Primary Metal

Plastics and Rubber Products

Food

Chemical

Miscellaneous

Furniture and Related Product

Printing and Related Support Activities

Computer and Electronic Product

Nonmetallic Mineral Product

Wood Product

Paper

Electrical Equipment, Appliance, and Component

Beverage and Tobacco Product

Petroleum and Coal Products

Textile Product Mills

Leather and Allied Product

Apparel

Textile Mills

State Jobs Added Rank

Michigan 22,500 1

Ohio 14,100 2

Indiana 12,200 3

North Carolina 8,600 4

Kentucky 7,300 5

Utah 6,500 6

Wisconsin 6,300 7

Oregon 5,400 8

Georgia 5,200 9

Florida 4,400 10

Manufacturing Jobs Added:January 2012 – October 2015

Manufacturing Jobs Added:October 2014 – October 2015

State Jobs Added Rank

Michigan 72,000 1

Indiana 52,500 2

Ohio 40,100 3

Kentucky 26,600 4

North Carolina 25,700 5

Georgia 23,300 6

Tennessee 22,600 7

Wisconsin 21,900 8

Florida 20,000 9

Oregon 16,300 10

2016 Legislative Session• House: 71 Republicans, 29 Democrats• Senate: 40 Republicans, 10 Democrats• January 5 – First Day• January 12 – State of the State Address• February 3 – Deadline for bills to clear first house. • February 5 – Primary Candidate Filing Deadline• March 2 – Deadline for House bills to clear Senate• March 2 – Deadline for Senate bills to clear House• March 14 – Session Ends.

Tax Issues• Fuel Taxes, Cigarette Taxes, State and Local Reserves for

Infrastructure Funding• Business Property Taxes

• “Big Box” assessment – What is a good comparable sale to measure assessed value?

• Business Personal Property Taxes – Disincentive for business investment

• Combined Reporting for Corporate Income Tax• Would require all affiliated business entities to report all income

in Indiana tax return. • Combine losses and credits from other states as well? • Need nexus for entity to be combined into Indiana return?• Waters edge election?

Environment and Energy• No More Stringent Than Federal Rules standard for Indiana

environmental rules. • Consistency and simplicity for regulated entities.

• Clarification of “legitimate use” for solid waste and hazardous materials.

• Further discussions for expanded use of cogeneration/combined heat power opportunities.

• No decision yet from Pence Admin. on implementation of Clean Power Plan.

• Indiana joined lawsuit against CPP. Publically opposed Ozone rules.

How Well Is Manufacturing Supported by Government?

2015 Indiana Manufacturing Survey

Infrastructure• Governor’s Plan - $241 million from state reserves, $450

million appropriated in 2018, 2019 and 2020, $50 million from accelerated distribution from Next Generation Trust Fund, $240 million from bonding, $26 million from bond refinancing.

• Senate Republican Plan for Local Units – One time distribution of local income tax trust account - $ 418 million.

• House Republicans – Longer term solutions? 5 cent gas tax increase to make up buying power losses since 2001; added local flexibility; study of tolling possibilities on I-70 and I-65; slowly add sales tax on gas to highway funds.

• House Democrats – Move all sales tax dollars from fuel sales to road and bridge spending - $500 million

• Senate Democrats – 50% distribution of local income tax trust accounts; $250 million from state reserves; local options

• Definition:• Employers may temporarily reduce the hours of employees in lieu of

layoffs during economic downturns.• Also referred to as short time compensation. • Work share is NOT job sharing.

• Nationwide, the average take-up rate is only 0.17% of the eligible work force.

• 30 states have programs on the books• Federal government gave out $100 M in stimulus funds to state

work share programs. • This funding is no longer available to Indiana for start-up costs.

Work Share

• Cost to the UI System• DWD estimates that the program will cost $1.5 M in

start-up costs.• Estimated $1 M in yearly administrative costs.

• Lingering Questions• Effect on existing collective bargaining agreements?• What about potential employer fraud? • Impact on UI Trust Fund?• Impact on other employers due to UI being a

mutualized benefit system?

Work Share

Indiana performs poorly as a state in key metrics of overall state skills

levels

Workforce Challenges

Workforce Challenges

• 36% of US businesses cited difficulties finding qualified talent in a 2014 Manpower survey.

• It is expected that the US manufacturing industry will only be able to fill 40% of the needed positions between 2015 and 2025.

• 500,000 Indiana workers with no high school diploma and 1 million workers with nothing more than a high school diploma

• 35% of Indiana high school graduates don’t attend college and of those that do attend, nearly 30% need remediation and only 30% complete a 4-year degree on-time

• Demand for over 21,000 trained “middle skill” manufacturing production workers in Indiana in 2013.

• During that same time, only 4,600 individuals received the necessary post-secondary education and 1,000 completed corresponding career and technical education programs in Indiana.

• Enrollment in and completion of manufacturing credential programs remains low, compared to demand.

Workforce challenges

Availability of Workers (2015)

2015 Indiana Manufacturing Survey

Availability of Workers (Next 3 to 5 Years)

2015 Indiana Manufacturing Survey

New Workforce Solutions

• New direction for Department of Workforce Development• Focus on industry needs• Demand-Driven Workforce System• SkillsUp Indiana Program

• Ivy Tech Re-Alignment

Civil Rights• RFRA – LEGAL implications different from PERCEPTION

implications. • 2016 Question – do you include sexual orientation and gender

identity as protected classes in state’s civil rights code? • Balance of rights of conscience – sincere religious beliefs – and

equitable treatment for LGBT individuals. • IMA monitoring proposed legislation for new causes of action

against Indiana employers.• Definitions and application language matters.

Your IMA Governmental Affairs Team Brian Burton, President & CEOGeneral business issuesbburton@imaweb.com317-713-5924

Andrew Berger, Vice President, Governmental Affairs and Tax PolicyTaxes, budget, energy, environment, state & federal legislationaberger@imaweb.com317-713-5920

Stephanie Wells, Director of Workforce Development Policy & AdministrationEducation & workforce development issuesswells@imaweb.com317-277-6990

Ed Roberts, Governmental Affairs ConsultantWorker’s comp, unemployment insurance, tortseroberts@imaweb.com317-713-5922

Jeff Goodwin, Executive Vice President & COO, IMASERVHealth care & health-related insurancejgoodwin@imaweb.com317-713-5936