August 21, 2024 2:00PM – Artificial Intelligence Task Force Meeting

During the Artificial Intelligence Task Force meeting held on August 21, 2024, at 2 PM, several important topics were discussed:

Meeting Attendees

Rep. Matt Lehman – House Co-chair of the AI Task Force, District 79

Senator Liz Brown – Senate Co-chair of the AI Task Force, District 15

Sen. J.D. Ford – Senate Minority Leader, District 29

Rep. Matt Pierce – House Minority Member, District 61

Tracy Barnes – Chief Information Officer for the State of Indiana

Ted Cotterill – Chief Privacy Officer for the State of Indiana

Adam Brown– Director of the Office of Technology Services, Legislative Services Agency (LSA)

Bill Barrett – Attorney with Williams, Barrett & Wachowski

Doug Hutchinson – Indiana State Police, representing law enforcement

Josh Jackson – Appointed by the Speaker, an expert in AI and cybersecurity, particularly with law enforcement

Zac Maier – IT Director for the Indiana State Senate

Cari Sheehan – Ethics and professional responsibility researcher in AI and ethics, also an ethics attorney

Cody Rivers – Director, Reveal Risk

Michael Mullins – LSA Counsel for the Committee

Key Topics

Impact of AI on Indiana: Discussions included the economic benefits of AI, such as productivity and efficiency improvements in various sectors like healthcare, education, and public safety. However, concerns were raised about job displacement, privacy, surveillance risks, and overreliance on AI systems.

Government’s Role in AI: The committee was tasked with exploring AI technology used or considered by state agencies. Tracy Barnes and Ted Cotterell from the Indiana government presented the current uses of AI across various departments, including:

Department of Workforce Development: AI is used to recommend training and job opportunities based on workforce data.

Indiana.gov Chatbot: AI is employed to assist the public by answering questions based on publicly available data from state agencies.

Cybersecurity AI Tools: AI monitors system access and generates alerts when anomalies are detected in user behavior.

Ethical and Privacy Concerns: The meeting highlighted concerns about the ethical implications of AI, especially regarding privacy and bias in AI decision-making. They discussed the need for responsible AI governance, proper training of AI models, and ensuring data security while using AI systems.

Vendor Management and Procurement: A significant portion of the discussion was dedicated to how AI systems are procured and managed by the state, including the need for contract terms that ensure privacy and ethical use of data.

Potential AI Liabilities: Concerns were raised about the risks associated with AI systems, including data breaches, bias in algorithms, and the high costs associated with AI implementation. The need for better data hygiene and retention policies was also emphasized.

Committee Action and Votes

There were no specific votes recorded in the transcript. The discussions were more focused on presenting information and identifying issues for further consideration.

Additional Notes

Further AI Meetings: It was indicated that additional meetings will be necessary to continue the discussion, particularly around the potential uses of AI in education and other state agencies. Tentative schedule of next task force meeting is on 2nd or 3rd week of September

AI Inventory: The state is preparing an inventory to capture data on AI usage across all agencies. This will help track the adoption and development of AI systems and assess their impact.

Challenges with AI Governance: The discussion emphasized the complexity of ensuring that AI systems are governed effectively, particularly when it comes to cross-agency data sharing and protecting sensitive information.

Indiana as an AI Leader: Attendees were surprised to learn that Indiana is a leader in AI governance and data analytics compared to other states. Indiana’s Management Performance Hub (MPH) was described as “data Switzerland,” enabling secure and compliant cross-agency AI data projects. This unique infrastructure impressed many, as few states have such advanced data-sharing capabilities without running into legal barriers like HIPAA and FERPA.

Efficiency of Current Systems: It was revealed that nearly all of Indiana’s government services have been automated and made available online, including systems like unemployment tracking, professional licensing, and rental assistance. This level of modernization set Indiana apart as being ahead of the curve in digital government services.

Cost Overruns in AI: Attendees were surprised to hear that AI cost estimates are often off by 500% to 1000% (according to a Gartner study), mainly due to the high costs associated with ongoing maintenance and operations of AI systems. This revelation highlighted the substantial financial commitment required for AI implementation.

All right. We’re going to go and get started. We’re going to do a tentative roll call here just so LSA has an idea who’s here. And then when we’re done with that, I’m going to have everybody go around and introduce themselves and why they’re here, and then we’ll make some opening comments and get started. So with that, would you like to call it roll? All right. And then you mark them off as you get to there. Okay. All right. So we’ll do this. I will go around, we’ll start interviewing with Adam. We’ll just come around the top and then around the bottom and just say who you are and kind of your role here. And then we’ll have, I’m going to have opening comments and I’ll turn it back around. Anybody else that wants to comment before we start taking some date, some detail information. So, Adam, we’ll start with you. Adam Brown with the legislative services Agency. I’m the director of the Office of Technology Services, just here to advise the membership of the IGA however we can and technology endeavors. Thanks. Zach Mayer, it director for the Indiana State Senate, co chair, Senator Liz Brown. District 15. Michael Mullins, I’m the LSA counsel for the committee outlayment, District 79, co chair, Matt Pierce, District 61, which is most of the city of Bloomington. Bill Barrett, I’m an attorney with Williams, Barrett and Wachowski in Greenwood. Doug Hutchinson, with Indiana State Police, representing the law enforcement section. Tracy Barnes, chief information officer for the state of Indiana. Ted Cotterell, chief privacy officer for the state of Indiana. Josh Jackson, appointed by the speaker with expertise in AI, cybersecurity with law enforcement, particularly Department of Homeland Security. Kerry Sheehan. I teach ethics and professional responsibility research in AI and ethics, the different components, and I’m also an ethics attorney. All right. Thank you, everybody. So I was already asked this question twice walking in today. Why are we here? So let’s talk a little about that. We’re here basically Senate Bill 150. It was a little bit of a continuation. We met last year talking about some AI stuff. The summer study charge that we have in front of us is fairly narrow. It deals more with what is the state doing, the state departments, what’s the impact on Hoosiers. But all that’s going to involve a lot of players, a lot of entities. I also think it’s going to have to, we’ll have maybe two, at least two meetings, maybe a third to really get even, bring in some of the outside as to what is happening in that world. Around us. So to prepare for this today, I kind of started thinking, what are the pros and cons of AI? We’ve had this discussion before. I just kind of put some thoughts down here. There’s the pros are always economic growth. We look around Indiana, some of the economic productivity, increased productivity, healthcare improvements. We’ve heard from some in the healthcare world regarding enhanced diagnostics, operational efficiencies in education, personalized learning, accessible education, public safety, some crime prevention, and maybe some emergency responses enhancing that environmental benefits, energy efficiency, some climate monitoring. There’s cons, job displacement. We hear a lot about that. Taking, taking the workforce with automation. Creating a skills gap for some, there’s privacy concerns, the data privacy, surveillance risks, ethical issues, is a biased, is a fair, the decision making process, dependency, reliability, we become over reliant or we have technical failures, regulations and controls, lack of standards. And then there’s also always the big competition world. So some recommendations that are jotted down promote responsible AI development, invest in our workforce, enhance privacy protections, foster innovation, regulatory balance, and encourage public dialogue by having meetings like this. Now, for the sake of full disclosure, yesterday I went on to chat GPT and I asked this question. I said, I want to know the pros and cons of AI for a presentation to legislative leaders. And in 22 seconds, that’s what printed out. It is wonderful and it is scary. I think it’s both of those. And I think now the rest of the comments I have here are mine. These come out of my mind, which may you’ll see why they wonder more. You know, we defined AI in the incentive Bill 150, and there was something that jumped out of me when I was reading that. And it says that it means that computing technology is capable of simulating human learning, reasoning and deduction through process, such as in that list of things. If I recall, last year, one of the presenters was talking about AI, and they said, we have to understand, we’ve had artificial intelligence for decades. For decades we’ve had it. Only it’s never been able to communicate back to us. We’ve always communicated to it. And by its ability now to communicate back to us, it has now intuition. So I had to look up what intuition means. I know the word, but what’s its full meaning? Intuition is defined as the ability to understand something immediately without the need of conscious reasoning. And that concerned me. When I hear the term without the need for conscious reasoning. Come, let us reason together. That’s why we’re legislative body. So there’s a lot of conflict out there. So we have to find that balance between good results that make our economies, make our jobs easier and better at the same time, not create more fear and doubt. I was talking to someone there today and I said, what’s the biggest thing you fear on AI? And they said, losing trust. And that is, is what I’m seeing real? Are the pictures I see real? Are the data I’m seeing real? Are we starting to cloud or blur that line between truth and fiction? So I think we’re just starting really with this discussion of Aih hinging from last year to this year. But I think now, focusing on the government, we’re going to have a real big issue moving forward. How does all this play into the real world around us? So with that, that’s just my thoughts, and I think where we’re going to go, I’ll open this up. Does anyone else have any other remarks they’d like to make opening remarks before we get started? I’ll open the floor. And we do have one more introduction. I’m going to come down here to you, Corey. Yes, sir. Thank you. My apologies again. Cody Rivers here reveal risk director, but happy to be here. Okay. Thank you, Cody. All right. Any other comments? Anybody want to say anything? Matt, go ahead. Thank you, mister chairman. So as a legislative member of the committee, I just think that we will need to rely upon the experts on the committee to help us really understand what AI can and can’t do. Like most new technologies, there’s a lot of hype about what it can or can’t do. And, you know, some people even saying that it’s going to take over the world and that’s a real danger. So the question is that really a thing? I saw something on the Internet which I thought was kind of interesting. It said in order to combat the AI threat, we would just hire one of the smartest it people possible, pay them a huge salary, and had them sit next to the AI computer. And if it started taking over the world, he would pull the plug. And so you think it’s maybe like Hal or whatever. So I’d be interested just to know. It’s like kind of, where is the hype? It’s like several years ago we were told we’d have self driving cars in two years, and that was just that. And then it turned out that it was a lot harder to make that technology work than we thought. So that, you know, how accurate can AI be? We hear about hallucinations and things and, you know, if state government begins to use these things, how do we make sure that we’re actually getting accurate information out of it and, you know, just all kinds of challenges? I don’t. I think it’s pretty much proven. If you look at the history of technology, it’s like you can’t put a technology back in the bottle and say, we’re just not going to do that. So it’s here, it’s going to get used. And the question is, what role, if any, does the legislature have in creating policies, at least for state government, about how the technology might get used to make sure that we don’t, that we limit the potential negative impacts of the technology and get as much as we can of the positive out of it. All right, thank Representative Pierce. Anyone else, any opening thoughts? All right, I guess everybody wants to get going so we can all go home, right? All right, so what we’re going to do today as what we’re charged with the resolution from the Legislative Council is to, based on Senate Bill 150, is to look at artificial intelligence technology that has been used, developed, or considered for use by state agencies and then recommended, issued, issued by their states, et cetera. We’re gonna focus on that today. I think moving forward, we’ll maybe bring in education and some other venues or some other factors that might bring a little broader spectrum to some of this, but today we’re gonna focus on that. So today we have two groups that we’ll be asking questions of and providing us data. Indiana Department of Technologies and then the maintenance performance hub. And I believe, let’s see. I think who’s. I’ll represent. You said you’re representing the. Okay, Tracy, you want to start again? Tracy Barnes, Indiana Office of Technology I have just a few slides just to kind of set some groundwork and give some perspective of what we’ve currently been working on, some of the things that have been in place, some recent and some for a long time. The big thing that you talked about and you guys hit on earlier is just the reality that artificial intelligence is not new. It has been around a long time in a number of various flavors and variations and different names and titles, items from robotic process automation, machine learning, neural learning, things of that nature. But we’re coming into a new landscape that brings a lot of fear and hope as well, for efficiency and effectiveness as well. When you look at the autonomous ability that it can start to make decisions and take actions for you. And while that sounds extremely exciting, it is also very scary when you think about the potentials that folks could use it for when they think about letting the machine do my job for me. So with that, I’ll just kind of go through a few slides here of information. The big thing I wanted to make sure we just kind of really started out with is just a quick separation of the two worlds of generative AI and what we refer to as traditional AI. Traditional AI is what I would say has been around a long time. Both have really been ingesting large volumes of data and information and starting to put together thoughts and activities and options and opportunities that can be taken advantage of to identify areas of efficiency when you’re looking at supply chain data analytics, data research, things of that nature. But when you slide into the world of generative AI, it is starting to actually take some of those actions and make recommendations and do things on behalf of the individuals. That’s where, again, most of our concerns start to come into play. You look at some of the examples like Chat, GPT, and Google Gemini, versus things that have been around a long time, like Microsoft’s Word spell check, which is essentially a derivative of AI, and the type ahead features that you get in search bars. Currently, there are about three main products that are in use across the state of Indiana that are doing some level of AI activity. The most I’d say, forward facing is the Department of Workforce Development’s workforce recommendation engine. They have been ingesting a large volume of their workforce data. It’s a private, large language model that is not public facing and does not have outside data coming into. It is all based on data that the Department of Workforce development oversees and manages, and they’re using that to make recommendations to individuals that are falling for unemployment to determine here’s training that’s available. There are jobs that are in the certain areas that fit the qualifications that you have and that system and went into production back in November of 2023. Our office has two AI tools that we’ve been working on, one for a very long time and one more recent, the most recent being our Ian dot gov comma, our web platform, a chatbot that we went into a beta test in June of 24 this year. Essentially, we put a chatbot out there and used Microsoft’s OpenAI tool to ingest all of the public facing content of our website. So it’s already public data. It’s already data that the agencies have deemed available and interested for the public to consume. And the hope is to start looking at the chatbot and let it answer those questions and make navigation and finding of resources and available information a lot quicker, instead of folks having to try and navigate and understand some of the intricacies of what agency does what. So you interact with the chatbot, ask questions, and it will start to give you directions on here’s the information that we’re finding, here’s what agency it belongs to, and we’re actually capturing metrics on that as well. So we can identify when it’s misidentifying information and we’re still in a learning mode that is still in a beta stage. Yes, ma’am. Good. Senator Brown, thank you. I have a question about that. With respect to the chat box, are you looking across all of in Gov. Correct. So if I have a question, DNR, how can I find a lodge that’s open or get my fishing license? Or if I go to BMV, it’s across all the agencies. That’s correct. Okay. And so it allows the ability to not have to say from DNR. How do I get a hunting license if I don’t know what DNR is, especially if I’m a visitor from another state. But how do I do hunting? Get a hunting license in Indiana or to have a fishing license to fish in Indiana, and it may bring you the information from DNR from office of tourism on different lakes and properties that we have available or potentially lodging opportunities as well. Okay. So it’s in the very front. So I don’t even have to find the DNR to know that that’s where we get that. That’s the goal. So I have my, then I have a question. Do we have a way, let’s say I really meant a marriage license, not a fishing license. You know, who knows? My head was. And so I go the wrong way. Right. And so who is or what? How do we audit that? To make sure you know? Or I just give up in frustration because it didn’t answer my question. Right. Because sometimes I hate using jackboxes. So how do we monitor that? That’s the big question. Right? So we’re capturing that information of what questions are being asked. We’re looking at the results that are being returned. We’re asking the individuals, did this get you the information that you’re looking for? If not, we’ll direct them back to the main website and start going down a path. And we have our folks on the other side analyzing that data to determine do we have bad links or bad information that we’re pointing people in properly or is it learning improperly? So we’re doing analysis on both sides. And a lot of it comes back to asking that constituent, did you get the information that you were looking for? So that we can make sure we guide you down a better path. Okay. So I’m gonna stop you there because I think this is where people are like, hmm. So it’s the same with the DWD. So we want the public to know I’ve asked all these questions about a hunting license, a fishing license, maybe I’ve even gotten very specific, like, cause I’m taking a vacation, I’m gonna stay up at Pocaghan, yada, yada, yada, and you, you. My something gets back to me and says, did you find everything? So how do we assure the public that they don’t know that I am going and going to be gone from my home on blah, blah, blah and all these things? Because that’s what everyone worries about. So how do they know that you have all that information? Not you, but the state has all that information about me, but that’s not really about me, right? Because that’s the concern, right, about our personal privacy? Well, that’s the scary part, is we can’t control what folks put into a question like that. So if they, instead of coming and saying, I’m looking at a trip to Indiana, I like to go fishing, what are some great options? If they divulge the level of information that I will be in Indiana from March 14 to March 18 looking to do hunting or fishing, and they start putting that information into the various models that are out there. That’s the concern that starts to raise as to what information starts being made available from our models that we’ve put in place. They are specifically and strictly access to Indiana estate employees, from our technical side, our tenants, and our infrastructure and our footprint only. So our data is not being fed into public models or public chat GPT or public LLMs in any capacity. And that’s the big piece that we’re working and focusing on right now, is governance and protection to make sure that any data that we ingest does not get made available to anything on the public, on the outside. And so that’s really, you know, I think Representative layman said at the beginning as well, is starting to manage and make sure we continue that level of trust. That’s how we continue to make sure we put the information into disclaimers on our website to identify and notify folks. This is information that we’re gathering for tracking purposes of the metric of the question, the results, the response. We’re not sharing this information with outside individuals. We’re not capturing it and tracking it for details about specific requests that they’re asking for. But the fear is the public and the average constituent being diligent enough to make sure they don’t over share that information and put information into these chat bots and questions that aren’t necessary. Right? So the difference between me and a chat box, say, with a store, say it’s a fishing store and I give all this information out there, they know a lot about me. That’s now kind of part of their data system. That’s right. You’re saying with the government, if I’m asking all these questions about getting a fishing license, going to pet Kagan, that’s wholly within, kept within state mph, that’s wholly within our system. We’re not sharing that. You’re not selling that to the fishing store. So now I start getting all these requests. That’s correct. But the other part of it is when you come back and ask me, did I get what I want, how do. We know. Well, two things. So if I overshare to the state, okay, so maybe I’m. Let’s do the conspiracy thing. Maybe I’m a person who adds too much information, like, can I get reciprocal carry privileges hunting? Because I plan to do something awful, horrific, illegal. Right. And I put all that in. How do we backstop that in case we have a security issue and at the same time, it’s anonymized? So that when I’m asking, you’re just checking. You don’t know. It’s Liz Brown in Fort Wayne, Indiana, yadda yadda, asking. You just know this request came in. Did you get what you want? Right, so you’re not tracking me, I guess, but that’s correct. Unless. Is there an unless? Unless I do something crazy. Ask something crazy. There’s not an unless on that. Okay, so purely on the public facing side, we’re not. You’re not logging in. We’re not asking for personal details or authentication or id and password or anything of that nature. So we don’t know. We do have the ability, just because of analytics, of web monitoring, to know ip addresses and different locations and ranges that folks are connecting and asking questions from, because it’s always good to know, if we see a large volume of individuals from Michigan asking about fishing in Indiana, do we target more campaigns for fishing activities and exercises to that jurisdiction? But we’re not getting into any personal, specific details of the individuals and the questions that they’re asking. We’re focused more on, and our system is set up more to focus on what content is being asked for. Are they getting served that information directly? And they’re being asked right then and there at that situation, at that request, is this the information you’re looking for? So it’s not a matter of coming back a day or an hour or a week later, because we don’t have the ability to do that. Okay, perfect. Thank you. You’re welcome. Very good questions. So the Indigo chat bat that’s been in a beta test for a few months now, we’ve gathered some good data and information. Lots of learning still to go on. That and another tool I’ve mentioned here, you see the production date back in summer of 2021. Again, just to make the point that in various forms, AI has been around for a long time. This is a tool we use called elastic, which does a lot of our log monitoring. So as individuals within our state, operations only are logging into our systems, we’re able to see where they’re logging in from. So that if we happen to see anomalies that all of a sudden a user id and password is being logged in from overseas or from a location or jurisdiction that they’re not typically logging in from, or at a time that we don’t use to. We’re not used to seeing them log in. We’re able to get alerts and notifications to make sure that we’re able to identify before a situation gets worse, if something, an account has been breached or credentials have been stolen or harvested. So this is much very specifically focused around our cybersecurity footprint and protections of the data and the systems at the state. The other thing I’ll share with you all is some of the potential uses that has come to us, and this is where you’ll see. I’m sure Ted will get into it a bit here. From the MPH side, our offices are working very closely together ensuring that AI, as well as any other technology, is being managed and procured and utilized very efficiently, effectively. But some of the use cases that we’ve been asked for from agencies, you look at user productivity, email summarization, calendar review, the Microsoft Copilot tool is the tool that’s been talked about a lot. So we’re starting to have conversations with firms like Microsoft and understanding the impact of incorporating that into our platform and our environments. Video camera footage monitoring and notifications. Being able to look at camera footage without a person per se and seeing, again, anomalies in the footage. If you happen to see our security cameras, happens to see a large crowd shifting in a very rapid pace, a notification gets generated. You have situations where not to speak for the law enforcement world, but the difficulties with staffing and recruiting and retention on the law enforcement side, being able to use and supplement some of that footprint with camera footage and camera capabilities that can give alerts to individuals so that you don’t have to have folks and bodies always sitting there at the desk watching the cameras to identify and see when a situation has occurred. Conversational response our contact center footprint, that’s another one that’s being looked at pretty significantly, very similar to the web chat bot, a conversational where folks can use natural language and communicate with an AI generated voice that can guide them down the right path to identify the data and information that they’re trying to find. Whether it’s within an agency or within the call center side of footprint, document review, interrogation, notification, creating cases. You know, once you’ve determined, hey, I’ve had. I’m looking for a hunting or fishing license and I found it. Now how do I apply for it or can you get me to apply for it? The potential to create that application and start going down that path for you. And then the other big one, content and document review and translation. Translation continues to be a big topic when you think about accessibility, both from multilingual and ensuring ADA compliance and things of that nature. There’s a lot of activity and opportunity for the state’s current websites and contents and data and systems to be able to provide data in various additional flavors and formats. Yes, ma’am. Thank you. Okay, so with respect to the email summarization, for example, so my sense is, so let’s say I get a whole series of emails about an FSSA, a Medicaid issue, enrollment, et cetera, et cetera. So Microsoft copilot, in this case, that potential platform reads through the whole thing, summarizes, they don’t know they are this and this and this and are they eligible? It summarizes it, right? Correct that part. So how are we, I assume our chats, if you will, this email system is because as legislators, if we are the recipient of some of these emails and it goes back to different state agencies, our documents are not public, our emails are not public. So how does that work with this? And I assume we have our own lake in the data storage system where all this is separate from others. So Microsoft copilot, my point is, is not integrating our emails to create a bigger chat system, if you will. Right. So that’s the key that we’re still trying to understand and figure out. And those are legitimate concerns. And when you think about agency to agency, maybe one thing within an agency may be another. Agency to legislator, agency to judicial, agency to public. It’s a very different flavor and variation. And those are some of the test cases that we need to start working on, which is why we’ve not vetted and validated and made this available for actual consumption. At this point, you’re going to where again, where the hair start to raise up on our neck with concern. You look at the initial use case that folks ask is despite getting into the details of, let’s say an FSSA case, I’ve just been going back and forth with my manager and they’ve given me three or four tasks and I don’t remember the due dates. And it’s going to give you a summary of you have these four action items and these dates that they’re due. And so that’s the simple use case but the reality is you look at AI, it’s not knowing. Let me only look for emails from your boss to summarize it. It’s trying to look at the entire footprint to make your life easier. Those are a lot of valid questions and concerns, which is how do we put the right guard rails and governance in place? And that’s where MPH and our teams come together to work hard to get that figured out and nailed down to make sure that we’re analyzing the data that we can and should and more importantly, that we’re analyzing and utilizing data or not utilizing data that we shouldn’t. Okay. So, and along that line, when you’re talking about the last bullet there with content and document review, that’s the other concern. Right? So, I mean, I’ve had a conversation with our chief technology office over here for the Senate about that. So if I allow as a legislator, one of these systems to create a document, if you will, and I put it out there, somebody still has to check that because now I have, I mean, this is now become official. Right. And that’s the problem. So can you just sort of high level, how does someone, you can’t physically, you know, sort of like what representative Pierce said, you can’t have someone sitting next to it ready to pull the plug or say that’s wrong every single time. So what is the process before it goes live as you’re viewing it, to feel good about that this is actually okay. It’s not going to envelop too much, but also we’re able to separate what is going to be private under our laws and what should be allowed to be public or a FOIA request. Right? Sure. Were you finished? Yeah. Okay. I don’t know. That’s the real answer. Right? There’s guardrails. There are the big key that, from IoT perspective, and I’ll see if Ted wants to add as well, is how do I make sure that the right pieces and right inputs are going into that analysis and summary from our perspective and opinion, I don’t think any of us are ready to let AI make decisions and take action on its own. So human review and human validation of anything, even if it’s generating what a recommendation for what could be an action to be taken that should still go through a human review and validation process that allows an individual. Whether it’s a caseworker, parole officer, someone in leadership to look at and say, okay, based on all the data that it has crunched for me, because I don’t have the capacity or bandwidth to do that. But the humans should still be involved in leadership, making sure that our policies are being enacted properly, our guidelines and processes are being adhered to properly, and that we’re not getting poor hallucinations and biased data that’s coming out. These models take a long time to learn. And so to think that turning on any one of these and that they’re live and effective immediately is very poor expectation and definitely has something from a tech perspective that we would recommend and put in front of anyone. Which is why, you know, for as I mentioned, our chatbot on the I n dot gov website, we are still in a beta capacity more than 60 days later. And we will be for a bit as we’re still trying to see how it learns and what it takes to learn. And is it learning the right way? That’s the big piece for us, is long validation and review of the technology and making sure and identifying what all it’s inputting and ingesting and pulling that data from, and human review and validation. It’s not about to your point, you’re not having a person having to sit there and look at it, looking at it, it process and act. But before final decision and action is taken, human interaction and human review has to be maintained. Ted, do you have any more to add to that? I could speak a little bit about the process that we’re putting in place and how we’re working with IoT on that. So Ted Cotterell, with the management performance hub, and for those of you who don’t know, MPH as we call it, really began in 2017, is this idea of enterprise data analytics. The state has all these historical data silos. How can we better leverage data across those silos to enhance decision making from a policy perspective or more boots on the ground activities that executive branch state agencies are undertaking? A part of that creation in 2017 was also this idea that we should have some enterprise governance around data. So, building on the what IoT has been doing since its formation and its current iteration in 2005, the legislature told us to create data quality policy for state agencies, to create data privacy policy for state agencies that builds on existing statutory frameworks. And the state CDO, the chief data officer that heads our agency, has some individual authorities around data transparency and analytics at master planning. So through all of that and working as an OMB agency kind of an extension of the governor’s office and where we’re placed in law, we’ve begin to, over the last few years, and particularly with, you know, chat, GPT comes into the public consciousness early last year. Immediately we were having discussions with IoT around how do we enable this. The state is never going to be at the tip of the spear, right, as a governmental entity, but I think we consider ourselves to be a leader in innovation. How do we enable the use of these technologies in a way that improves the Hoosier condition, but does so responsibly so that we respect individuals and groups of, in a biased context, or we’re not getting sideways with a data owner as it relates to maybe intellectual property. So what we’ve done from a process perspective is to we put out a policy for executive branch state agencies that adopts the NIST AI risk management framework. So National Institute of Standards and Technology in the US Department of Commerce, NIST is, Nistena puts out all kinds of standards that govern different, a lot of it processes. The NIST cybersecurity framework is one, for instance, that we subscribe to. NIST’s AI risk management framework sets forth a large number of, I wouldn’t say they’re controls, they’re just general things that points of consideration as entities. And really it’s any type of organization adopts an AI enabled system. So all we did as a first effort is to say we’re adopting the NIST risk management framework. State agencies, if you want to innovate with AI, that’s great, but let’s do a risk assessment in front of deployment so that we’ve answered some basic questions about that system before. It’s interacting with hoosiers, making decisions about them, whatever it may be. Can certainly talk more about that, but thought I’d offer that high level. All right, thank you. Before we go on to the potential liabilities on the issue of current usage, potential usage were some questions. I think Josh had a question. Thanks. Josh Jackson, lay member here. I noticed Microsoft Google some of the common names in those public clouds. Are theydehethere restricted to Indiana or the United States and how the data is being used? Or is it though, like copilot? Is it in any region that Microsoft deems appropriate? The majority of footprint of our cloud operations actually reside in government cloud or Fedramp compliant cloud. So that is restricting that footprint to us based operations. Okay. So my follow up, I guess, would be for DWD in the engine that you built, it was that internally built? That is an. On Prem. On Prem. On Prem. That is not cloud. Got it. Got it. Okay. Thank you. Yeah, it was a custom built on Prem engine. All right. Representative Pierce? Yeah. So I guess this report essentially says we’ve got three places where AI is currently being used, and we’ve got, I guess, four or five others that are potential. So is this the whole universe or just within IoT, or do we, are we sure we know what all these agencies are doing as far as AI? So respectfully, we never know what everybody’s doing and we also never know what every vendor is out there selling. So the reality is a couple things. One I’ll say is, even with all the tools and technology we’ve had in place, some for over 1015 years, AI is being included and incorporated into base products and being added as features and functions every single day. So there’s a lot of footprint that’s around there. Most of what I’ve captured here are some of the new specific use cases that have been targeted and identified because of AI. To give a perspective of what we’re seeing and what we’re hearing and what folks are asking for. Yes, sir. Then one other follow up. In terms of we don’t know what every vendor. Right. Is out there doing, have you. So the Department of Homeland Security and CISA, or the Cybersecurity Infrastructure Security Agency put out secure by design, have you put that into practice on vendors adopting or signing that pledge? We have not. That’s actually great question and a great topic, and we are extremely supportive of what Secretary Eastley and CISA is doing with that. Secure by design. There’s got to be that practical balance, though, between secure by design and productivity. And as we’re still trying to make sure we keep our operations moving forward and not limiting the solutions and services provided to citizens and constituents. The secure by design has a long way to go to get caught up. It’d be very difficult for us to limit ourselves and put that as a requirement in state contracts at this point. I think it’s definitely something we can start to shift towards and maybe even legislatively identify a path forward that. But it’s very hard to get there when especially the large organizations, large entities aren’t there yet. Good. Cody. Cody laymember so this I see is the sanctioned usage to your point earlier, as you’re looking at the unsanctioned usage of AI across the, the organization or the enterprise, do we have any, are there any efforts around education or awareness to then educate the average user on hygiene or things? Because you have these, which are personal devices, and there’s a numerous amount of apps you can download each day with AI. And so is there any effort or kind of like future plans on education for the workforce to teach that hygiene? So the state has existing regular training through the state personnel department, and IoT has cybersecurity training that I’m sure Tracy can share more about. We’re working with IoT right now, so we’ve done all of this sort of policy formulation, and then on the back end of the policy formulation is a lot of, okay, how do we operationalize this? How do we build something into the procurement process? So there’s, so there’s a check here that’s a big piece for us that we’re focused on right now. How do we put boilerplate terms in place and contracts to sort of start to bring parity to the way that vendors approach us? Because that’s the starting point for state negotiations to the point of state employees. We’ve got 30 something odd thousand state employees that are, we’re always, the individuals are the weakest link in the process, right? We have a draft sort of do’s and don’ts guidelines document that’s going through review right now that we would put, that we intend to put out as a, as a, you know, we have policy, standard procedure guidance. Right. It’s a guidance document that sits on the side of some of these more formal things that we’re putting out. Senator Brown, with respect to that and the bring your own device issue, is there a way if employees, state employees go to certain sites, there may be screens, but when they bring, it’s blocked. But if they bring their own device, but are, I mean, like I have, you know, I can get my Senate email account on my own cell phone if they use their own device, is there a way for currently to detect in the same way that they’ve gone to a site they’re not supposed to on a state system? Is there a way for you to see the watermarking idea that someone has used AI or is that not possible yet? Does that make sense to an extent? Screening type of tool? There’s a couple different pieces that go along with that. There is anything that’s connected to the state’s central backbone. From a network standpoint, we do have visibility and monitoring on where folks are going and what sites they’re visiting. We’re able to block certain sites and things of that nature, state devices and even state cell phones. We do have a similar ability to manage, monitor and block and control what sites and tools and apps are incorporating for the byld and personal devices. If they’re incorporating state application and state system usage. We do have a tool that we’ve done mobile device management through that gives us more control, at least that protects and encapsulates the state specific data and systems and activities within a, let’s say a section of their phone, not the entire footprint of their phone. This is an area that’s getting more and more mature as time progresses. But there’s still a lot of folks are crafty and there are always ways to find avenues around it and loopholes through it. If someone wants to move data from one side to the other and from different avenues, there’s absolutely to be a way to do that. But we’re doing a pretty good job of putting as much in place as we can to try and isolate and separate and segregate that data and those systems from the public access side of their personal devices. To follow up on that, let’s say I ask, I’m a state agency person and I ask an employee of mine to give me some information and data on our current maternal health records or whatever it is, and then I get a fabulous report back. But is there a way for me, and it’s not. It’s on their personal device, so it’s not coming through. Is there a way for me to know this watermarking idea that they have used something so that they feel good about it, but maybe they didn’t actually check it and then now I think I have good data and a good report. So you’re talking about rely on that. Is there a way for me to know that that validation within the state system, you’re protecting me, but from outside this, is there a way for me to know that that validation of authenticity? No. So in the long term, you know, right now we’re, we’re turning the ship right where we’re in this big period of transition. And all of these web based tools that come with their own click terms that the state in most cases cannot agree to, those are there and they’re easy to use. And then government and most organizations probably that are large at this point haven’t set up fully functional internal versions of those things that are safe and trusted in the long term, that’s probably where we’re headed, where we have sort of a pressure relief valve so that folks don’t feel the need to go out to a web based chat GPT that they have a tool right on their phone that they can use that’s appropriate. I don’t want to scare. I think your point is you’re going to provide the tools so that they can be more efficient using these AI tools and not going off to like the cheap version, so to speak. That’s quick and easy, but not very good data in it. Right. And so you’re going to provide the tools they need to make our employees efficient but also secure at the same time. I think that’s the vision, yeah, absolutely. Okay, other questions? Yes, go ahead. Sort of follow up on Senator Brown’s comments. I’d like to pose a hypothetical so that we. Have some concrete examples that would be helpful to me at any event. So the state has existing protocols, both by statute, by Reg, by administrative policy, and by technology that say what’s private and what can be public. I think that sort of defines the universe of the walls. So let’s put inside those walls tax return, a search warrant, and a search warrant that’s been generated in a revenge porn investigation. So there are images that are private. When AI becomes fully functional in the state, how do those protocols that I generally defined before that keep things in the box continue to keep them in the box? Go ahead, Tim. So to your point right at the top there, that the state has existing sort of administrative protections law policy around in APRA, it lists a lot of records as confidential in the Fair Information Practices act, essentially our internal Government Privacy act. It further says that all personal information shall be kept secure by state agencies context. So I know the rules wouldn’t change. That’s not what I’m asking. I’m asking what effect does AI have on the operation of the rules or the effectiveness of the rules? I think it makes it more difficult because we have to put technology around, we have to put technology in place to implement actual technical controls against the movement of data in certain instances. So in an AI development context, context, the context of use is so important, right. We have to understand AI over here in DNR to do a thing may be completely different than an implementation in DC’s. Right? So we’re going to ask a different set of questions and as a result, impose a different set of probably technical controls, working with our partners at IoT to ensure that the right people are seeing the right information for the right purposes, and then following what the state archives tells us, we’re destroying it when there’s no longer a statutory purpose to maintain it. So does that require, or might that require a further subdivision of the rules as they exist now or as they’re applied? Let me just go back to my example of the search warrant in the revenge porn case. There are two people out there who are involved, the putative defendant against whom the warrant’s been issued, and the victim. The victim’s interest is in not having that image spread publicly under any circumstance, save perhaps in court, at trial. The state’s interest is not having the search warrant disclosed to the bad guy, because means methods of operation of law enforcement are dangerous to disclose. So that’s why I asked, does the type of protection, the type of barriers or barricades that you put up get down to that level of granularity such that in order to put AI in a fully operable mode, you really have to start from zero. When in a product development context around privacy and product development, it product, when you create an IT tool and you have a privacy council involved in that, often privacy council will ask for a data flow diagram, what data elements are being created or collected in this transaction and where do they go. And then from there we can talk to our architecture people and understand who has access to those various locations. Right? That’s all a part of the development process. So what we’ve done through our existing, through the policy that we put in place last year, was to say all of this AI implementation work is a team sport. MPH has a lot of competency around data science and data engineering. IoT owns enterprise architecture and has a firm grasp on cybersecurity, right? And then we have business owners, business users, ctos in each agency, and some executive sponsor somewhere that has this idea of what, what they’re trying to accomplish. It’s all of those folks in a room working against a standard that is, one, just generally respected. That’s why we’ve looked to NIST, but two, that it’s applied uniformly across all of these implementations, and then we adjust for context. Let me, let me add to that as well. Just something to maybe a little more perspective. Keep in mind, state operations. From the executive branch side, we’re operating with 100 plus different agencies, boards, commissions, and like in your two examples, between Department of Revenue information data and law enforcement data, they’re also bound to the federal rules and guidelines of how that data is managed as well. So from a revenue standpoint, you have the FTI, federal tax information, and from law enforcement you have criminal justice rules and regulations. Those footprints are already segregated and separated as it comes down to the state. So in order for there to be concerned cross agency, that has to be explicitly and implicitly decided upon by the folks that are engaged in whatever activity is going on there. Again, this is all encapsulated within a state footprint that is not publicly accessible. So as you start to refine the requirements from federal rules, state rules, and then specific agency administrative codes and policies, it gets more granular. And it has to in order for the governance to make sure that whether it’s an AI tool, a dashboard or report or analytics that’s being asked for, requested, that the right information doesn’t get into any of the wrong hands, no matter what mechanism it’s available or being requested from, through a report or through an NAI activity. Thank you. Further questions I think it leads right into your next slide. Sure. Potential liabilities, one planet to consume all the time here today. But I, and we’ve talked about a lot of this, the potential liabilities that we see from our side, that loss of protected, sensitive data. That’s our biggest concern. I know our folks and the MPH folks are very closely looking and thinking about those issues. Inclusion of unnecessary data causing bias, whether it’s intentional or unintentional. The big piece that you start looking at, you’re hearing the efficiency and effectiveness offerings and sales pitches. Is our agencies ready for a tool that’s AI compliant or AI enabled? Is the data clean? Accurate? Current? Is it updated? Do we have good data hygiene? Are there different aspects that are making sure the data is being manicured and maintained regularly? And then back to Senator Brown’s point, the validating of the accuracy of that work product, especially if it’s happened to be produced from an external vendor or partner on that side? And then lastly, just an update. Part of the Senate Bill 150 requests an inventory. We have started to put the framework in place for that. These are the fields that we will be adding to our current inventory store to capture that information from agencies, and we expect to have that ready for capturing that data by the end of this at the end of September. So we should be able to start capturing and pulling a lot more of that AI inventory together soon. Okay, questions, Senator Brown? All right, so I was going to ask, under the potential liabilities, there’s also the cost. So what is the cost of these systems? I mean, are these the ones you already had put up on the previous slide? Are we testing them out on a potential buy basis or are we already purchased some of these systems? And what is that going to look like? Because the efficiency is great, but we’ve seen companies spend literally millions and billions and they’re starting to pull back because they haven’t gotten their ROI. So how is that going to look for us as a state? Or is it too early to say? It’s a very good question. I think it’s too early to say. Definitely not. From the ROI standpoint, we’re truly looking at pure costs right now. The cost for licensing, everything that we’re talking about has had some level of cost implication, whether it’s product licensing, resources consulting, contracting resources, equipment for crunching the data, if it’s an on prem footprint and activity. But we’re nowhere near, I think part of TED, as part of your evaluation, doing ROI analysis. So part of the risk framework review does do an ROI. As for an ROI analysis, but we’re nowhere near at a point where we can actually give any indication outside of saying it’s looking expensive. Go ahead. So we were invited by Gartner to attend a presentation that they did primarily to chief financial officers around AI, just to try to understand what the CFO role is and what the costs could be. Looking back at some of those notes here, it’s not fresh, so forgive me, but this was from June. Cost overruns was one of the sort of enterprise levels, what they termed AI stalls. Cost profile of AI is unique. Implementations have unknown costs, but the estimates appear to be off from. Perspective, anywhere between 501,000% with ongoing sort of maintenance and operation costs as the big unknown. So right now, did you say a cost savings by using it or 500% to 1000% over? Well, they said cost estimates are off by 500, are off by 500% to 1000%. And the big focus was, was ongoing maintenance and operations. So we’ve already in this conversation mentioned procurement a few times and the way the state buys things, certainly we’ve got, we have a lot of good processes in place around buying technology because technology is inherently different than buying these desks and chairs. Right. But as Tracy mentioned, existing vendors are saying, oh, we have a new AI thing that we’re rolling out and now you’re in our cloud. So through their change management process, they’ve just told us the AI is now enabled. So from a procurement, from a vendor management, third party risk management perspective, we have to, over time, get a better handle on that working. It’s both of our agencies, it’s idoa, the attorney general’s office, to put good contract terms in place, but also real teeth in our change management process for vendors in the way that they have to notify us and then we have to have a conversation or do an assessment or something before that goes into place. I’m a little bit familiar with the contract issues because that was a little bit part of Senate bill from 150. So I guess that’s what I’m thinking of with respect to it. For example, years ago, many cities instituted the red light camera thing, right, to catch speeders and people running. And then a lot of them turned them off because they were so expensive because of the storage issue. So thinking just one of your examples from a previous slide, the doc thing. So that would be great, particularly because some of our doc facilities have issues with hiring up. And so if you could, for example, have a monitoring system in place that was AI generated, so if something was amiss in the lunch area, blah, blah, blah, it would alert. So you don’t have to keep multiple people on that. Right. But the flip side is you have to preserve all of that. So as opposed to, you know, Sergeant Smith sitting there every day and watching now this AI, Sergeant Smith, you’re going to have to preserve that. That means cloud data storage. And that gets expensive, right? Correct. I mean, that’s part of this issue. And then, and you add in, maybe we never access it, so it just sits out there, but we store it and then we have to put in the whole risk management point and how long do we have to keep it, etcetera that was the other. You know, I use these simple analogies like the red light, but isn’t this the same thing? It’s going to be expensive. The retention policies that go along with that, and the volumes of data that are usually look to be kept available in order for the engine to learn and look through the anomalies and look back through history. I mean, those volumes are getting large. And so that’s really the while, that’s the brainpower behind the engine. It is an exorbitant cost as well. That is a really good point. So say, for example, we started this because this is going to be completely ours. So we’re not integrating other state systems or out in the public. So we wanted to institute a crowd control call, an AI system that is being sold to us, and we’re going to use it in our correctional facilities. The first day out, the first day of deployment, it has no data, so it is learning, and then someone is sitting next to it and saying, no, those two individuals are not doing anything illegal or inappropriate. There’s no violence there, blah, blah, blah. So it’s okay, but over time, it will learn. That’s an interaction that should be flagged, but it takes a lot of data. So even if it’s all benign data, if you will, nothing is happening. You have to continually feed this beast, if you will, until it’s eventually understands what is the good versus the bad. So that’s part of the problem, right? That’s the. The expense and the storage issue. But this is another instance where the state has existing policy procedure around how long we keep things. So, just last session, I remember a conversation with Representative Pierce around the state archives issues records retention requirements for all state agencies and all units of local government in Indiana. Those become increasingly important as we go forward because a state agency doesn’t maintain a statute. Purpose to actually continue to maintain the data after that retention period has expired under law. So we should be destroying it if there’s no articulable use for it anymore as we implement more AI systems, that should be part of the process too. Although it’s kind of interesting because you can destroy everything that’s stored, but it’s really not destroyed because it’s been integrated into this AI machine or this AI. Right. Kind of ironic. Tracy mentioned DWD’s workforce recommendation engine, or pivot, as they’ve rebranded it. That’s an instance where we leveraged mph working with the folks at DWD. They wanted to train this model on education data, k twelve and higher ED data, along with the data that DWD owns. In the unemployment insurance context, DWD didn’t maintain a clear statutory authorization to see the other data directly at the level needed to train this model. So we did the training. MPH has statutory authority to access all of it. We did the training in an IoT licensed environment that MPh sort of has control of, and then separated the actual model from the, from the personal information and handed the model to DWD to then run and productionize. So from there, DWD’s environment now doesn’t need that big bulk of training data that it, that it initially was injected with. That’s interesting. So if different agencies have different rules on out of retention and at the same time, what level of permission, assuming the feds are out of the issue, HIPAA, whatever it is, you know. Right, but what level of permission are we willing to give to break down the walls so that the data can be linked? So you’ve got a, you know, looking at maternal health and now you want to add an education and then you want to work, add in workforce development, sort of. And so all those silos have to come down. But when you integrate it, then are you mucking things up? Right. Well, you said you pulled it back out again. Well, and, but an important distinction there in my mind is a transactional system versus an analytical system like what we have at MPH. So in a transactional context, DoE is collecting the daily student record. Right. And that system has to be on to receive that data from all of the schools across Indiana. DWD is interacting with unemployment insurance claimants all the time to do a thing like this. What we need is the MPH system to, we pull only the data that we need to train a model out. We have a copy of it in this MPH bucket. We conduct the activities that we need and then we pull the model out and the actual separation goes through. We have a policy documented online. We refer to it as our, it’s a data review team and our HIPAA privacy board that we’ve set up and the data review team reviews that data product, ensuring that only what’s going out is only what was intended to go out is going out, and then tying that downstream use back to the statutory purpose. So where other states probably still struggle with this, where they have a health and human services agency that does those things and they have an education agency that does that, connecting that data is very hard because of FERPA and HIPAA and 42 CFR two, they can’t get past those barriers. What the legislature did for Indiana in 2017 in creating MPH was sort of create a data Switzerland where we can come in again. We don’t operate in that transactional context. It’s only to do these kind of special projects. So we were scient, and I remember I was newly elected when we passed that, which I did not think at the time, but I would have to say. So are you telling me that other states don’t have something like the management performance hub? They’re not, because that. So they don’t have the Switzerland that can make these AI models and pull the data out without interfering legally with any of the. All other states do not. Wow. Yeah. So from a management standpoint, I mean, we’ve had some great questions here about AI and the risk and everything. We know there’s limited budget, people, resources, time and just ability to change. Your point from a design standpoint, can you speak a little bit about the process of like how you’re gathering these. Specifically AI risks across the organization and then like gathering them, prioritizing them, and then is there a line of demarcation of like, look, we’re gonna, we have the means to tackle the criticals. We can’t do high, medium and low. But is there, is there a process in place to kind of track that and then share alignment on what we’re, what our focus is? So the process that’s in place right now, the first gate, if an agency, I would just say, wants to do AI there, we’ve designated, we’ve designated an agency privacy officer in each of the 100 plus business units. And that APO, as we call them, is tasked with submitting a readiness assessment to us. And it asks very basic what we see as very basic questions about this proposal. Do you have sufficient staffing resources to go through the implementation process, but then importantly maintain and operate it for the long term so that hopefully we’re not on the hook with a vendor to do that? Do you have the requisite it infrastructure? Have you had a conversation with IoT? They don’t need to be blindsided. As agencies try to do these things. They want to be involved in the process so that they can help inform and bring to bear this, the benefit of enterprise infrastructure and everything that they do. What does the financial situation look like to maintain this? MPH is an OMB agency. So we want to understand that an agency has sufficient resources to do this. But then we get into much more the substantive line of inquiry, which is what’s the regulatory frame look like in the space where this it implementation, this AI implementation is going to be the data that you expect to ingest to create to output the types of individuals that you’re interacting with. Because again, in my realm, in privacy context matters, right? So we’re asking some basic questions at the outset and that’s going through a review in our office. And it’s a, you know, I talked about in the larger NIST context, we designate a project team. It’s many individuals that have different competencies, sort of following the HIPAA model, right, that look at a data product to determine if it can go out. This is similar in an AI implementation. Many people with different competencies. We have the same way that this committee is representative, right? We have it, we have legal, we have operations, we have policy. Everybody’s looking at that through their own lens. And then their putting questions back to that state agency. That’s just the first gate. Ideally that doesn’t take more than a few days. Now we’re at the very beginning of this operationalizing it is hard. Then what we do is we either determine that we can grant an exception to that, to the NIST portion of our policy in all or part because it is a, the Iot chatbot is a great example. That’s, it’s a, it’s a locally hosted model. It’s trained only on publicly, already publicly available Ion dot gov data. And Iot worked with us. An important component of our policy, I think, is that hoosiers need to receive notice when they’re interacting with an AI enabled thing. Right? They need to understand that black box and IoT worked with us. And I if you click on the beta instance of the Ion dot gov chatbot, a notice pops up and it gives you very easily readable set of guidelines that hey, this is how this works. This is what’s happening. So from there, if the implementation doesn’t get the exception, that’s where we’re going to this full nist assessment. And our policy is still very young. We’ve not done that yet. And I think one of the things that MPH is kind of trying to figure out is how do we ensure we have the right resources from a data governance perspective around assessments and evaluations? We’re already doing data maturity assessments in state agencies. Our CDO has asked our team to do that. We have a privacy maturity assessment and a privacy impact assessment program that’s pretty light. Still, functionally, these AI assessments, agencies want to do this. Vendors are selling AI enabled stuff. So if we’re saying you have to go through these gates first, we want being housed in MPH. The whole goal is to enable innovation with data, but we want to do it responsibly. So how do we allow that to be easy for the agencies? We’re still working through that last piece. Great. Thank you. Any additional questions? So I have one on the, I would say as a representative, one of the things I hear more than about anything else is complaints from constituents on getting access to data. You know, I’m checking in on my unemployment and I’m on the phone for 45 minutes and then I get sent to another one, then I get cut off and I have to call back and then they’re mad, so they call me. Are we moving towards that information being available? Like to the, to the chat bot. To the chat bot conversation? If you directing them to go to workforce development, you can ask them, how do I find out where my, what’s the status of my unemployment? And that gets into that point a lot quicker than that. 45 minutes on hold time. Are we kind of across the spectrum of all of these, you know, interactions? Is it to that level of getting these people that kind of information? Yeah, I would say we’re, most of what’s going on now is really bridging a gap between what’s already publicly available and what most receivers of services can get to through an online system. We have the state houses and operates over 2000 different applications across all of our state agencies. So user self service access is available in almost every agency from almost every level of credentialing, permitting licensure, any of the footprints that are out there. And a number of agencies are continuing to modernize and make those more easily accessible and available as well. The question starts to become into how do I, for folks that aren’t technically savvy and that don’t have the same level of access, is there a way that we can get them more conversational or readable or simplistically access to that data without them having to remember usernames and passwords and things of that nature. And that’s the world that we’re starting to look at and understand. And that really is going to require significant investment and time from the agencies themselves to make sure they’re meeting their mission goals and modernizing some of that technology behind it? So it kind of goes to, we talked a lot about, you know, phishing licenses, and you don’t, you don’t hold any data other than how many people inquired, where did they inquire from and things like that. But if we get into these issues, like, I want my unemployment status, how much is, how much unemployment paid me so far, I want to get that. That’s going to require you to ask me a lot of more detailed questions of who I am. Correct. I realize that the Department of Workforce Development already has the system that tracks your unemployment. And as a unemployment recipient, you can log in and see that information directly. Okay. So that’s why I think there’s a little bit of disconnect with people, because I tell them, you can. This is one particular question was, where’s my unemployment? You can go on and create an account and you can track it yourself, correct? Well, I just called them and they didn’t answer their phones or whatever. And I think people are moving when they hear. I just got a call today from somebody who said, why? I saw on the Internet, I can get this, this or this. Is this a good thing or not? I said, if you got on the Internet, the answer is no. Okay. It’s obviously getting to buy something. But I think people are looking for the fastest, safest, and easiest way to access data, kind of without that login process. So if I want to get by, I don’t want to have 42 different logins and passwords. I want to be able to just get online and get that information almost immediately. But again, you have to find a way to know who I am. Otherwise, I want to know what Matt Pearce has been getting, unemployment, etcetera, that opens up that whole can of worms. That’s exactly right. Yeah. So are we. What’s on the horizon for that path to easy, accessible data that you’re almost. I don’t want to say immediately, I don’t want to go down this discussion today, but you hear a lot about facial recognition and things like that, and I think that’s another issue that plays into this whole AI thing moving forward. So I think that may be for our next session or two or three. I’ll refer to it. I mean, we’re making a lot of progress. The technology has come a long way. Again, it requires investment from both time and resources and financial investment as well. But we’ve got a pretty good cadre of available activities, actions, and filing of rental assistance. We stood up a number of online systems through pandemic because of the inability to get into buildings to get things done. So there’s not been that I can think of any transactional service that the state’s not providing online, that they’re providing in person, that they’re not providing online. So the access is there. The simplistic approach to getting it, that’s the question. And that’s the challenge. User interface, user engagement, customer access. We still have. And I think there’s, you know, there’s one, I don’t know the code offhand, that requires us to still accept applications on paper. So, I mean, there’s still that balance between how do I move forward in technology while still not leaving anyone behind? And so we’re stuck in that. You know, I’ve had folks ask me all the time, don’t you want your website to look and act and work like Amazon and Google? And I said, I can’t afford that. Well, and I would say this. From my perspective, 30% of my county is Amish, which means if they want data, it has to come through a request, written request, and a paper sent to them. So in one sense, how do we keep moving forward with all this technology without cutting off a segment of our population that has either rejected technology as they have or just hasn’t? I mean, could Bruce Border still get this on his flip phone? I mean, because that’s. I mean, he’s probably one of the only reps I know still has a flip phone, but, and that’s just it. I mean, it does what he wants it to do. He can call. That’s all he wants to do is call. Right? That’s right. So if he does, are we forcing them to move towards this, that they don’t want to move towards that? And then there’s those who, just because of their belief, have rejected it. Yeah, I think we can’t let that those people get away completely or to the curb. Other questions? Adam? Partly a statement, partly a question. But if you’ve noticed, Tracy and Ted both have said numerous times as they’re talking about this, we already have to do this. We already have to keep this data private. We already have to look at the business value. We already have to judge the cost. In your last statement, though, Ted, you talked about working on an AI assessment. Explain for the group what is different, because if I had a really good, really smart group of people that would scrub the data that has been proposed by the agency, and they could do it as fast as AI, which that’s what we’re talking about, right? Intelligence. It’s artificial, still intelligence. So a group of people does it. You’d look at the business value. If it’s private data, if it’s public data, all of that. Tell us exactly. Tracy, you could talk about this, too, but tell us the differences or the factors that differ from every other technology decision you’ve made throughout your career that AI presents, right, because I don’t think it’s as much as we think. Right. As a group we’re asking all these questions. Mister Barrett, I respect your questions. Those data, they’re private. They’ve been private since I was an attorney and went to law school. They’ll be private long after I’m dead. That doesn’t change today, right? We’re not releasing AI to go just scrub all that. So I guess, Ted, if you could talk about the assessment you’re building, and maybe Tracy add in on it, I think it would help give context to the real business problem we’re talking about. I think what’s different here for us is that AI presents this ability of a computer to sort of be human like, right. And it can, we’re a traditional IT system, we’re used to that interaction. The dynamic is changing and it feels much more like we’re interacting with a person from a purely contractual state government bureaucracy perspective. My mind goes immediately to, we were kind of talking about this before. If a state agency needs a statutory purpose to process, to collect, to maintain, to use, eventually destroy state data, data that is passing through these halls, certainly our third party vendors need to be held to at least that standard. So right now we do that very informally through our state boilerplate contract that the Department of Administration maintains. What we don’t yet fully have in place is I think we need more resources to refine our existing processes and make them more scalable. So talk about this in the context of this assessment. It’s recognizing that these types of IT systems pose new risks. When we talk about we’re building a thing and there’s a foundational model from Google Cloud, and then we have a local it vendor that’s going to build some customization on top of it. What’s that intellectual property situation look like? Who owns the inputs, who owns the outputs? Who trained this on what data was it? We want to understand that if it’s going to be making decisions about or interacting with our population, right? So from a contract perspective, we can put in place all sorts of administrative controls. Vendor, you attest to us that you’re doing this, you promise to do this, right? And here’s a penalty if you don’t. But we talk a lot about trust, but verify the, but verify in this instance is something that we want to do before the fact, and that’s this assessment. To do the assessment, we need to either farm out to third party assessing organizations so groups over here that aren’t in the data analytics aren’t in the it building space that do these assessments professionally or, and probably more likely when I talk about vendors help, the state does a lot of process stuff really well. Third parties help us innovate, and that’s a good thing. But the long term maintenance and operations of those systems, speaking just as TED for a second, in my mind, that probably shouldn’t be farmed out in most instances, there are cases where it’s appropriate. We probably need this assessment competency in house to evaluate these tools under our existing framework. Now, I’ll step back and I’ll kind of end with also recognizing that right now the framework, and I hope I made this point at the beginning, this is our first effort. This came to the public consciousness. Everybody wants to now do AI. The agency heads and their CIO’s, their ctos, they want to improve the condition of their constituents. Right? That’s a good thing. We want to enable that, but we want to do it responsibly. So we immediately looked to NIST and built up a maturity assessment on top of it. There’s probably over time going to be a better way to do it that’s more efficient and we’ll pivot to that when we feel like it’s right. No, just to add in, Adam’s got an extremely valid point, and I think that’s glad he brought it up. The reality of all these questions that we’re talking about here, these are all the same questions that we have in basic general technology decisions. We’re just adding in an extra layer of complexity and cost. When you think about doing it from an AI perspective, I mean, it’s the evaluation of how do we continue making sure that effectively, our agencies have missions that they need to accomplish, they have goals and services that they’re trying to provide. What is our actions and activities to help enable that as effectively and as efficiently as possible? And that sometimes is not always a technology tool. I mean, there’s been scenarios and situations where, hey, Tracy, can you guys build a program that goes out and identifies and contacts these 2000 people to determine whether they’re valid or not valid? It’s like, yeah, but how quick can I get ten people in here to get on the phone and make that call and have that done by the time I get a programmer to get up to speed and understand what it is that you’re trying to do there? I mean, those are the evaluations that we are going through on a regular basis. This adds another level of complexity. When you look at letting a tool do it that has unknown levels of programming and coding and development, and not maybe secure by design concepts behind it, these are all standard actions and activities that we take on on a regular basis. And I mean, this is just that next iteration. And it’s, you know, not the final one. We know there’s another one with quantum around the corner. I mean, these are, this is the iteration and evolution of technology in our daily lives. Bill, I think my question has been answered well by the last two comments, but to be clear, my question wasn’t, how do you make data private? The state’s done that for years. The question is, and it’s the heart of what we have to work on, is how do you keep data private as you transition into the use of AI? And because it is intelligence, the question is more focused than a device that simply answers rote questions. This is terra incognita for the whole world. And so we’re all trying to learn it. That’s why the question remains relevant. And a specific question that comes from that is, do you require vendors to disclose their algorithms so you can look inside what they’re doing, so you can know that something is going to be treated the way you expect it to be? So we’ve not gone through our full NIST assessment yet. We’re in conversation around one of those. I think that would be the intention. NIST has 70 odd, I think it’s 72 subcategories that, where it asks very specific lines of inquiry. To effectively answer those and determine a maturity on each, we would need to see under the hood. Senator Brown? Well, I just want to, I want to echo and appreciate your comments, Ted and Tracy, because I think, first of all, going back to what you said, that there’s not a transactional, what did you call it? No, what, Tracy, when you were saying across the agencies, 100 plus, that is not automated in some way already. In other words, I can see, yeah, I think that’s actually quite amazing. Because most of us don’t. You know, maybe we do our bmv registrations online, but most of us are not doing a lot of stuff with the state. And if we’re not engaged with FSSA and checking our Medicaid account or checking one of those things that unemployment and that’s, you know, just all one offs. But the fact that that’s all automated I think actually is nice because it puts us ahead of the curve. Because the little bit I am starting to read about this a lot of, I think other states, because the feds aren’t doing anything, are trying to be efficient. And how can I use this tool to make our agencies more efficient? And that’s really not what we’re really needing right now because our agencies are efficient because we have moved that workflow so that people can see and that’s what our constituents care. Now you got a high amish population, they can’t go online perhaps, although some can, right to see that workflow. Where I am in the process, my permit, you know, I’m the professional licensing agency. They’ve started to up their game. You know, they were one of the last, quite frankly, and they’ve started up the game. So I can see where am I in the process. It may still take a while, but at least I know, yeah, they got my documents or whatever the process is. But I think that’s really important. And so that also, and I guess I would just say then my comment is that actually puts us in a really good spot. So we can choose or not to go down the path, maybe with one agency or lots of agencies to look at these models and these products, if you will. But we don’t need to because we’re not efficient enough. It’s more how can it enhance the product we’re offering? So I think that’s what’s nice about the chat box. I don’t know what I don’t know. So when I am starting to ask the state, I’m thinking of being a landscape architect, licensed, blah, blah, blah, where would I even go? Or do I need to, or I ask those really broad questions, right? That’s how that’s a good place because we don’t want someone, you know, sitting by the phone answering. But I think it’s also your point that if ten people could have been hired on a contract to do the phones, which, you know, was the whole unemployment mess, through Covid, et cetera, have these people out there and then in a sense when their job is done, they’re gone instead of buying this big system that we really don’t need all the time. That’s an important piece. But also the fact that we’re looking at the places where there are gaps right now, so to speak, go back to the chat box, but not because our agencies themselves are not doing their jobs and have already integrated technology. I think that’s really important as a takeaway. So even though, as I said when I, you know, visited the cybersecurity or what’s it called, the council, yes. Government’s always going to be behind. In this case, it’s okay because we have pushed our agencies to get out there and be more efficient in their technologies and to adopt what is appropriate to server constituents. But we’re not going to have be looking to adopt these really expensive, bright, shiny objects because they’re cool and they’re fun tools to play with. But there are so many unknowns. And, you know, just from when I. People don’t even know how to audit these, you know, to even see, right. That they’re actually doing their jobs, you know, at the end of the day. So I applaud you too, for having a sort of brought this to us in a way such that you’re honest and that you don’t know what’s out there. And that’s why we don’t have to rush to judgment on some of these things. That’s really reassuring. Thank you. And maybe to build on that from the standpoint of, I do think we’re a bit of an outlier, maybe ahead of the game on some. But what, what have you seen in other states? I mean, are you guys part of any, I mean, like, we’re all part of some organ, NCSL and coil, everything else where we go and we chat and we hear, my state’s doing. Here’s your state’s. Are you a part of any of those organizations and what are you seeing out there that either. Either you come back and you go, man, I’m glad we’re not doing that, or you come back and you say, you know what, we need to develop that a little better, a little faster, a little stronger. So my office, my team, we’re part of the National association of State CIO’s and that has the CIO level. My counterparts from the 50 states and the four or five different territories, we meet regularly. I was just in a meeting in Milwaukee about three weeks ago, and I mean, this is a hot topic, but what are they doing? We’re all cautiously trying to figure out what to do. There’s one use case that I think our friends out in North Carolina have done, you guys may get a kick out of this, is actually interpreting legislative code and bills to understand what they need to be focused on and what, what they need to be prepared for. To testify or be prepared. To work on as their sessions are going on. That’s been the biggest item that has actually made it into a production state that we’ve seen and talked about. I think the agency said that when their name was mentioned in 40 different bills and they didn’t have the bandwidth to digest them all and understand, they were trying to look to an AI tool to make sense of that and summarize that for them and prioritize their time and attention. So it’s very cursory use cases like that. It’s content summarization. Productivity seems to be the one that folks are just dying for and talking about nonstop. And maybe that’s because that’s some of the hype that the vendors are putting with their sales pitches as they’re talking to different jurisdictions across the nation. But we’re all in a cautiously moving forward capacity looking to see what are we missing, what are we doing, how do we make sure we’re doing this the right way and protecting, while increasing the collaboration and the effective output of that value? I’d add, from our perspective, we’re also in the privacy space, lucky enough to be able to glom on to the CIO’s through NaCio, the chief information security officers and the privacy officers also have a group that comes together through them, but also the International association of Privacy Professionals, the biggest privacy association in the world, about, I think, just shy of 100,000 members worldwide. They’ve released recently. The first sort of, I don’t know, I think I’d say commercially accepted AI governance certification. Another team member and I, my colleague Jen Cooper, attended their first AI conference where they’re a governance conference where we’re hearing from people worldwide, particularly in the European Union, around. How are they tackling this? Because often they’re taking the hard governance approach, and ours tends to be a little softer, but we have a lot that we can learn from that, too. All right. Other questions? Comments? So maybe one thing on, on that as we talk, as we wrap this up yet, but, but a couple things. One is I, you said moving cautiously in this, and I think what, what all factors go into that, moving cautiously, because I want to go back to, I think the, the biggest issue I have is data versus human, is, is that loss of personal touch. And I think how many times have we all been in a situation where we see something and say this doesn’t seem right, it’s that intuition we have as humans, to say, I don’t think this is good, it’s going to have a negative impact on something. I didn’t anticipate, whereas data is cold. Data may say, yeah, you’re going to negatively impact this x group, but we don’t care because we’re data, right? We’re giving you the facts, not the feelings. So when you start to move through these things, how much of that we never want to lose the human touch of government to the public. And I think there’s already a disconnect in a lot of that. They already think government’s disconnected from them. But the more we go into the they want faster, they want cleaner, they want smoother, but at the same time they love to hear a voice, they love to touch a hand. And so I think how does all that bounce together? I’m going to answer one piece and I’m going to put tail on the spot to answer more specific to that content from our world. There’s a few gates that we’ve been trying to get through in order to even say we’re ready to do something with AI. There’s been legal reviews of new contract terms and conditions that have come from some of the large providers. So we’ve been going through evaluating, reviewing those, understanding what their models are, their data sharing practices are what they’re looking for. Our ability is to install and utilize that within our own frameworks, our own tenants versus them trying to pull it into a public tenant. Getting the next step, starting to look at can we put what we call a playground or sandbox in place so that we can have our own internal footprint to start and see how does this actually work? How are agencies trying to use this? What are you looking at? So we’re a ways before even looking at any output or determination of has a human needed to or been involved in reviewing and ascertaining the validity of that data and output. We are still working through framework what are the right governance protocols within the technology? Does the technology even fit within the framework and footprint of what we’re doing with our overall enterprise architecture standards? Do we need to be introducing foreign technology that may or may not have been existing in the state operations already versus the tools that like I said, we’ve been using that are starting to infuse AI into their footprint and so we’re still at from our side. That’s how. Tom saying cautiously moving forward, making progress with starting to acknowledge and ascertain the tools that we already have in place or that are really kind of top of mind versus actually getting data ingested and processed through it and analyzed and output determined and actually decision ready. Ted? Yeah, thanks, Tracy. That’s as I listened to your answer. That’s why I think Indiana is blessed with having IoT and now in a smaller and a narrower role, the management performance hub with enterprise architecture. And then between both of us, a degree of enterprise governance in it. We talked about it a little earlier. You get agency heads and their chief technology officers, their chiefs of staff, they’re charged with doing certain things in their domain, right? But often it’s strategy and improvement for that agency’s mission. And today that involves information technology. So having, if they are in a position, generally speaking, where they want to go, they want to do this thing, having that enterprise viewpoint, the 50,000 foot view, that’s a check in the process. In a government context, I think it’s still pretty important. We’re not a startup. We do want to be innovative, but again, we’re not going to be right at the tip of the spear. So specifically, to your question, I mean, it again goes back to other things we’ve talked about. AI is still very much a copilot. When I’ve talked about the NIST risk management framework, if you look at that, it talks a lot about human centricity, that certainly the context of use matters, but that in all decisions relating to the implementation, we should be thinking about what is the impact on all of the user groups. So in a state government context, that could be external users, that might be policymakers, and the information that you’re going to glean from the use of this system. Right. And if we keep those sort of principles in mind as we go through these processes, I think the real struggle just becomes, okay, how do we operationalize governance? How do we actually put a new team in place to do this thing, this assessment that we were talking about or something else? So in a way, is it fair to say it’s kind of that separation between data and decision? Because I look at, I think if I asked you, if I asked Department of Workforce Development, give me unemployment data over the last 20 years, broken down by age, demographics of location, that would take an individual hours and hours a week, multiple people working on that task, whereas AI might be able to generate that report to me in hours type of thing. Now I have the data I want. The question that becomes is AI should not decide to. Okay, now who should get the benefit, you know, and I think that’s the difference. And that’s where we have to make sure we’re putting our parameters is we. I think AI has a wonderful potential to cut down on the time it takes to get just pure data, you know, because there are times you want a long track of, give me this history, years going back and it’s, you know, and God bless LSA. But they’ll say, yeah, we’ll get you that. How many bills were filed in the last 20 years on X issue? We can find that. If they could do that through AI, that’s great. But when I say then AI needs to decide how we’re gonna write the bill, I kind of want Mike looking at that with his eye. So I think that data versus decision, I think is where as policymakers, we need to make sure we’re putting parameters around. We want speed to data. We just don’t want it making the decisions. Is that fair to say? Completely agree with that, Senator Brown. Thank you. You know what, following up with that with respect to that and, you know, referencing LSA, I think that’s the difference too with us right now. And other states, the states that I’ve looked at that have already legislated in this area. I mean, we don’t know what we don’t know. And they’re already saying this is what it should look like and this is what the outcome is. And that product and that whole process could change even before, you know, ink is drying the bill and it’s been implemented. And I think that’s amazing because, you know, that idea of change, of separating the data and the decision is so important because some of the legislation that has been passed is already deciding what the outcomes are supposed to be on these processes. And you can’t really do that. You know, then you’re just almost gaming the system. Right. And so that’s what’s so. Interesting about taking the time to look to see if these processes, products are even appropriate or necessary and where we can fit them in. Because if we’re going to already decide what the result should be in a sense with these, you know, purchasing an algorithm, an AI product and using it, then we’re sort of setting either setting ourselves up for failure or we’re automatically, in a sense, requiring bad data to put in. I think that’s interesting because I can’t imagine where we are today. And frankly, how, again, I’m going back to your comment, Tracy, about how far we are in the space with servicing our constituents in transactions that other states are ready to implement these products and put them out there and decide how, how they should be ethically assessed and audited when they’ve not, they cannot possibly have been tested thoroughly enough within their state systems to know how they should be governed. I mean, it’s really quite remarkable. And I think there are a handful of states that I can recall already have gone down that path, which is kind of amazing when I think about it. I mean, I never envisioned that we would be doing any legislation in this space anytime soon, but that just sort of reinforces it because we could just be basically spending a lot of money and because of our own legislation causing a bad product really because of what we’re asking the outcomes to be. Right. That’s kind of an interesting way to look at it, I think. And then I would just say, and we haven’t talked about this, but, and I’ll just say as the author of the underlying bill we looked at, and it was on the cybersecurity side of our local government. But that should make us all a little concerned if any local government or any government entity in Indiana is already putting these products, using these products because you have a much greater bandwidth to test them, of course, you’re doing it across a lot more agencies probably, but that would be a little disconcerting to me if my local units were using these because they’re expensive. And even with the expertise you have, it’s going to take a lot of not just manpower and figuring out how to make sure that they’re doing the right thing, right, that they’ve been implemented properly. So, you know, I was concerned initially on the cybersecurity side in terms of, you know, us being a connected to these local units of government and their vendors and things, and then they somehow, you know, malware, etcetera, gets in our system. But on this side, I didn’t think about it, but I mean, think about all the data that we take as an example from local units of government, you know, the county health departments, you know, maybe our jail populations and, you know, voter registrations. And if they are implementing products and processes in these areas because they’ve been told it’s efficient and we get better results and we take that in, that could really be a problem for us in the end. So. Okay, so that was a very long winded comment, but how do we then tell the locals, slow your roll. Frankly, you know, don’t let’s, let’s have a conversation about this, because we don’t have a control over them right yet. Well, I mean, for one, we, my office has been engaging with our local government it leaders for the last two and a half, three years. And so for one, we’ve started at least a conversation. We are all, despite the fact that we’re the state, they’re locals, whether it’s counties, cities, libraries, water, wastewater, school districts, we’re all it people trying to fight the majority of the same problems and the same issues and dealing with all the same vendors. So we see it as a collaboration opportunity. We definitely see it as the ability for us to provide some thought leadership we’ve brought together. We just had our last cybersecurity conference in June, and we had over 300 folks from the state and local government footprint just to have the open door communication and ability to share with each other. These are things that we’re thinking about. Hopefully you’re thinking about them, too. This is what we’re hearing from vendors. Here’s how we’re trying to tackle this. There’s been a lot of interest in seeing the output of this task force and the creation of the task force. So the opportunity is there. And so it’s, I think we have folks that are interested in working with us and working together along a same, similar accord just because they see it as the right thing to do in good value. And seeing that the state is starting to be a bit more vocal about technology from that perspective, there’s not been a push or desire or ask for control or legislation or standards or requirements on how to do specific things. Again, we never want to get into tools and specific activities and actions. But the reality that they see us struggling with it and they see us being more methodical, definitely helps them reinforce their messaging to their leadership and their elected officials, that we’re working together and trying to follow the same pattern and same model with each other to keep each other honest and keep each other on the right track to that point. We’ve had a real good run in building coalition between our state and local government education partners, and this is just another step of that iteration as well. As we continue to see, the folks don’t often understand where city services stop and state services start or vice versa. I mean, we hear that all the time. We get yelled at about something that has absolutely nothing to do with us. We have our folks in the local area calling us saying, I’m getting yelled at about something that doesn’t have to do with them. Citizens don’t know that difference. And so how we can, can better provide services overall, I mean, that’s the goal that I think we see when you talk about citizen engagement and digital services. Our constituents are the same six and a half, 7 million residents that interact at every level of government within the state. And how do we simplify and make that more seamless so that understanding between us and handle it from a technical side that we can do, but not necessarily put that as a liability for them to have to figure that out and the challenges that they’re working through as citizens to know where do I go to get these services? You know, we’ve been working on the website side with local governments, the security spaces. It’s been a huge target for us for a while, and I think we’re going to continue bridging that gap. So the one entity we’ve really not talked about is what happens if the federal government says we want to get involved in all this? Are you hearing rumblings of that? I mean, you keep talking about these state groups you meet with, which is fantastic, working with counties, working with cities in the state. Is there any movement that you’re seeing on the federal level that’s going to say, thanks for doing all that, but here’s where we’re coming in and we’re going to set the rules. And I know, Josh, you worked on some federal stuff, so maybe you can chime in, but I just, I’m curious what you’re hearing rumblings from any sort of federal regulatory oversight of all of this. With the, the White House’s executive order on AI last fall, there were many directives to many different federal agencies to say over the next. There were different periods depending on the context. But 68, 12, 18 months, you need to study this and determine what your parameters are going to be for the use of AI, and then you’re going to report. So I actually have bookmarked, there’s an AI dot gov at the federal level, and then they have a list. Each agency was required at the federal level to compile a list of AI use cases. So NIsT, for example, interestingly, doesn’t have any, but the National Archives has a whole long list of them, some of which actually are pretty compelling to our team, too. What I think we should be aware of as it relates to that executive order is that, for instance, not saying that this is going to happen, but if Health and Human Services says any of our grantees that are doing AI have to do these things, if we get out in front of that and build an AI enabled it system right now and it’s not in compliance with something that comes from them ten months from now, is rework going to be required? What’s that going to cost? I just think that those agencies, the administration, we’ve already had some conversations internally about it, so we’re aware that that’s a possibility. That’s part of our check and our initial process right now, but not sure how aware each individual agency is. Matt? Yeah, there’s just a recent news update on that. So the Congress and the executive branch out in DC have definitely been looking at this and trying to figure out what, if anything, they need to do. And so I thought it was kind of interesting because California is also moving ahead on a bill and I think they’re getting close to passage. And Nancy Pelosi actually wrote a letter to her legislature saying like, you guys need to back off because you’re getting ahead of yourselves. And we got all these Californians out here in Congress working on this. So I think that’s interesting. But, you know, it’s the tug of war because sometimes you got to get something done. Privacy is the classic example. Just the Congress has been gridlocked and not been able to do a single thing. So the states have had to fill the breach. So we’ll see. But I just think that was interesting. That’s very recent kind of development, Josh, Yemen put on that. I know you’ve worked in DC on some stuff. Yeah, I mean, I think, I think they’re a long ways away in DC. I think the states definitely, whatever, 13 different states that have privacy bills, and they’re leading the charge with different AI task force. I think there’s more guidance coming from NIST, I think there’s more guidance coming from CISA and DHS saying, hey, here are some threats. And we’re, like, actively looking at those. But they’re not sort of law enforce, they’re not law enforcing, they’re not regulatory enforcing. It’s more of a, hey, we have to work on a public private partnership sort of standpoint, which would be different than here in the state of Indiana. To continue down that line. I think there’s, what I have seen is this productivity versus risk. Like, where does it fit in the quadrant, right. One thing that I’m curious about as we talk in terms of data, like where it’s all centrally located, because I think you said centrally located, right. A Switzerland of sorts, is that correct? So our analytics environment I refer to as a data Switzerland, housed on Prem and in an IoT sort of a protected data zone. Got it. Got it. So, like, segmentation, I think a lot of people want to know, like, what is that segmentation? Because if it gets broken into, what does that look like? Is all citizens data getting leaked out from one central source? That is probably the most concerning that I think everybody is looking at. Right. We see this with hospitals, right. Or banks. Banks. All your money is one bank. It goes down. What are you doing? So I think those are like, specific use cases. I think the federal government is looking at, like, banking and what that looks like holding people accountable. Like the SEC. Right. And they’re. Who are we holding accountable for that? So long winded answer. I think that’s good. And I think, you know, when you mentioned about California made me think, why wouldn’t the message to California be, what are you doing that we could use rather than stop doing that? I mean, I think that’s the issue I have with that communication, lack of communication between the feds and the states. If we’re getting it right, then ask us what we’re doing. Ask us how we’re doing it. So they use our data. Nothing forced something upon us that now we got ahead of them. Right? Well, if our ahead of them is better. So, I don’t know, does it mean, do we need to have some engagement with our delegation in DC, the indian delegation, to say, always remember this, if you’re going to do something around data privacy and around AI technology, talk to us before you just, you know, buy into something that this sort we’re going to pass out to all 50 states and the territories as mandatory standards? Well, I think certainly the administration, through our federal lobbyist, engages in that context, in the privacy space. A lot of what they’re debating as a governmental entity, we are in large part exempted. As I hear this part of the conversation. I know we’re talking about federal potentially flowing down to state, but my mind goes back to the state flowing down to local that we were talking about before. And the, you know, Tracy, having IoT be that rising tide that helps, helps the locals in cyber and with websites and self service models and all of that would just encourage everybody to think about the other touch points that state government has with local governments. From a policy perspective, I go back to the state archives and Records Administration that has actually very broad policymaking authority around records creation and maintenance for local governments, for prosecutors, for clerks, for recorders. There’s a lot that can be done there to help, to kind of steer in a certain direction. And certainly one other example, you know, we get from the federal government, when we receive federal monies, we’ve got flow downs and obligations that come to us as a condition of that receipt. Right. If we need to get the locals to improve or to adopt an assessment framework to do an it thing better, sort of follow the state best practice, maybe those regulated entities are encouraged by the, the relevant state agency to do that, too. So, you know, pulling one out of the hat. Department of Education, talking to school systems, hey, when you’re going to do these things, particularly in the AI context, as. Relates to children. To me, that’s a, you know, we like DWD’s pivot example because it was adults and it’s an, and it’s an opt in system. It was a captive audience, so it was probably going to have high use from the outset. But adults and opt in. To what degree can state agencies, through existing touchpoints, sort of flow down some of these obligations that they want, that we want our state agencies to have? Sorry, I twisted your question there a little bit at the end, but I. You used an AI answer to my question. One of the difficulties I would add in, though, is so we work very well with our federal partners. There’s not an owner of AI at the federal level. I mean, that’s the, you got AI looking broadly across. I mean, we’ve been unlike cyber, where we’ve, you know, we now have the CISA agency that we work closely with on the cybersecurity standards and things of that nature. You’re starting to hear some more rumblings of policies around cybersecurity because of the ability to set those as more general standards. But we get data privacy regulations from almost every flavor of federal agency that are all different. They’ve not been able to, and doesn’t seem very interested in even standardizing their expectations at their level, let alone looking to pass something down to us. So I’d be hesitant to say, you know, do we wait for the feds, or do we, you know, be too concerned about getting out in front of the feds? More to Ted’s initial statement of maybe we are doing it with the awareness that there could be potential for rework or adjustments as they finally decide to what level they want to engage and set that expectation and put that information out there. But it’s very hard engaging and regularly interpreting the various footprints of the regulations of the numerous acronyms, from sieges to FERPA to HIPAA to FSMA to pub 1075 to FTI, across the footprint that we have to then try and separate and silo and apply to the different pieces of data that apply to our different agencies at the state, state level. Senator Brown. Thank you, chairman. I do think that’s interesting, though. I was thinking of Ferpa and Hipaa. I couldn’t think of all those other things you mentioned, Tracy. But I do think it’s interesting, though, if the feds ever said, you know, you talk about us in the local units, had a light touch, but said, oh, by the way, all that data you have, we’re not actually going to ask you for it. But we’re going to ask you to share it with our model so that we continue to grow. Right? In a sense. And your point about children versus the captive audience on the DWD site? I think that’s really interesting. And I think that is what would make or should make every state the hair in their back and say no and a heck no. Right? Because that’s where it’s a soft touch. Like I’m not really going to make you do these things, but I’m going to gather this. And then again, we don’t really know how you’re going to use the data that you now are forcing us to give to you for this model. And obviously it’s usually by the purse. But that’s an interesting thought because on the cybersecurity side, it’s different. You know, we’re saying if you’re a vendor with us, we are able to say you better have the protections that we’re going to require before we have a contract with you. Right. And maybe we look at how we can help our local units of government, who I say are in the cloud attached to us. Right. In a sense, too, but that’s a different thing. And that’s actually kind of interesting because, I mean, data is everything, right? And it is quite clear when we passed the consumer data privacy bill a few years ago that there were some disgruntled individuals and associations in the hallway because their access was going to be cut off or at least made it a little bit harder. But on the government side, that’s pretty interesting because we won’t, if we’re not careful and always staying ahead on that point, we won’t be able to control what the outcome is. And, you know, we’ve seen this, we’ve seen the feds have not been really good. I mean, I don’t want to get too out there, but like in this whole border crisis and keeping track of just human bodies coming over, obviously it is a huge issue. But just like this, we don’t want to give them information if they’re not going to be able to keep good track of it. And then in turn they put it into a system that’s going to skew. And then how do you argue with the computer that what your outcome is wrong? Because we haven’t been able to, in a sense, watch. The algorithm and assess it. That’s really interesting. I just want to go back, though, real quick, before we finish, Ted, you had said when I was at this conference, they were saying we don’t have something like underwriters laboratory, in other words, that good housekeeping, if you will, seal of approval for electronic device, electrical devices and things. So are you saying that there is now an AI governance seal of approval certificate? That’s not what you meant to. No, that’s a. It’s AIGP. I believe it is. If you look up the International association of Privacy Professionals at AIGP, that’s a certification for individuals to be recognized as governance professionals. Frankly, in my own mind, of where I think this might be headed, I think it follows the cybersecurity model someday of that, you know, we have a, we have a Fedramp program at the federal level where cloud service providers that want to do business with the federal agency have to have a Fedramp authorization at a certain level to maintain that federal data in the cloud. And to get that those cloud service providers go through a very robust assessment process and third party review of their cybersecurity posture. AI models present interesting. Certainly there are cybersecurity concerns. That’s one of the various areas that the NIST framework’s concerned about. But AI models and the way that they pivot over time, that they can decide to move in this other direction, they present unique challenges where I feel like we might get to a point where there’s almost a FeDramp style, a trusted assessment for foundational models, and then there’s some way to validate the models that you’re, you know, often local vendors are building on top of that. So not there yet. The fear would still be the data being put into the model. And I think that’s the thing to keep in mind and think about is even if an entity organization comes out and says, we are going to be a model certifying agency, if you’re going to put bad or improper data into it, do not expect valuable output at the end. All right, we’re at 04:01. I don’t want to cut anybody off, but I do want to. Is there anything else, Ted or Tracy, you want to comment or anything to wrap this up? I think what I was hoping to accomplish today, I think we did, is where’s Indiana at, and what are we doing? And I think we’re hearing some positive things. I think there’s possibly still some challenging things ahead of us. So anything you guys want to wrap up with or say one thing, completely non substantive, I’m reminded, and I went back to a note from one of those, from that AI conference I talked about. Trevor Hughes, who heads that IAPP, the privacy association, was using an analogy of Carl Benz inventing the car in the late 18 hundreds. And his point was that trust and safety allow innovation to move more quickly. He invented the car, but it had no brakes. And the initial regulatory response to that was to have a flag man, a man with a red flag, walk in front of the car. So everybody knew a car was coming. It was his wife, Berta Benz, who said, maybe you should make the car be able to stop. And that idea of pumping the brakes a bit and maybe, you know, it allowed all of us to use these things. So when I heard him say that at this conference, that’s worth noting for the work we’re doing. I like that. All right, if you would. I think the next meeting, I know we’ve reached out. We’ve had several people reach out that want to come and present secondary education. Some space, some people in that space, some other technology spaces want to come and opine and give their information. So we’ll look at having another meeting probably sometime that second or third week of September. And then. And I don’t know, I’m just. I’m thinking, I’ve got some dates here that I know I’m going to be very selfish. And, you know, basically say, since I’m driving from northeast Indiana, I’m going to be down here on the 9th, the 16th, the 18th and 24th in the evenings. So if any of those days would work, we’ll reach out to your las and your staff, et cetera, and we’ll talk with LSA as far as availability and things like that to make one of those days possibly work. So I don’t have to drive so far. Yes. Can I just get on the record one topic I’d like to look into for some future meeting? And that’s the issue of using facial recognition to identify potential. Perpetrators of crime. There’s been some problems up in Detroit, at least, where AI was used to basically go out and compare surveillance footage of someone who’s committed a crime. So they’ve got a facial recognition profile of the face, and they’re either going through all the governmental records of all the photos that exist of people, and they’re looking for things that appear to match. Or some cases they’re going out and scraping, like all the social media, and they might come up with like 145 photos that kind of come close to this person that’s visualized committing this crime. And they’re kind of figuring out which one they think just based on that data, which they think is the most likely the perpetrator, and then they throw it into a lineup. And so they basically had situations where a couple clearly innocent people were actually charged and brought in to. And so that raised for me just a question of, is any of that type of technique being used in Indiana? And if so, are there any kind of guardrails on it? And would that be anything we would need to address? I put down AI in the educational space, and then I put AI overall in the economic space and the societal impact space. I would say it’s more in that societal impact space because I’m still, and I’ll say this, it still troubles me, and it just, I can’t get it out of my head. Was last year when the gentleman showed the picture of a group of people and he said, not a single person in this picture is real. They were all digitally created. So there’s no, those people don’t exist. And it led to the issue of, what do you do with things like child pornography? You know, if I can generate digital imagery where my defense would be, who did I harm? And that’s dangerous, and I’ll turn to law enforcement. You already have trouble enough trying to make sure the data connects, and I got this evidence. But we are going to have some societal issues with AI that we’re going to have to say, is that still a crime? Because in my opinion, yes, because it’s where you go next with that data. So I think we. But that’s an issue that I think going to the facial recognition, I like the idea of saying, hey, I can tell who did that because I got their face, but I don’t want to put somebody innocent in jail because my data was wrong. If he goes to the airport now, some airports, like four Wayne airport, you just show your id and they send you through. Right. Other ones where you have to stand in front of the little thing and look at your picture. And I think, is there no one else in the world who looks remotely close to me? I mean. Cause you just go, yeah, yeah, okay, go ahead. You know, and I’m like, okay, there’s no bad guys that look like me, you know, but I. It’s good that there’s not, let’s put it that way. So I think that’s. I’ll put that in that societal impact, but I’d like to have maybe some input from some people in that space. We’ll go to Kerry, then we’ll go to you for the societal impact. And what representative Pierce was saying, that also has a bias impact. Those facial recognitions, they have been shown to only recognize certain races, certain ethnicities, and they have the wrong identification. So you have an ethical issue. And one of the things, I know we went on privacy, but the elastic log monitoring the anomalies and abnormalities, I know it’s been in production since summer 2021. But how are you combating those biases within that program, too? Because AI is only as good as the person who trains it. And as I teach my ethics students, if you have a brain, you have a bias, because we all do, even unconscious. So how do you really train it? What is an anomaly? What is an abnormality? And how do you fight human biases that are training these AI programs going into it, especially when it comes to say you have a group of people of one race and a group of people of none race. Well, maybe it thinks it’s an anomaly to see the one but not the other. And so who is training the programs and then the facial recognition that go into it? There’s a lot of ethical issues that do come around with that. Well, thank you. I think that has been shown, you know, and it’s, it goes back to the, whether it’s good data or bad debt, but also what your base is that you’re using. Right. I mean, I believe it was Amazon that used internally for resumes to try to improve their own retention and hiring. And of course, they put in all of their current workforce and maybe, I apologize, whatever. This tech company, ironically, and of course, it came out with what they already have. Right. I think the bigger question is, though, to piggyback on what representative Pierce was saying, is if a local unit of government, because we know we’re doing an inventory of what the state is doing across law enforcement, every agency. Right. We’ve already had that. I think the concern is not that we’re preventing local government, but that. The ramifications of that. And I think we do have the resources here with this task force and with the MPH and IoT offices here, agencies here to be able to give guidance, and that’s the best we can do. But, you know, we may put our finger on the scale when we’re, I go back to the cybersecurity answer when we’re in issue, when we’re linked with them. But I do think it is important, you know, and I don’t know if any local units of government are using it, but I know what you’re talking about, representative Pierce, and that is disturbing because it took it one step further. You know, Tracy and Ted talked about having an individual and rep. Lehman looking at it before the decision is made. Even if you’re using a product, if you will, or process to create the data, they didn’t do. That is my understanding. You know, so the decision was made, and all of a sudden this AI product made a decision on who the bad guy was, and the decision was wrong. And so that’s what we’re not doing in the state of Indiana. That’s a good thing. But I do think, and I know your office has done a ton of outreach, Tracy, the Iot, but I do think we can’t emphasize enough how we can help give as many tools and information and advice, et cetera, et cetera, to the locals to say, you know, there’s a lot of good products out there and there are a lot of bad ones, and they all sound good at the outset and they’re going to give you great results, but there are really bad, bad ramifications when they go off the rails. And I think that’s another important part of this task force, maybe not writ into the original governing body roles or whatever it is that we have, but I think we need to be aware of that. And so if we know of any local units of government, or if anybody wants to come forth and say, yeah, we’re using a tool, I’d love to hear it, you know, if any are using it to show us how they’re using it in a good way. But, yeah, I’m with you, Representative Pierce. You know, if we’re not ready to deploy at a state level with the resources we have and the teams we have in place, I don’t know how a local unit of government would be ready to deploy some of the things that you mentioned. So thanks for bringing that. So are you asking maybe that we need to ask for that inventory from local governments, not just the state government? We’ll put that on the list. The other thing I would say is this, and I want to make sure, I want to make clear, because I know there’s people watching and there’s people preparing to come and give their two cent. We need to make sure we’re staying somewhat relatively close to what our challenge here is in the resolution and in Senate Bill 150, which is the effects of state agencies use of AI on Indiana residents, including constitutional privacy interests, employment, economic welfare. So again, the tie has to kind of be to that state and governmental entity. So if you’re watching this out there and you think, hey, here’s my chance to come and pitch my product, you know, and things like that, that’s not, that’s not what we’re, that’s not what we’re here to do. We’re here to have you come and say, this is going to be the impact on our public universities, our public schools, our public, whatever, public welfare. So through our agencies that are monitoring and governing that. So that’s, we got, stay close to our charge. And with that, we’ll send out some information on dates and times and any other comments, questions the committee, then we’ll stand adjourned and we’ll see you in a couple of weeks.
June 18, 2024 10:00AM – State and Local Tax Review Task Force Meeting

During the Indiana State and Local Tax Review Task Force meeting held on June 18, 2024, at 10 AM, several important topics were discussed:

Meeting Attendees

Joe Habig – Acting Budget Director

Cris Johnston – OMB

Rachel McCarty – Senate Majority Fiscal Analyst

Krista Ricci – Senate Majority Fiscal Analyst

Travis Holtman – Senate District 19 (Adams, Wells, Blackburn, Jay, parts of Allen County)

Jeff Thompson – House District 28 (parts of Hendricks, Hamilton, and Boone Counties)

Ben Tooley – House Republican Fiscal Analyst

Jack Jordan – Representative from Bremen, Indiana (Marshall, Fulton, and part of Pulaski County)

Gregory Porter – House District 96 (Indianapolis)

Ed Delaney – House District 86 (North Central side of Indianapolis)

Dan Hughey – Public Finance Director for the State of Indiana

Fady Qaddoura – Representative from the north side of Indianapolis

Ryan Hoff – Representing the Association of Indiana Counties

Stacy O’Day – Allen County Assessor and President of the Indiana County Assessors Association

Scott Bolling – Executive Director of the Indiana Association of School Business Officials

Key Topics

Max Levy Growth Quotient (MLGQ):

Ryan Hoff’s Presentation: Focused on the Max Levy Growth Quotient (MLGQ) and its impact on the distribution of property taxes among different units. He explained that the current MLGQ system does not distribute growth equally among units, leading to discrepancies in funding, especially for schools.

Examples and Impacts: Hoff provided examples of how different units like schools and municipal bodies are affected differently by MLGQ. Schools often get a higher share of property tax proceeds in areas with high assessed value (AV) growth due to the automatic function in their funding formula.

Challenges and Recommendations: Hoff recommended looking into more accurate mechanisms to reflect service costs in the MLGQ calculations and highlighted the need for possible reforms to ensure fair distribution.

Property Tax Caps and Distribution:

Discussion Points: Property tax caps were discussed as a significant issue, leading to redistribution challenges. Different units feel the impact of these caps in varied ways, affecting their budget and services.

Representative Porter’s Input: Highlighted the disparities in AV growth across communities, which impacts how property tax revenues are shared. Porter stressed the need to address these disparities to ensure fair funding.

Impact on Local Government: The conversation noted how local governments are forced to fight over limited property tax bases due to these caps, creating funding issues, especially in slower-growth areas.

School Funding and Debt Service:

Shift to Debt Service: Schools are increasingly moving operational costs to debt service due to constraints in their operating budgets. This shift is driven by inflation and the need to maintain services.

Scott Bolling’s Analysis: Bolling detailed how inflation and property tax caps strain school budgets, particularly in high circuit breaker districts. He presented data showing that transportation, utilities, and insurance consume the majority of the operations fund, leaving little for other expenses.

Inflation Impact: Highlighted that while school debt has increased, it’s largely due to inflationary pressures on costs such as construction and maintenance.

Farmland Taxation:

Concerns Raised: Increased farmland taxes are becoming a burden for farmers. The discussion touched on how the decline in net farm income exacerbates this issue.

Investor Influence and Development Pressure: It was noted that farmland prices are being driven up by investor interest and pressure from Greenfield development, adding to the tax burden on farmers.

Call for Policy Intervention: Participants emphasized the need for policy measures to address these taxation challenges and support the agricultural community.

Residential Excess Land Assessment:

Stacy O’Day’s Presentation: O’Day discussed the legislative proposal to reduce residential excess land assessment by 50%, explaining the different types of land assessments and their implications.

Market-Based System Importance: She stressed maintaining a market-based assessment system to ensure assessments are fair and can be statistically measured. Arbitrary reductions could undermine the system’s integrity.

Recommendations: O’Day recommended making adjustments on the net side (deductions and credits) rather than altering the gross assessment values, to help those affected by high property taxes without distorting market values.

Committee Actions and Votes

There were no specific votes recorded in the transcript. The discussions were more focused on presenting information and identifying issues for further consideration.

Additional Notes

Several representatives and presenters emphasized the need for nuanced approaches to property tax reforms that consider regional differences and specific community needs.

The complexity of the property tax system was a recurring theme, with many participants calling for simplifications and more equitable solutions.

The impact of policy decisions on local communities and school funding was a major concern, with calls for more data and analysis to guide future legislative actions.

My clock just said 10 o’clock, so we’ll call the meeting to order. Thank you for being here. I think we’ll first of all start with Director Havik. Do you want to introduce yourself, please, and just go around here and you can tell what we do or where we’re from and so forth. Do you want to introduce yourself, please, and just go around here and you can tell what we do or where we’re from and so forth. Go ahead, please, sir. All right. Thank you. Good morning. I’m Joe Habig. I’m the acting budget director. I’m the for Chris Johnston, OMB. Rachel McCarty, Senate Majority Fiscal Analyst. Chris DiRicci, Senate Majority Fiscal Analyst, Travis Holtman, Senate District 19, which is Adams, Wells, Blackburn, Jay, parts of Allen County, Jeff Thompson, House district 28 parts of Hendricks, Hamilton and Boone Counties. Ben Tooley, House Republican Fiscal Analyst. Sitting next to a very shy Tanz, uh Ms. Tanzel, but uh Jack Jordan from uh Bremen, Indiana. I have uh Marshall Fulton and part of Pulaski County. Good morning, Gregory Porter, House District. 96 Indianapolis. Ed Delaney, House District 86 North Central side of Indianapolis. Uh Dan Hughey, public finance director for the state of Indiana. Thank you. And I miss misspoke already. Uh I represent parts of Hendricks, Boone and Montgomery counties. Okay. So obviously I don’t have part of the kind of I think I mentioned there. So he’s in Ecuador. If you want to go ahead, please. And good morning, Mr Chair. Good morning. Committee members. My name is Fady Qaddoura and I represent the north side of Indianapolis. Thank you. Thank you. Today we have, I think four different organizations that are going to excuse me, testify, present with regard to some of the things that were talked about last time. I would encourage the members. I plan to, in a couple of cases, make comments or ask questions. I think it would be an educational time. Hopefully we learn some things that we don’t understand, maybe today, and so we end up with a better policy when we eventually, hopefully act next session. And so with that, we’ll get right to the first presenter, the association of Indiana Counties, if they come forward, please, to have, of course, a presentation that’s been already emailed to you. Floor is yours. Is that the right button? Okay, great. Good morning, Chairman Holdeman, Chairman Thompson, members of the committee, Ryan Hoff, representing the association of Indiana Counties, wanted to comment on a couple of the items that were assigned to this task force for the summer, though not all of them. First, I want to talk about the max levy growth quotient that was topic one and four. I won’t go through the history of MLGQ and how we got here. I think Representative Thompson did a great job of that at the last meeting. I want to just point out a couple of the functions of the current system, the current MLG queue that impact distribution shares amongst all of the units, because not every unit gets the same MLGQ across the taxing district, but also within different growth areas, you will have that MLGQ impact felt differently than in other places. For example, for schools, I think if you remember, the max levy growth quotient for counties is the six year non, the average six year average non farm income. And that rate applies to all counties equally. Same with cities and towns, I believe, for schools. However, the school operation fund gets the greater of the Max levy growth quotient, that six year non farm personal income average, or the three year average av growth in the school corporation. And that is an automatic function that the school corporation has actual assessed value growth built into their calculation, whereas it’s not for the other types of units. So in the recent housing markets increase, where you’ve seen housing values create a lot of extra av within certain taxing districts, certainly not everywhere, but within certain taxing districts, that has shifted more of the property tax proceeds over to the school district distribution because their growth was higher than the other units. So I point this out as a way of saying not all units get the same growth. But this is also largely a function of how units of local government, local taxing districts, local taxing units are forced to fight over shares of the existing property tax base, because in many, if not most, parts of the state. We’re now property tax caps, so you’re just changing how you distribute the pie amongst each other. So for schools through this functionality, in some places where they’ve had high av growth, they will be growing at a faster rate than other units. And yet not all AV growth is the same in terms of service requirements. If you have, let’s just use the recent good news of large data centers being brought to Indiana as part of economic development. That’s a massive increase of assessed valuation, and yet the property tax base will be impacted amongst those units differently, even though the service requirements of those units are different. For municipal units, counties included, growth in AV no longer impacts the units. MLGQ absent other mechanisms, MLGQ calculation does use growth and assess value if you’re considering annexation adjustments. So when a city or town annexes, assess valuation that had previously been outside the city limits, bring that new assessed valuation in. It gets added to the municipal levy, taken away from the county’s levy. Also, in fast growing communities, MLGQ calculation allows for excess levy appeal if the unit’s certified net assessed value and population growth meets certain thresholds. So that’s another mechanism by which certain units can increase their the growth of their levy, potentially to the detriment, well, not even potentially very likely to the detriment of the other units. The MOQ calculation also does not allow for a reduction in levy from previous year, absent any of the other statutory mechanisms that I’ve mentioned. But again, I’ll highlight that because not all assess value growth creates the same service costs, the growth in the CNAV does not necessarily reflect growth in service requirements and costs to the unit. Existing statutory allowances for growth beyond standard MLGQ rate and excess levy appeal can further alter the share the unit receives from the property tax base. Additionally, not all funds within the units are subject to the max levy growth quotient, so called outside the max, which increases the impact and revenue split amongst the taxing units, where some funds will be allowed to grow at a much faster rate than the controlled funds. We certainly seen the impact of that in the past couple of years with the growth in residential assessed valuation. Just to highlight, debt service is probably the one that gets the most attention, but also there are cumulative funds that are controlled by by rate rather than levy. To highlight one of ours, major bridge fund is controlled by rate rather than levy. Unequal growth in the max levy growth quotient and tax caps caused different properties to pay differently toward county wide services received by all county residents. So as the MLGQ grows disproportionately in some places and properties are at the tax cap, you will have residents within the city or town paying less toward county services than their counterparts who live just outside the city limits relative to inflation. Wanted to give a little bit of a glance at what I’m talking about. This is annual rates of change. So post 2020, obviously inflation being the purple line there, grew and then delayed. You saw growth in the net levy also go up extremely fast. However, the green line, which is the controlled funds, grew at a much lower rate. Here on this chart you will see index to 2018. While inflation was very low, levies grew just above inflation. Now, with the growth higher inflation, the levy is lagging inflation. The controlled levies increase at comparable rates with the max levy growth quotient as expected. Contrast, the increase in the non controlled funds which rose with inflation, though delayed, to the slower controlled funds. Just to sum up, the use of the exceptions to the max levy growth quotient is part of the manner in which we’re forced to fight over property tax dollars, but does not reflect service costs. The current MLGQ calculations may really no longer function effectively to align costs to revenue distributions, but increased service costs absolutely do need to be continue to be recognized and allowed within county budgeting from property taxes. Counties, all the local units really are experiencing inflation, just like the state experiences inflation. County receipts from the property tax base need to be reflective of the increased cost in doing business at the local level. Whether the max levy growth quotient is that calculation any longer, I say there may be better ways to do it. The current calculation is really reflective of ability of taxpayers to pay more because it’s based on income growth rather than service cost growth or av growth. That’s the underlying. Calculation, but increased service costs due to inflation, due to increased number of service recipients or new services provided. For example, if the county creates a new jail, excuse me, a new court, actually, if the state creates a new court within the county and the county has to foot that bill, that’s an increased service cost to the county that needs to be reflected within the share out of the tax base. So we would ask if Max levy growth is going to be reformed. Recognition of the rising service costs due to these factors and others must remain part of the system. And before I hand it over to Stacey O’Day, the Allen county assessor, to talk about the next portion, I’m happy to take questions. Senator Holman, so what is your recommendation? Ryan? If we reform the MLGQ, do we do away with excess levy? Do we do away with this disparity between schools and other units of government? How do we find a rationale for senior citizens who are on a fixed income with very little increase in maximum increases from one year to the next, how do we explain to them that we’re not going to do anything to fix that result? Sure, it’s a balancing act, obviously, between tax policy but also budgeting, because that’s more what the discussion is here is how much you can budget out of the property tax base even when it grows or doesn’t grow. The current calculation being based on growth and income, like I said, does not reflect service costs. So either there needs to be more ways to track service costs and for our purposes, like an automatic adjustment when a new core is created, more of those mechanisms that reflect service cost need to be added. Or we look at the ones that are existing, that shift kind of the deck chairs around for local government to make sure that everyone is receiving growth relative to their service costs. Do you think there’s some inequity in having a statewide MLGQ as opposed to regional MLGQ? It would certainly have different impacts on different counties. For example, I live in Delaware county, much slower growth than Hamilton county, for example. So the status quo affects counties differently. So changing it will affect counties differently. There would be winners and losers in, in that reform. Thank you. Other questions. Representative, go ahead, please. Thank you, mister chairman. Thank you. Ryan, your presentation, how does the TIF and tax abatement enter into the funding equation? Do you have any thoughts on that in the impact of the property taxes, regards to that? It wasn’t in your presentation, right? Right. I know that’s part of it, but it was not addressed. You need some help? I don’t know the answer to whether or not a abated property adds to the school district’s automatic inflation because for the other units it doesn’t increase your max levy growth question because it’s based on growth and income. Right. But those automatic, the automatic growth in AV, excuse me, the growth in AV, whether that applies to the calculation for the school district or if abated property is part of an annexation area, I don’t know whether I can’t answer that question, whether that applies to the calculation for those units or not. Can I look forward to trying to get that? Yes. Yes. I’d be happy to reach out to my friends at Department of Local Government Finance to get you that answer. Okay, thank you very much. Other questions? Yes, sir, go ahead, please. Thank you. Chairman Thompson, just two comments because I think this might be, probably will be an area that I would hope we have some reform in, that is property taxes, local funding for local units. Etcetera. The first comment is, I think you’ve actually highlighted part of the issue is just the complexity. Anytime there’s complexity, it results in unexpected outcomes. It also results in a lack of accountability. So as we move forward, I’d hope you and other organizations that represent local units would help us with simplicity, because with simplicity becomes accountability. I mean, this ain’t rocket science. I guess I’m adding a whole bunch of verbal twists on this one. So I guess I would ask, as we move forward, help us with ideas on simplicity, because I think it’s important for funding services, will be important for taxpayers, etcetera. The other comment I’ll make is you’ve highlighted several times, we get an extra quarter, we get extra services. The thing that I keep hearing is that local units have $4 billion of untapped tax revenues through income tax. That’s the number I just keep hearing. And yet I see local officials unwilling to use that to fund extra services, et cetera. And I think there’s a reason why is nobody wants to be the one that raises taxes. So we just keep looking to the state to change the formula behind the scenes, do these gymnastics. And so I guess I would say at the state level, I, for 01:00 a.m. unwilling to continue to do these gymnastics when there’s, you know, we’ve done an experiment and local officials aren’t willing to raise the taxes. So I guess as we move forward and we talk about accountability, local officials, I would like them to be the ones that make the decisions on there, on their taxes, as opposed to us in many ways, just as we move forward. I’m picking on you a little bit today, but I’m not trying to. I’m trying to say we want to partner with you as we move forward. Yeah, happy to absolutely be part of any of the conversations around reforming the max levy growth quotient. Use of lit, roughly $4 billion is the current local option income tax receipts in the state. So obviously those counties have, well, counties and cities and towns, through lit boards and so forth, have taken that opportunity to implement those taxes. In a lot of ways. The growth has, the growth in county budget, local budgeting, to the extent there has been any, has been through use of local income taxes rather than the property tax base, because obviously it is capped to large extent. So where there have been new service requirements above what each unit gets out of the property tax base through the MLGQ and the formula and levies, that’s where that growth has happened. You know, for example, use of the jail, let’s for jail construction, just as one example, but certainly happy to be part of any of those reform conversations going forward. Thank you for other questions represent DElaney yeah, I wanted to focus on something that struck me, which is that it seems that the current structure deals with what I’m going to call the problems of success. So if a school district has substantial growth in terms of AV, we give them a break. We can allow certain units to get an excess levy because again, they have special needs needs that come from growth. I don’t see anything in this series of slides or comments that tell me about the places that don’t have the problem of success, but have the problem of low av, low house values and have the same cost problems others do. Do we have any mechanisms that are designed to help with those communities which do not have the kind of growth that a Westfield or Carmel does? Is there anything that we have for them? Not within the current formula, no. Well, that strikes me that we’re fundamentally asking either the wrong question or we’re asking one of two questions that we ought to be asking. I think that’s a fundamental question. What do we do for those units? If I understand, you’ll know the history better than I do. Back in the seventies or eighties, there was a mechanism to support either the schools or the property taxes in communities that didn’t have quite the same revenue generation capacity. Is that right? We had a mechanism where the state would help fund, let’s call it the shortfall in property taxes. Before my time. But I know, for example, there used to be property tax credits that the state funded. And maybe that’s what you’re referring to. I think there were, of course, that we could create more mechanisms. So I think that’s a fundamental problem. The other thing I think we’re not talking about, it relates. So if I’m in an area that’s having substantial growth, my observation is that typically I’m not at the 1% I as a homeowner, I’m talking about the homeowners. I as a homeowner, I’m probably not at the 1% cap. I’m probably paying seven tenths, eight tenths of a percent whatever on my property taxes. Okay? Whereas if I’m in an area that is not prospering, I’m probably at 1%. So the 1% cap is inadequate to protect the poor person and useless for the one that’s well off. Is that a fair summary? The question of whether someone’s at the CAhps or not is very location specific. So I’m not sure I can generalize to say that growth communities are under and non growth communities are over. I’m not sure I can comment on that. I’m basing that based on the constituencies that I represent or that I’m familiar with, and I see this phenomenon. So I’m just raising the question that I think we’re not necessarily focusing on the real problems. We’re probably focusing on one type of problem. Lastly, is there any mechanism that you’re aware of that we could use to address this issue of the person who is elderly, living in their family home, wants to stay, and actually is lucky in the sense that their av is going up, but their income isn’t okay, and they or their heirs may benefit when they finally dispose of the property. But in the meanwhile, they’re pressed, what device do we have to help those people? So there’s the currently the over 65 deduction. Now, depending on the community that you’re in. I think Stacy O’Day, the Allen county assessor, intends to hit on this partly in her discussion, that mechanism. If you live in a community where there are almost no homes that are below the current av cap in that deduction, it’s very diff, it’s difficult, if not impossible, for aging individuals to get that credit buying into home in that community. So I know that’s something on the assessors association’s mind that I think she is going to comment on. Okay, thank you, Representative. Thank you, mister Chairman. Thank you. Represent Delaney at least from my observation. And again, it’s nothing scientific. A lot. If you hit the caps, it’s a combination of the property mix. If you have a good mix in, you know, all three classes, you’re probably better off. And then debt. I think a lot of times if you keep school debt there under $0.50 or so, that makes a lot of difference than a dollar. Now that’s just my observation, again, not scientific. Thank you. Thank you, Chairman representing Porter. Thank you very much. Just wanted between you, Representative Delaney, just want to give a point of clarification or introduction. When previous administration got rid of the tax situation with schools, if you had like a small town, like city like Seymour versus Carmel, the cess value would be up in Carmel because it’s growing, et cetera, et cetera. We know that scenario. What was going on was part of that formula, that was feature of school funding formula, which was at that point, they named it reward for effort. And their reward for effort went away under with three governors ago. So when we talk about that, we need to. That was that gap that was there. Mister Chairman, you might have been part of that back then. So I think that’s something that we need to you look at some history of what happened is we call reward for effort. I’ll look at that. Thank you. Further questions. Thank you. Thank you. And I’ll hand it over to Stacy O’Day to go through excess residential assessment. Thanks. Good morning. Floor is yours. Good morning, Chairman, committee members, thank you very much for your time today. My name is Stacey O’day. I’m the Allen county assessor. I’m also here representing the Indiana County Assessors association. As the president, I was invited here today to talk about residential excess assessment. There was a proposed legislation last session that was going to put a 50% reduction on all excess residential land. I guess first we need to decide, talk about what is res excess land. I’m sure people don’t know what that is. You have a home site value, which is a more expensive value, which is where your home sits and your homestead is applied to. You also have farmland that is used for farmland. Residential excess land is not farmland, and it’s not the homestead. So it’s that land that’s just being manicured and used for whatever you want to use it for. So the proposed legislation last session actually wanted to reduce it by 50%. And luckily, we’re here today discussing maybe what we could do differently with that. The caution that I’d like to mention is the assessment system is based off market value and use, and the assessors perform ratio studies annually to make sure that we’re hitting our target. And the ratio studies are filled with statistics that let us know that we’ve hit that target. If we take residential excess land and cut it in half, we would no longer be able to perform a ratio study on it because we can never compare it to market value. It would always be half of market value. Therefore, I just looked at some numbers in my county. I have probably more than 10% of the properties have res excess land. Anybody over one acre typically is going to fit into this bucket. So we need to be careful not to go away from the market based system. And that’s another thing I wanted to just mention. The market based system does allow us statistical measures. It’s very important. What I’d like to ask the committee to do is to help us with the implemented changes. The town of St. John’s brought upon us about ten years ago is basically leave the assessment system alone so that it can be measured and we can make sure that we’re hitting our targets. And if we have to make reductions on, let’s make it on the nut side, because that’s where the taxpayers are feeling the pinch the most, is out of their pocket. And we do have the tools to actually do that with the deductions, credits, and circuit breakers. And that’s another, you know, discussion you were talking about with the elderly homes. We certainly have folks, we get phone calls all the time from elderly people saying, you’re taxing us out of our homes. And that’s certainly a sad situation, but we can fix what’s coming out of their pocket on the net side. But I ask that we leave the gross side, the market side, stable because we don’t want the system become arbitrary. If somebody comes to file an appeal. I can’t file an appeal on something that’s arbitrary. The market based system gives us units of measure to make sure that we’re hitting our targets. So that’s one of the things I wanted to ask today, is that we actually adjust the deductions on the net side, but not on the gross side. The assessment system needs to maintain its integrity. Do I have any other questions? I think I kind of talked about everything that’s already in the slides without reading it. Thank you. So what you’re saying is this, my neighbor, just over the weekend, had somebody come in and bail the extra ten or eleven acres there, and by bailing that, it becomes farm ground. That is true. At that point, it’s probably a couple thousand an acre. And I assume if he hadn’t bailed it, it had probably been a value of 25,000 an acre. And so the way to handle that is to put a 90% red, I guess, not deduction, but exemption on that. So exempt 90% of the value when it’s not bailed. Because if one chooses to mow it himself and one chooses to have it baled, it’s night and day difference in the taxes. I mean, huge difference. That is true. The legislature can choose to use those tools that are allotted in the constitution to give exemptions, deductions on that side, that it can be handled on that side. It would be a little bit difficult in this particular situation only because most credits and deductions are standardized like it’s a percentage. It would be a little bit difficult, and we’d have to work through, like, if you have ten acres and you have 20 acres and you have 30 acres, it’s not a standardized deduction, so we’d have to work on the mechanics of that. But it would. That would be something of a bit of a challenge, but we could work on that. Thank you. Further questions. I have a question. Yes, Senator Holman. So your solution would be an exemption of excess property. Then that would come in after. We wouldn’t do it. We wouldn’t provide a new class of something other than farm ground or the one acre homestead property. It would be done through an exemption. Is that what you’re proposing? Exemption, deduction? Whatever you feel is most appropriate. I just want to maintain the integrity of the market based system that we have. I think we’d be opening a can of worms because if I have two acres of excess, but my neighbor has 20 acres excess, where do we draw the line? Is all excess property that’s mowed and looks like lawn, does that become subject then to the deduction? Otherwise, as chairman Thompson says, if it’s baled and farmed, then obviously it’s farm ground. But I just think that we’ve got to tighten the, we’ve got to tighten the requirements down in some fashion. To have a number of acres and excess land that’s available to be exempted, deducted from the tax bill, that’s possible in the assessment world. I’m worried about making sure that they’re at market value, because when you purchase a property, it’s an investment, but when you turn around to sell it, the assessment should be market value, and I don’t want that to be half the value. So if you want to make them equal on the side of deductions or credits, the constitution does allow that. Okay. Okay. Thank you. Further questions. Thank you. Thank you. I believe. Next on the agenda, we have the association of Indiana Municipalities. Good morning. Good morning. Just give me a second to pull up my. All right. Good morning, everyone. I’m Kamala Ricci with Aim, representing cities and towns this morning. Thank you all for inviting me to come and speak. As is often my role here, I get to tread over some of the same ground that my dear friend Reinhof has tread over. So bear with me. If I repeat some of the things, I will try to add new value to the things we talk about and not just repeat the things, things he said. So the first thing we wanted to talk to, just like the counties did, was on the maximum levy growth quotient. So the MLGQ is the cap for how much our general fund property tax levy can grow each year. It’s up to 6% normally, or it’s currently capped at 4% from the 1499 changes. And other than that, it’s the six year rolling average of non farm personal income. It’s been that way for as long as I’ve been here, even back when it was called the AVGQ. This is predominantly the only way that the general fund property taxes grow. The other part of the general fund for most cities and towns is local income tax, but that’s also distributed based on the property tax levy. So the MLGQ, able to grow adequately, also helps with the local income tax distribution. So those things are inextricably tied. So even when we talk about local income tax, going to your question, Representative Jordan, that’s still tied in at the moment to how the property tax levies are growing. And though there is this untapped capacity for cities and towns at least, and for many counties, some counties can change it unilaterally because it’s controlled at the county level. For those where they have a local income tax council, you have to have collaboration for many units to change it, and they don’t always agree. So there’s not always a way for an individual unit with an individual cost problem to address it directly that way because they have to negotiate that with the entire county, either at the county government level or with the county government and all the other cities and towns in the county. So simplifying that system so that we can get it down to where individual cities and towns or individual counties can change their own rate without having to affect the other ones could be a way to access that capacity without affecting the property tax system and without affecting the other units. So that is one thing that we’ve been working on. I know Representative Thompson has been working on that question for many years as well. We’d love to see that move forward. I just wanted to address your question while I was talking about lit briefly here. That that is, that is something that I think we could work on coming out of this committee as a way to ease tensions among all the units. Because a lot of time when you talk about the property tax system. It’s people fighting over similar pots of money. And everyone has an incentive to grow their levy because they want their share of the capped property taxes and they want their share of the lit. Even if you have tax cap problems in that community, easing some of those tensions would benefit everyone and reduce the amount of times that they would come to you asking for solutions. They could deal with it locally. The other thing I wanted to say about MLGQ is that, like I said, it only caps the general fund portion of the levy. There are just, as Ryan mentioned, parts of the levy that are outside of the MLGQ. He mentioned debt service is the biggest one, and also some of the rate limited funds like cumulative capital development and of course, the school referenda, which are both outside the cahps and outside the MLGQ. I put on here this chart the DLGF made, because I think it’s illustrative. If you look at the levees that are inside the MLGQ, they’re growing less than half as fast as the ones that are outside the MLGQ. That indicates that the MLGQ is working to control the part of the levee that it actually is designed to control. And the part of the levee that’s actually growing to a significant degree is the part that it doesn’t affect. And I worry that when we talk about MLGQ, we’re thinking that we’re talking about the portion of the levee that’s growing. And to a significant degree we’re not, because the levy is growing much faster in those levees that are outside the caps and the ones that can more easily capture av growth. Because if you have a rate limited fund that automatically captures the av growth, if you have the levy, that’s out, but you can reset the debt service one, then you can reset it at basically the same rate as you had before. But now it’s captured all that av growth, and you can sort of disguise it that way, has the same rate, but the actual collections go much higher this one. So we’ve been through this period of very rapid av growth over the past couple of years, and it’s been significantly in excess of the MLGQ. The MLGQ was 5% last year and has capped at 4% this year, whereas AV growth has been up around 15% during that first year. And I think it’s going to be around 9%, I think they’re saying this year. So how that would normally function mechanically is the AV goes up and the MLG goes up less. You expect rates to be driven down to the extent that that’s not happening, that simply can’t be affected by the MLGQ, and further capping the MLGQ is not going to deal with that problem. I also wanted to address one thing you said, representative Thompson, during the last meeting, you were talking about units where they’re not growing, but they’re still taking their max levy going up, and that’s driving the rate up. And that certainly does happen. That can happen. But what the statewide data shows is that what’s more often happening is that the AV is going up more than the MLGQ and the MLGQ is driving the rate down, which I believe is the intended function of it. But that also means that if we’re looking at ways to control the rate, we should probably be looking outside of it. The last thing I would say about MLGQ, because I know Senator Holman asked Ryan, what would you do? How would you make it different, talking about regional differences, that sort of thing? This is sort of where our thinking is at. On, on it. So there are sort of two functions, the MLGQ. One is it’s providing, so when you want to provide some sort of like inflationary adjustment for everyone, because just because you’re not growing, your av doesn’t necessarily mean that your costs aren’t growing. So there should be some consideration for that if you reform the MLGQ, for there still to be some sort of growth, even if you’re not growing very much. But it would also make sense to perhaps differentiate it based on how much your county or community is growing so that you can better capture those things without resorting to going through the excess levy appeal process. We would certainly obviously love to see the details of one of those proposals, but that would sort of be the thought of those two pieces. One to make sure that every community can still have some sort of account for their cost increases, and the other one to have some sort of accounting for growth. That makes sense. I just wanted to address this quickly. We talk about how the property tax bills have been rising recently, and there’s been a portion of that that I feel like has been under discussed, especially among cities and towns. Cities and towns have more than a quarter of the tax cap loss. Of units throughout the state. Because we have an extra tax rate on top of all the other tax rates, you’re more likely to hit the caps. That also means. So that means that more of the properties inside of cities and towns are at the tax caps. When gross a fee rises, regardless of what decisions you made at a local level, you may have not even kept your, you may have kept your property tax rate stable or even decreased it somewhat. I know on my property tax bill, all my taxes rates decreased, but my AV went up this last year, and so my liability went up because I was at the caps. I think that’s probably a very common phenomenon, especially inside of cities and towns during this environment. And so a lot of what people are experiencing right now is not really a change in the policy at their local level, but just the way that mechanically the property taxes caps are functioning to increase their property tax bills. When their mayor is confused, he didn’t do anything about it. It just sort of happened organically there. So I think when we talk about that, the focus is always on the people who are on a fixed income right, who now their property tax is rising despite the fact that there’s nothing they can do about it. Ryan already mentioned the over 65 circuit breaker and how that doesn’t necessarily affect all communities. There could definitely be a way to look at that, to reform that, to get those thresholds to a level where they’re more effective in the current environment of property tax bills. I also wanted to just point out that two years ago we had that we passed the county option circuit breaker for that same purpose for people over 55. I believe if the county wants to, they can cap their growth at between two and 5% and they can target that at specific neighborhoods where there are problems, as our gift from our late friend Sunder Sandlin. And so I just want to point out those mechanisms probably make more sense for controlling the actual growth of property taxes for those people who are most affected. Because I do think, especially among our members, the effect is significantly due to relieving cat pressure, is what is driving those amounts up. And before I move on to the excess levy appeals, which is related, though not the same, I’m happy to answer any questions about MLGQ, couple of, I guess, comments, questions I made. It’s an unscientific, maybe a too strong word of accusation, but at least from the data looking at cities and towns, the amount of bonding has just started to the past two or three years, started to increase in at least a concerning way. I mean, you could have some expenses that you could, in place of using your general dollars for, you could bond. Do you see much of that from your view? I mean, I don’t know. I don’t have all the data in front of me. The impression that I get is that the biggest project that you’re going to see on a general obligation bond for a city and town is a road project. And road projects have been especially sensitive to the price increases recently. I wouldn’t be shocked to see the debt service levies reflecting that increase in the cost of the road projects because that’s the one I would see most often, go to general obligation for a city in town. Just another maybe statement. It’s kind of the obvious. We pointed out last meeting that, I mean, wide disparity of dollars per student in the operations fund, and students are pretty well scattered roughly across the state. So what that tells me is there’s a wide, I mean, wide disparity in av per resident across the state. Is that a fair statement? I think so. I mean, yeah, I think that’s fair. Other questions? Comments represent Porter. Thank you, Chairman Thompson. Thank you, Cam, for being here. Your presentation, I think number three, chart number three shows that aim has a major concern in regards to the GLGQ levy growth and activities not covered under the MLGQ. Do you have any information on how much more or less these percentages impact cities and towns and governments, particularly for schools? I mean, I think when Representative Thompson presented last time, he did have that chart. I don’t have it in my presentation about where the debt service levies are highest and so on. The debt service we saw, obviously the schools were highest on driving the debt service rates. They also have the. Referenda, which are also not capped and are also rate controlled. So I would expect that to be there, too. On the other rate controlled funds like Ryan mentioned, the bridge fund or the Cumulative Capital Development Fund, those are funds that counties or cities control. And so those will be included in that, that are also rate controlled and are quickly capturing any av increases. So, I mean, I would guess the debt service is the, is the biggest driver of the ones that are outside of the gaps, especially on a statewide level. Locally, you might see a referendum here or there be the largest driver in some local community, but I would say statewide, I would expect at service, though I don’t know for sure. Further questions. Senator Cordura, thank you, mister chair. Good morning. Thank you, Campbell, for your presentation on this chart. It seems that the statewide levy values for both within the control under the ML versus outside of the control were actually not significantly different except for 2023. The chart or the slide makes it sound that if you want to cast blame on where the taxpayers are being hit hard on their property tax bills, it seems that this slide is trying to convey that message. Now, what happened in 2023, is that the delay and because one, because of COVID assessed values rising and inflation, is that what attributed. Yeah, I mean, that’s what most people attribute to. Obviously, because we pay in arrears on 2023, you have the prior year. So that’s more close to Covid when we had that increase. So again, if I compare the percentage change for the levies inside of the ML control versus those that are outside, you’re still within one to 2%. Comparing the two categories, except for 2023, it more than doubled. So I think I would slightly disagree with the framing of these numbers as far as to say that this is a systematic, ongoing issue. It is factual. That is more than by one to 2%. But how much out of the levies outside of the MLGQ is attributed to specifically school referenda? I don’t know. Perhaps those data are out there, maybe DLGF have them, but I don’t. I would expect it’s not because school referenda are not in every community. And so I would expect that to be proportionally low, though locally it could be, you know, higher for a certain community. Right. Because that $2 billion on an annual basis. I think Chairman Thompson, in one of the meetings of this committee, presented and showed a specific slide, I think that showed specifically for schools how much they were raising in the form of referenda. And it wasn’t 2 billion, it was less. I anticipate that some of it is debt service payments or levies for municipalities potentially. Yeah. Like I said, like some of those other ones, obviously municipalities and counties also have debt service. So it’s not just school debt service that probably rose and also all the other rate limited funds, not just referendum rate limited, but obviously there are others, like I mentioned, and those would have all been affected as well. Great. Appreciate it. Thank you, mister chair. Thank you. And Senator Cordura, I guess a kind of response, I understand what you’re saying, that 1% difference in a couple years really is not that big of a deal. Over 20 years, that’s what we see starts to happen. Those things all of a sudden just mushroom on you in the course of time, given enough time. Thank you. Further questions. Representative. Thank you, mister Chairman. Just one more quick question. So the presentation again. Thank you. So what do you believe is a mismatch between what is needed from property taxes that were generated versus the amount of revenue that you actually need to run a city or town? And if you know that answer, what is the average, or do you have a number on that, what is actually versus what you get, what you really need? I think that will probably depend community on community. I mean, I think some would feel even if they were given a new revenue option, like a new lid option, they wouldn’t feel like they needed it because they feel like they’re meeting those needs. Others, especially the ones that feel like they’re growing a lot, would probably say that with the levy controls on how their property tax levy grows and with the lid being controlled in the county level, they’re always pushing up against what they need to provide services. So I do think it depends, and the best solution to that is to push more of those tools down to the local level so they can control their own destiny on that revenue piece with responding to their own voters. Thank you for the questions. Thank you. Thank you. Go ahead, Ann, please. All right, I’m going to move on to excess levy appeals. This is sort of the other piece of the puzzle that we were talking about that also relates. The MLGQ, the excess levy appeals allow you to grow your property tax levy in excess of what the MLGQ would ordinarily allow. There are a couple of reasons for this. They’re due for annexation, like Ryan mentioned, or for a government emergency. But the most common one is called the three year growth appeal, which is the one we were talking about so far this year. This is, as I mentioned, it’s one of the only escape valves. If you’re a. If you’re a fast growing community, the MLGQ is statewide and the cap is what it is. So if you are growing significantly faster than that, and you have higher cost of services and you have new residents coming in, you need to serve them, this is the tool that you need to resort to. The only way you’re eligible for this is if over the last three years, averaged, your assessed value growth was 2% higher than the state’s assessed value growth. So even if you’re growing much faster than the MLGQ, so like the state’s statewide assess value growth, last year was or was 15%. So even if you’re growing something like 10%, which is well in excess of the MLGQ, you wouldn’t qualify for this. So it’s only for those experiencing truly exceptional levels of growth. The other part of the way that it functions, I just wanted to bring up is that if you qualify for the appeal, the amount that you can qualify to for is up to the difference between your actual AV growth and the MLGQ. So when you see the MLGQ capped as it has been, or AV’s grow significantly faster than they normally would, you see the amount that difference is bigger. And so what you’ll expect to see is the amounts that they’re asking for in appeals could potentially be higher, which is sort of what I wanted to point out. I brought in representative Thompson’s chart from last time, and what you see there is, I mean, you see a growth in the number of appeals. What you really see is a growth in the amount of the appeals, and the growth in the amount of the appeal is driven by how much you can actually qualify for. And what that’s driven by is, one, how higher AV grew, and two, how. What the MLGQ is. So when we cap the MLGQ at 4%, that increases the value of the excess levy growth appeal and therefore one’s incentive to go after it. Especially for those communities who are growing well in excess of the MLGQ and really feel like in order to meet their service needs, that they have to go for one of those growth appeals. I will say it does point out here that not all of the appeals are approved. You do have to present when you’re doing that appeal, what you intend to use it for. VLGF often wants data on that and explanations on what you want to do with it. And not all of them are ultimately approved, though, as we can see, most of them are. One thing I will say about the excess levy appeals, I know there’s been some discussion about how these are functioning and if we want to control the growth of them, it is the only mechanism for dealing with a rapidly growing community wanting to catch up its revenue base to its actual cost of services. If we want to limit this tool, we need to find some sort of way in the normal formula to capture that growth. Because if there isn’t that mechanism, this is the mechanism they’re going to want to seek. If they don’t have the ability to raise lit, to deal with those cost of services or they don’t have it in the formula some way, this is the only escape hatch that they try to seek out. So that’s what I had to say basically on the excess levy appeals question. Anyone has any questions for me on that, I’d be happy to answer them. Somewhat, I guess, related to that in how we grow levees, you have two communities. They’re identical in size, and, excuse me, one takes off and really grows and they have a lot of annexation, and then 20 years later the other community takes off and grows and they’re the same size. Now, today, won’t the property tax levies be different? Because when you grow, if you grow early, if you will, you end up with a higher base to work off of than if you grow late, am I thinking correctly? Yes, that’s definitely true. I mean, obviously growing, anytime you get into a formula that compounds earlier, it compounds greatly to your advantage later on down the line. So yes, that is true. At that point in time, those two identical communities will be like this. Because one grew first and one grew later, even though they have the same identical number of people and same services needed. Now the one confounding factor on that is that when you do annexations, you can do excess levy appeals based on that to deal with that change. And to the extent that at different points in times those are different and those are reflecting the actual needs of services, and that system is working well. You would hope they would be able to right size that, you know, obviously there may be situations in our history where that has not happened, but that would be the point in that process where you would try to fix that imbalance is trying to right size those levy changes when the growth happens and when those appeals happen. Thank you. Further questions. Thank you. And my last part is very, I just wanted to very briefly touch on the control projects piece. I know that we had on the list, your idea that is currently in effect to cap control projects based on tax rates instead of on the size of the control projects. I just wanted to bring up this mechanism for some people’s edification. Currently, a controlled project means that if you have a property tax funded capital project that’s usually based on debt, that’s over a certain size of the project, the citizens can remonstrate against that or send it to a referendum if it’s sufficiently large. We made this change to do that based on tax rate as well. So if you put your debt service tax rate sufficiently high, then you have the chance to do the remonstrance. This is the primary mechanism we have in code to control debt service levies. And I know that with all the discussion about debt service levies, this is likely something that you guys are going to take a look at. I just wanted to point out that you guys want to keep in mind when you’re working on this, not to make the process for going through control projects, going through the remonstrance process of the referendum process too costly or to take too long for local units of government. We have had issues where there were communities trying to time their capital projects with grants, federal grants and things like that, and the control projects process through a real wrench in that. So while I understand the need to use this project to probably look at those debt service levies, I want to make sure that any reforms that we look at don’t make them too burdensome, that they won’t be practical for the actual construction concerns of our local units. And obviously, I’m happy to work with you all on that as you’re considering those. But I just wanted. I know a few years ago, we work with Senator Holman to deal with that for road projects, because the road projects, some of them had been delayed past the federal grant funds from that process. And I just want to make sure that when we’re looking at this, we don’t unintentionally create issues like that. So I want to keep working with you all on that as we look at it. And that was the last piece of my prepared remarks. But obviously, I’m happy to answer any questions. Thank you. Any questions? Sing nun thank you for presenting. Thank you. Okay, next, I believe we have the association of Indiana school Business officials. Floor is yours. Please switch over the presentation here. Thank you, mister chairman and members of the task force. My name is Scott Bolling. I’m the executive director of the Indiana association of School Business Officials, and I’m completing my first year in this role. Prior to coming on board with IaSBO, I spent 14 years as the CFO and superintendent at Crawfordsville Community School Corporation. Denny Kastarison, who continues to consult for Indiana ASbo and I appreciate that Chairman Thompson invited IASBO to present today. Once we received the invitation, we notify the other education management associations to receive their input regarding this opportunity. So joining IASBO on this presentation are the Indiana association of Public School Superintendents, the Indiana School Boards association, the Indiana Small and Rural Schools association, and the Indiana Urban Schools association. The associations engaged with policy analytics to prepare the data for today’s presentation. And we’re fully aware that the invitation was for 15 minutes, so I will move as quickly as possible through the information. First of all, the data that we are presenting takes a long term look at the changes in property tax revenue and expenditures for schools over time. This data is publicly available through annual financial reports that schools must. Submit and through budget orders certified by the Department of Local Government Finance. It does not take into account voter approved capital or operating referendums because not all school corporations utilize that as a source of revenue. Also, it’s important to note that we decided to look at this data on a per student basis because we believe that this is the most fair way to make comparisons. So some key takeaways that we hope that you consider from the presentation today. The first is that assessed value of property across Indiana has averaged 3.7% since 2010. The past couple of years have seen a spike in assessed values. We acknowledge that, but if you look at a longer time period, the average growth is much less. Second, operations fund revenues for school corporations have not kept up with inflation, and on average, 75.5% of those dollars are spent on just three non discretionary expenses, transportation, utilities and insurance. And also in 16% of Indiana school districts, these same three expenses actually exceed the amount of revenue coming into the operations fund. The third key takeaway is that inflation has increased by five and a half percent annually since 2010, while debt service revenue to school corporations has increased by 2.6%. When you look since 2010, we acknowledge that school debt has increased, but we believe that inflation is a key driver of that increase. So, first of all, some definitions. We felt it was important to look at some broad subgroups of schools because not all schools are the same. So we chose three types of school districts. Small districts with an enrollment of less than 2000, growing districts whose enrollment has increased by 1% or more over the last five years, and districts that have revenue losses of 20% or more in their operations fund due to the circuit breaker. So even though our system of taxation is the same across the state, it results in some important differences depending on the type of district. And so we wanted to take a look at that at. So let’s start by looking at assessed values on a per student basis over roughly the last decade and a half. On the top left of this slide, you can see the statewide average was essentially flat from 2010 to 2014, with an actual decline in 2011. Then we saw low but steady growth from 2015 to 2022, and then a spike. That’s the only way, really to describe it in 23 before returning to a much lower level in 2024. But when you average out these numbers, the result is an average growth of 3.7%. And this pattern was pretty consistent. If you look at those different subgroups that I talked about, the small, the growing, and the high circuit breaker districts follow a similar pattern. But it’s worth noting that growing districts have had an average growth of 2.8%, and they lag the statewide average on a per student basis when you looked at those growing districts. So next, we’d like to have you look at what tax rates have done since 2010. This chart shows the statewide average of school property tax rates. The blue bar is the operations fund rate, and the orange bar is the debt fund. The top number is the combined rate for those two funds. So you can see that, for the most part, the combined tax rates have held relatively steady in 2023 and 2024. The average tax rate is actually lower than all the previous years. So we’ve talked a little bit about assessed value and we’ve talked about tax rates. Now, we wanted to do a comparison to compare assessed valuation on a per student basis to the combined tax rate, because those are very much related. And for this, we just looked at the current year, 2024. So on the left, the statewide figure for assessed value per student is 439.6. And that’s measured in thousands of dollars. And on the right, you can see that the statewide combined tax rate for schools is $0.97. For small districts, the assessed value is very close to the statewide number, and the tax rate is identical. But for growing districts, the assessed value drops to 385.8 on a per pupil basis, and the corresponding rate rises to $1.02. And for high circuit breaker districts, that 343.5 number corresponds to a rate of $1.30. So what are we trying to show here? These two charts show is that school districts are trying to provide the same level of support for their students regardless of their location. So if you live in a district with lower property values, it takes a higher tax rate to generate the same amount of dollars as a district with higher. Property values. So now let’s talk about actual property tax revenues. We’ve talked about rates, we’ve talked about assessed value, but this is where the rubber meets the road. This chart shows revenues from property taxes on a per student basis going back to 2010. So you can see that in 2010, schools received $2,561 per student. The next year that went down to $2,433 and then down to $2,300 before starting to grow. However, schools didn’t reach the 2010 level of funding until 2019. Now, since 2021, those revenues have increased and they’ve increased quicker by an average of 7.6%. But if you look at the average growth from 2010 to 2023, it’s 2%. So again, over the past decade and a half, revenue growth from property taxes to school district is 2% per year. Now we’d like to talk a little bit about inflation. We’ve got a couple different measures that we’d like for you to look at. The first on this chart measures inflation of goods and services most commonly purchased out of schools operations fund. So if you look at this chart, you can see that prices for goods and services have increased by 2.9% since 2010 and that they increased substantially from 2020 to 2023. If you look at the next slide, this chart shows price growth of construction costs construction costs, both for new buildings and for maintenance projects, are expenses that are typically paid for with debt in school corporations. You can see that the producer price index for construction costs has increased even more dramatically, so by 4.2% since 2010 and by 9% between 2020 and 2023. So if we kind of combine two concepts and we use our inflation data and go back to 2010 to see if the operations fund revenues have kept pace, you can see that they have not. Inflation over that period of time has been 2.9% annually, while operations fund revenue has increased by 1.5% annually. So now let’s take a high level look at the expenses of the operations fund for school districts. The first column here is the statewide expenditures in the operations fund, broken down into some broad categories. You can see that the average district spends $777 per student for transportation, $403 per student on utilities and $94 per student on insurance. Those three expenses consume 75.5% of operations fund dollars on average, leaving 24.5% for everything else, school bus purchases and maintenance, student technology roofs, h vac expenses, parking lots, anything related to the functional operations of schools. So when we look at our small, growing and high circuit breaker subgroups, you can see that small districts have a bit more room. But the growing districts only have 13% of their dollars on a per pupil basis left for those expenses, and the high circuit breaker group has no room for these types of expenses at all. They have to spend more than what they receive in revenue just to cover transportation, utilities and insurance. So we looked at operations fund revenue in comparison to inflation. We wanted to do the same thing with debt and look at it in comparison to inflation. As you can see, revenues are not keeping up with inflation. Debt revenue has increased by 2.6% on average since 2010, and inflation has increased at a rate of 5.5%. So what’s driving that high rate of inflation? When it comes to schools, construction costs are certainly a huge piece of that puzzle. They’ve skyrocketed in value over just the last four years. Steel used to be $4,500 a ton, and now it’s 9000. Roofing costs are up 69%. You can see the other cost increases listed here. So our last slide for this presentation simply takes one year, 2023, and compares the revenue received in both the operations fund and the debt fund. On a statewide basis, schools received a combined amount of $3,324 per student. Small districts do a little better than the schools as a whole in their operations fund, so you can see their bar for debt decreases. Growing districts receive quite a bit less than the statewide figures, so they make up the gap with debt. And high circuit breaker districts receive even less than the growing districts in their operations funds. And they try to make up for it with debt, but they can’t quite get there. And 46% of those high circuit breaker districts have referendums, and that’s what they’re trying to do to meet that gap. So once again, appreciate this opportunity. Please know that I, Asborn. And the other education management associations are looking forward to continuing the dialogue about property taxes. We understand that there are issues, and we’d like to be a part of that conversation. We fully support the comments made by Chairman Thompson in April that school corporations are complying with the current law, and that any review must move towards simplicity, flexibility, and that it will take more than one legislative session to try to make these significant revisions. There are additional issues to discuss that schools are involved in. We’ve heard some of that today. We understand that we’re involved with the maximum levy growth quotient issues, and we look forward to that conversation, the referendum question. And we understand that there is a need for additional transparency for the public regarding debt that need to be discussed in the near future. So with that, appreciate the opportunity to present. Thank you. Questions? Representative Delaney? Yes. First, let me thank you and the groups that support you. I think this is probably one of the most revealing documents that I’ve seen on the whole question of school finance, and I wanted to clarify one critical point. You indicated. I think you were talking about, I don’t know which page here. Page seven, perhaps, but you indicated that despite location, meaning growing, not growing, having tax caps issues or not, that the support level per student is very similar. Is that a fair summary of what you said? Yeah, I would say, okay, but the cost or burden of those students is not the same. Is that a fair statement also? I agree. So let’s get very specific. I’ll be really specific. I did a comparison some years ago, which I hope to repeat this year, between Wayne Township on the west side of Indianapolis, a mixed district with quite a bit of poverty, but some nice middle class areas, the airport, the interstate, all that, and the Carmel schools. And I compared them because they each have roughly the same number of students, 15 to 16,000 students, which is quite interesting. And what I found was that because of the tax caps and because of the lower av per student in Wayne Township, they struggled with referendum debt and so forth just to get to the same dollar spending per kid. But the Hamilton county kids, the Carmel kids, were maybe two to 3% in poverty, and the ones at Wayne township were over 20%. So at the end of the day, our complexity formula, which supposedly gives more money for poor kids, and our special ed money and language money, did not overcome the property tax differential between these districts. Right. When you switch over from the state support side of the equation over to the property tax support side of the equation, there is no real accounting for complexity. And if your costs are higher, you just have to raise your taxes through referendum or struggle or provide less services. There may be other choices, but those are choices. Those are the main ones. Yes. Options rather than choices. Thank you. Further questions. Senator Holman? Yeah, Scott. Thank you for the presentation. Very insightful. Do you know the total debt for all schools statewide today? What is that number? Do you know? I don’t. I don’t have that information. I apologize. Okay. I think Chairman Thompson does probably call. It’s about 2 billion, give or take. Just some rough numbers. It’d be interesting to see if you folks could come back to us and let us know the growth in that debt, if it’s been exceedingly high just in recent years, or if it’s just was at a plateau and it stayed there, and what those uses for the debt were, whether it was football fields or classrooms or whatever, it’d be interesting to know if you could find that for us. That’d be helpful. We can definitely research that and get back to you on that. That’s a good question. Thank you. Further question. Representative reporter? Thank you, mister chairman. Thank you, Scott, for being here. I just want to piggyback on what Representative Delaney said about the comparison between Wayne township and Hamilton county schools. Ben Davis area we think it was 2021 in a summer committee, which we did a complexity index study, but in. Never went anywhere. So we do have that data from 2021 in the summer as part initiative that we initiated. It’s there. So I think we could revisit that, Representative Laney, because we did talk about the complexity index, but I guess it wasn’t important enough at that time. Again, thank you for your presentation. My question also would be this. One of the things that has not been discussed in your presentation, as I looked through it, was the fact of the way the schools are making ends meet, how they begin to fill that gap, and the fact that some schools are transferring money from the education fund to the operational fund. And these transfers are very significant for some schools. And so do you think the caps or current restraints of these transfers should be permitted to provide at least some breathing room, Scott. For school districts, or that simply cannot generate enough money for their operational needs? I would say that the current rule, where it’s the same across the state, does make it difficult just because of some of the things that we’ve laid out here. There are differences in different communities, and applying that same rule across the state could result in disparities. Thank you. Thank you very much. Thank you. Further questions. Senator Kadora. Thank you. I appreciate the presentation was very informative. Any specific recommendations that you can share today based on this presentation for this committee? I think the main thing, it was in our takeaways, we realize, I mean, obviously, this committee has been, you know, is meeting, and we’re looking at all the different sources of on the property tax side of things. I think the main thing that I would recommend is just to make sure, as it moves through the legislative process, to realize that rules that might look really good for one community might seriously hamper a different community. That’s one of the reasons why we broke out the subgroups, is to show that even though we have a system that’s the same across the state, it can have very different impacts depending on the district that you’re in. So that’s key, in my opinion. I appreciate that. I think I have a couple of quick comments. First, request for more data analysis. One, it would be helpful to tie these types of districts with school or educational outcomes to show the reflection of the level of funding received by those schools, and then school or educational outcomes. I think my assumption is that there’s a strong correlation between funding and academic achievement. If you’re not paying teachers well, and then on the operations side, transportation, capital, all of that, I think there should be some kind of correlation between those, and we have heard that consistently. So that would be one recommendation the second recommendation I can’t help. I raised that during the last committee meeting. While today we are focused on property taxes, I would like to see some additional data analysis that shows overall school funding, including property taxes. And what is the need? Every time I speak with one of my colleagues, they keep asking me, well, faddy, what is the need? How much schools do need more? And I always argue that when you look at 1 billion of annual operational needs on a local level, whether race to referenda or property taxes, in my view, that’s unfunded or unfunded need by the state of Indiana. That pushed the locals to come up blessed by the state, empowered by state law, pushed the locals to raise these dollars to fulfill an obligation to provide services for our kids. So while we are focused on property taxes today, the question remains, how much is that need and whose responsibility to pay for it? And I think we get deep into the analysis, but there is a critical policy question to be asked. Who is responsible to pay for it? And then finally, when we just peeling the layers here, I wonder, and I was doing just some math in my mind, over the last couple of years, we gave more than a billion dollars over the biennium for vouchers. For example, while traditional public schools are the only schools that can raise, until last session, historically were able to raise dollars through referendum, now there’s a sharing mechanism with charter schools. But if I look at the billion dollar plus that went to the vouchers program, because money follows the student when it comes to school funding and discussion about property taxes and local needs, and the need for schools to go to the taxpayers and the voters to vote for it, I would like to see the data that shows for every dollar that went to the vouchers, how much the locals had to raise taxes locally if they need $1.5 billion locally. And we gave a billion dollars to the voucher program, is it $0.70 on the dollar? $0.80 on the dollar? $0.90 on the dollar? That the. Local. The burden was shifted to the locals to come up with that. So I would like to see that level of analysis. I understand it’s a little bit beyond today’s discussion, but there are consequences for policy decisions. The more that you divert dollars to different school systems, you’re starving different school systems, not just one, but most of them. Yeah, I understand. Thank you. Thank you, Senator Kadora. At least in the data over the years I’ve looked at, it’s about those that have a voucher are about half funded in total dollars compared to those that are in traditional schools. And that stayed pretty consistent. And so at least a point to be made is refunding those children at half the rate we fund those in traditional education. Right or wrong, it’s what’s happening. And I appreciate that. Mister chair, if I may just comment on this. I think, again, this is not about property tax, but more about policy and fiscal discussion. When you remove the cap on the vouchers to be 742% of the free and reduced lunch or the federal poverty line, so that a family can make almost quarter million dollars to receive that vouchers, that’s different than all of those communities that are struggling across the state. So we can. You’re absolutely correct as far as the. How much the value per student that goes to each school system. But I think there are other factors and variables, and I’m not debating the politics of education, I’m not debating even the preferences between parents, and that’s a parental choice where they send their students. I’m not even debating the policy of money follows the student. I’m just looking at it purely from a financial perspective. You have a certain limited pot of money, and now you have one system, two systems, three systems, four systems, five systems. If that limited pot of money is being divided across multiple systems, you’re squeezing the balloon from different areas, that each system will be impacted differently. And that’s really the concern that I have. I supported the chairman’s ideas of equalizing or normalizing the differential, the operational differential between different school districts, because that’s a symptom of that problem. So I think, I hope today was extremely informative, and I really appreciate the data driven approach. I think it becomes we have to take it back as legislators and think systematically and comprehensively, you know, what is the need, who’s responsible to pay for it? And if we are going to continue to ask the locals to put property taxes to fund our school systems, what is fair for these communities? Very good discussion. I appreciate you, mister chair, for that thank you. Further questions. Porter? Mister Chairman. Thank you, Mister chairman. Thank you, Scott. I have a question to follow up on Senator Holdman’s question regarding the composition of debt, and I realize you’re going to come back with that information, but in looking at slides eleven and 13, where we’re looking at the operations property tax receipts per student, and then also, then the debt and proper debt property tax receipts per student, and then tying back to the aim presentation about the growth in non controlled levies, or levies outside the controls, when I look at the 22 to 23 for on slide eleven, the receipts per student goes up $96. And then when you go to the debt property tax receipts from 22 to 23, it goes up $229. So has there been any studies? Are schools moving projects that would otherwise be paid from the operations fund to the debt service levy to pay for those projects, such as roofs or H Vac? Yes, and so I can’t, since that’s not debts, since that’s not referenda debt, which is probably a school building that’s paid over 20 or 25 years, we have projects that are actually being financed over two or three years, which then the annual debt service is compressed over a shorter period of time, further driving up the debt service levees. I think that’s a correct conclusion, and I’ll just give you an example from where I just came from. We were one of those high circuit breaker districts in Crawfordsville where basically all of our money went to those three categories. When you do that, your roofing projects have to move over to debt if they’re going to get done. All those smaller type projects that other schools may have room in their operations fund to do, replacing H Vac, those sorts of things. Schools in that. Group don’t have that and so they’re forced really to go to debt. But it’s not just those high cb schools. If you’re not taking enough money in on your operations fund on a per student basis to fund all the needs in there, debt is where you have to look. And so I would argue that the inflationary pressures that we’re seeing specifically on the items within the operations fund is then putting pressure on the debt service fund because that’s the relief valve. Well, inflation probably. But then also if you’re in a district that is fighting over a pool of property tax dollars that because of caps, you’re also looking for mechanisms to maintain your share of the property taxes, right? Yes. Okay. Thank you. Further comments, questions? Thank you. Thank you, mister chairman. Just a comment, mister chairman. Chairman Thompson, vice chair Holman, one thing that was not are we going to hear from the suburban schools in regards to this committee the way that the agenda today, it pertains to this? I’m going to entertain some comments they want to make. I think if they’re here and want to make comments, I’ll be open to listen to them. Sure will. Good answer. I wasn’t born yesterday. Okay. Yeah. Cause I think it’s important because that kind of tells me that maybe they’re in a lot better position than my other school districts. Also, I just want to circle back to your comment about the vouchers in Seneca door. The voucher situation right now, we’re not going to be as flush with money as we had been in the past. And no one’s really talked about those federal dollars that were there that came down in the last two budget cycles. They’re not there anymore. So we’re going to have to try to figure out as somebody builds its next biennial budget where those dollars are going to come from and what’s going to occur. We’re not really talking about it. And in regards to the comment about vouchers getting half or whatever from traditional public schools, we have to understand that we gave $400 million to that, to vouchers that now according to the bond rating, they are an entitlement. So that’s something that has to happen again. So I just want to keep it realistic and keep people’s minds moving in some type of cohesive direction in regards to building this budget when it comes to education and property taxes over the next two or three years. And we just have to remember that those people are our students, not those people. Our students were already in the system, and now we’re giving them a shot in the arm. So that’s my comment as we conclude this portion of the agenda. I just want to make sure we get that out there. Thank you. Thank you for the comments. I guess the one thing, Scott, and just thank you for the presentation. When I looked at slide 15, it reminds me of something important. It’s a lot of cases of things I talked about last time where I call them the outliers because if they’re within that rough range, there’s not a lot of problems. It’s those that are the outliers that get too far out. And then sometimes, of course, when we react, maybe appropriately so. But that’s a good slide. I really like that. Thank you. Appreciate that. Thank you. Thank you. I believe next on the agenda we have Indiana Farm Bureau. Thank you, mister chairman. And I guess I’ll switch over if I can find this. Close that. And there we are. Well, I can’t see. Oh, I can see it here. Anyway, thank you for this opportunity. I think the title of my presentation kind of says it all. Farmland taxes are rising. So if you live in a rural area, you’ve probably heard that from your constituents. And I’m going to explain a little bit about that. This is a chart that just shows you a lot of people. People are like, well, yeah, you know, farmland sales prices are increasing. And that’s true. We don’t use sale price for farmland assessment in this state. But it is, I do want to point out, just for those who are not necessarily in this real estate market, that those sales have been impacted a lot during the pandemic and more increasingly by investors who are looking for a long term rate of return. And there also is a lot of pressure from Greenfield development. And I think we’re seeing examples of that that are sort of out there all across the state. The one thing, too, is that in some, in recent years, the commodity prices and so forth have also been pretty favorable, but that also has impacted greatly the taxable value. So just a little history. One date that’s not on here is 1972. And that was a part of the bow and tax package where they decided that rather than the assessor picking a value and being very arbitrary, that the state would begin to implement a use value system, and they were to develop a system of soil productivity. So in 1980, that was first implemented, we were one of the first states to have a market value in use method for farmland. And although many states across the country have that now, and in particular in the midwest, the twelve Midwest states that farm bureau identifies as Midwest, they all are a market value in use. And I know my slide has got a use in use, but it’s value in use, except for Nebraska, who has more of a, a sales price issue system. And they definitely, we hear from them all the time that they want to know how we have done that. We’ve dealt with the town of St. John. Stacy O’Day talked about that a little bit, and that decision allowed for market value and use. So we crossed that hurdle. We’ve had some adjustments to the formula in 2010. The last big one that we have been grateful for and felt like was working until lately is the formula change that occurred in 2016. And that was where the introduction of the 8% cap rate came in. And then we also have, just like in 2010 and 2016, we’re back in a point where farm assessed value is a mismatch with farm income. So that is really why we’re here. It’s kind of a fiscal cliff. And some of the things that I will point out is that farmland owners don’t really have options for other kinds of tax relief that other classes of property have. I do want to point out that my slides and the charts you’ll see were prepared by Doctor DeBoer, so he couldn’t be here with us today. Because he’s going to go see his brand new, well, sort of brand new granddaughter. And so I just, if he’s listening, I want to thank him because he’s, as I look back at old presentations, it was a lot of his work anyway, so this worked out very well. So we use the market value in use rather than sales price. As I say, said it is only land devoted to and utilized for agricultural production, which is a little bit of that conflict that you had in the excess acre discussion that you had. It’s a capitalized net income approach, and it is, as I said, a standard practice in the market value system. So this is what the farmland base rate per acre looks like and has looked like since 2007, which followed a couple of years after the St. John was implemented in 2003. The value then was for a few years, 1050. So we knew at that point that farm income was down. And so the tax board at the time released the value. After some pressure from us, though, it came out to 880. So nevertheless, as you can see, over those years, up until we got to 2015, there was a lot of increase. There was a freeze in between 2015 and 2016 and then 2017, the formula really started to kick in and help us, and that it was primarily because of the implementation of the test between what cap rate it will use. And I’ll explain that in just a second. But as you can see, as there have been additional income available, and that’s based on global prices, that those things are. I mean, really, this is a reflection of global commodity prices. So we have a base value. That base value is going to be impacted by the soil productivity factor I mentioned, as well as influence factors, and that was one of the mechanisms that was considered last year on the excess acres. But I will address that at the end. I have some thoughts about that. So this slide, and I won’t go through it, but it just explains what soil productivity factors are based on and gives for the novice, which is all of you compared with me. Anyway, that’s what that amounts to. And we do get those. The assessors get those maps and they’re detailed soil maps from nrcs, which is part of the USDA. And so those have been implemented and they continue to be updated. The influence factors, I just think these are important so that you know that, yes, there’s a base value, it’s adjusted dependent on the productivity of your property, but there also are things that will reduce your value depending on its ability to produce. Corn is really what the basis has always been. So it could be in a classified forest, a woodland, it could be tillable, it could have, but it could also be flooding. So a lot of folks call me about that. It could be non tillable, it could be woodland and other farmland, which is like barn lots. But then there are some things that are 100% deduction, and that’s for ditches and roads and so forth. So the components of the formula include, as I said, this dollars per bushel, and you can see the variation over time. And some of those on the global corn price in particular, you’ll see in 2008, that price went up. That’s about the time that ethanol came into it. And also commodities seem to be better when other values are going down. Between the years of 2012, there was some recovery time there that is due to the drought of 2012. So there were. This is all really. These prices are very. Are completely sensitive to the world grain stocks and what those are in the end. So they have leveled out and then we’re back into increased prices. And that is really because of the stresses in supply chain. And the pandemic certainly had a lot to do with that. That drove the global corn price. In addition to the conflict in Ukraine, that is probably farmers appreciate it more from the standpoint than it is kind of a bread basket, if you remember that from your high school or middle school or elementary school geography. Ukraine is a really important part of the world food system, so that’s where that came from. Soybeans are impacted a little, pretty much the same and like I said, it is based on global stocks. The thing that I wanted to talk about, too, is yields come into the formula. So we have a net operating income that is a part of the formula, as well as cash rent. But let me. So the yields are important because we’re going to also look at different points in the system where. Different points in the system where the, where we’ll pick what the price. So the yields, I would point out, you can see in 2012, where beans were not affected as much as corn obviously was. It’s a high water user. But the one thing I would say is, if you look at the change between 2010 and 2023, it’s interesting to me that that change is really due to response from the seed varieties and the technology that goes into producing a crop. So as Americans, we are enjoying, and one of the things that drives a higher residual on global stocks is the fact that we have responsive varieties. So the prices are used there. And the thing that I would say on these prices that this chart doesn’t show is that prices are in decline right now. Today on the Chicago Board of Trade, the price for beans is like 1150 and corn. I wrote those down on my thing. Hold on a minute. Oh, yeah. Excuse me. Beans are $11.83 and corn is 450. And it’s actually been there for quite a while. As representative Thompson might know. So nevertheless, that’s really the problem, is that the formula is very sensitive to this. The other element that goes into the capitalization is we get average operating and land loan rates from the Chicago Fed. And in this case, you’ll see how, just like other interest rates, very stable for quite some time, and then they have been on the rise and since the, well, pandemic and other factors, and so trying to control inflation. But the one thing I would say is that we, these rates are used in the formula to establish, and there’s a slide that’ll show it. It kind of establishes a, it establishes a value, and then it says, how much did you increase? If you increase more than 10%, then your rate is going to be 8% for caps. As those interest rates that are actual compare with that 8% cap, there’s certainly less, as you can imagine, less moderation of the increases, which is the statutory rate cap, is to try to smooth out those peaks and valleys, which is not quite working there. This chart, if you look at the certifications from DLGF, this is one that will be projected, and I think it’s probably already out there for next year. But doctor DeBoers left in 2017, just as an example of what will happen, what was used before. So you can see that the lower rents and where we had really low operating, net operating income, that was due to an escalation in lower prices, but also dramatic escalation in the input cost, in other words, fertilizer, gas, all those kinds of things. And those have come down to a degree, but not very much. So you can see that for next year, the value will be 1900. And we look at the last five years and then drop the highest one. As you can see, we’re going to get to the point where we’re not going to have the low ones to moderate the increase, so it’s going to go high and stay there. This shows how the results of that. The red line is the calculation using the rates from the fed, and the green line is what the formula actually does. So there is no, I mean, we don’t have any question that there’s actually relief in the formula, and we are very grateful for the introduction of that 8%. I mean, there’s no question about that. The thing that I think that we get to is that for the most part, we can, and the slides will show that we have a very, the tax burden is very related to the base value. So that’s just basically it. So these increases are what I think our concerns are, is how much increase per year can people absorb? This chart is just another way to show that the delay in the years of the market value, the data that is used, and there is a delay, and by the time you do it, we’re still dealing with a four year delay. So when we worked in 2016 to try to change the number of years and so forth to extend that out, we really, I mean, we still have a four year delay before it was a six year delay. So we’ve chopped off a couple years, but we’re still not there. This is just another way to look at the results of the formula for cash rent and operating, obviously, cash rental. As any of you that own farmland may know or talk to people, it’s pretty stable because the people that own land are not all that interested in having something less. And so you get into a situation compared with operating revenue, that’s kind of all over the place. So if you farm your own ground, or if you farm and share that risk, then this is that variation. You’re hoping that you have more high years than you have the low years. This is another way I’m going to skip over this slide, because it just compares soybeans to the market value. These slides we tried, I asked Doctor DeBoer to look at a variety of things that we thought were problems in the formula. So the next couple of slides just show that we look at the November project. And then there’s also, like, a marketing year average that we look at. And the thing that this just shows on the next couple of slides is there is a mismatch there of that data. But in the end, as those were, as we tried to put those in the formula, and I’ve got some additional slides that I got from him that I’ll be glad to share with you, mister chairman of the committee, that really show that even trying to work on this doesn’t make that much of a difference. The thing that this slide basically shows is that corn is the most sensitive. So if, for instance, because I looked at this slide, I’m like, I don’t even know if the formula is even really working. But so if you move the corn price over because there’s this delay, then it’s really pretty much right on track. The thing that I wanted to point out is that you probably saw some slides that were predicted that said that our tax burden for last year, when the value went up 16.7% would be there. But the results of that show, of the actual numbers, because these all came from the abstracts, is that because of the growth, probably in other parts of the tax base, in particular homesteads, that you worked hard to offset that instead of the 16% for AG, the increase was only 10.5%. Now, certainly that’s an average, because I had a lot of people calling me saying, hey, my taxes went up exactly 16%, like you said. But the other thing that I did want to point out, and these are actual information for this year, the formula went up 26.7%, and the actual tax burden across the state went up 26.5%. So there is, absent any introduction of a lot of assessed value into the base, that’s, you know, to offset what’s happening. This. It’s a very direct correlation. And on the. In a future slide, I mean, the correlation is like, 8.3 or nine. It’s very close. So you can look. And the one thing I would say about when it’s looking at these ag business taxes, this also includes the overall tax that we’re paying for personal property. So I know that’s important to some of you. So, as the formula is changing, the one thing that is also changing in direct correspondence is our share of overall taxes that are being paid. And so we, as you can see, getting to the point where we’re now at $700 million, rather than where we were earlier just a few years ago at 500 million. So that’s a pretty big change. This slide just shows it based on the actual. And once again, this is the point where there is such a direct correlation between the base value and the overall taxation for farmland, which is 0.89, which is a really high correlation. So this is a slide that I really think is important. And this data just comes out of the LSA handbook. So we’re looking at our real estate and business, you know, business, personal property taxes after credits, which we don’t really get too many credits or circuit breakers, but you can see that we had a high, and that was addressed by you. It came down, and now we’re on our way back up, and without some sort of an intervention, that will continue to increase. The other thing is we looked at deductions and lit, for instance, and you’ll see that, I mean, this won’t be a surprise to you. Stacy talked a little earlier about deductions. I thought it was interesting that he also put in the amount of lit that was allocated to relief in those areas. Even though we have been the biggest cheerleaders for property tax relief, we see a lot of other people, and rightfully so, I suppose, taking it, you know, getting some benefit from that. But that’s the one thing that we are not in a position to do. And I just want to point out that net farm income is expected to continue to decline, and that is obviously a real concern. That is the thing that creates the mismatch. And I’ve got some notes on. One of these pages that I do want to make sure I got to, I think the thing is, with the six year average and the four year delay, it’s going to take a long time for the current formula to adjust itself so that net farm income is somewhere in the ballpark of those, of those, of those things. And on the, the thing, I guess I would say, and maybe you’ll say, well, what’s the solution? Honestly, most of the time I’m standing here and I kind of know what we need to do, but this is a complicated issue. So I wanted to show you today all the things that we’re looking at. We have an internal tax task force as well. They’ll meet at the end of June. We’ll take a heavy look at all of this information. And there are some things that I’m thinking that, you know, for them, our members to consider because really, our policy, as you know, comes from them. But I would say that I think that they’re serious. One of the, I had a meeting not too long after tax bills came out. And yeah, I got some calls from people whose farmland taxes went up 76%. Okay. I think I’ve shared that with both co chairs that was because of school debt. I mean, they, but the thing that is good is they were able to look at the statement that comes with their tax bill and figure that out. So for all the, there have been a lot of pushback on those statements. And no, they don’t really work very well, but they at least were able to tell what happened and talk to some people locally about that. But I do want to point out that was a pretty big concern to them. So I have some closing thoughts here that I think are important, and I just want to make sure that I covered them all. So farmers income is in decline. And the call that I, the meeting that I had that I didn’t get to was I was in a meeting with somebody who, a young farmer who had just bought some farmland. He’s like, I just got my farm bill or my tax bill. And now I know that my plan, my farm payment plan is not going to work out. So I don’t know where I’m going to get the extra money to do that. I mean, it’s a very tight, as most of, you know, sort of expense to try to pay for things. So I don’t want to just get up here and say, poor mouth. But I will say this is a real concern. We have homeowners and other folks whose bills go up a few hundred dollars and that is real burden to them. But for farmers, it’s several thousand at a time when their bill goes up, you know, 27% and another 20 and so forth. So the thing that I would say is that a couple of things outside of this. So we’ll come, I’ll come back with some more information if you need anything else. I know this is kind of heavy overload, but I did want to address some other things that were discussed earlier. So I guess I’m going to take my public testimony time now. So on the excess acres issue, it is kind of an issue where somebody, just to your point, you bail the, you know, hay on your lawn and then basically you’re okay. Or if you’ve got a fence, those are challenged continually by assessors. And so, you know, I get calls from people all the time. But it is the General Assembly’s prerogative even, I think, according to St. John, to change definitions to include deductions or exemptions. So my point is the approach of the influence factors, even though that’s stated in the law, perhaps that’s not the way to address. I mean, I see the concern that the assessor earlier had, and so it. So maybe there’s a way, a different kind of a mechanism rather than the one that affects the influence factor. The last thing that I guess that I would mention, and many of you have heard me kind of harp on this. So at the end of the day, if the rest of the tax base is not growing, then that exacerbates the problem of, if that’s, you know, the biggest part of the growth in the tax base, that exacerbates our problem. And I have complained, you know, or at least highlighted my concerns about excess value and taxes that come off the top. So when you have almost a 10th of your tax base coming off in TIF, then there isn’t really any growth to, it captures all the growth that would be. Be available to offset. You know, you’re not really growing your tax base. If we have the theory of broad base and low rates, we’ve got to do something to accommodate some sort of growth. So I guess the other thing is just, we’d like to be a part of the discussion. We have concerns, we’ll have a lot of different concerns as you do a variety of things. And the, and the last thing I would say just on the debt situation is that I do think that while you’ve tried to address what those thresholds are, I do think that process probably needs to be taken a look at because these debts that are under the cap really occur without the public knowing very much about those. So, and that seems to have been a lot of the increase that people have sort of have taken notice of. So that’s all I’ll go over today, mister chairman, and thank you for the opportunity questions. Representative, thank you very much. Appreciate your presentation. Katrina. I guess the last page talks about what does agriculture need? And my question you talked about fairness between classes of taxpayers. Could you expand on that? Does that mean that, are there any specific suggestions? Should it be non homestead? Should residential caps be moved from 3% versus 2% or down 2%? Oh, yeah, I left off that slide. Yeah, you left off that slide. Yeah. So we want a stable burden that’s kind of predictable. Everybody wants to do that for their business. We always say significant and lasting relief, but that’s hard in an environment that is all the, you know, you have a lot of plates that are spinning. As far as fairness, I think the one thing that I have been concerned about, and you have heard me say this before in anything that you do, as far as reforms, I would be concerned about shifts. And so how, what kind of, you know, you obviously have some ideas in your mind and some point you have pointed out even the problem with over 65, those provisions, the tax bill increase as well as the deduction. The thing I would say about those, for those that are concerned is that the income test that goes along with those is part of the issue as well as it could be the income test or it could be the assessed value test. Actually, it’s the assessed value test. So for like your, you know, older folks that are in a home that all of a sudden their neighbors are doing some kind of wild renovation, then their value goes up and that may push them out of being able to get an over 65 or to have the other limitation that increase. So those are the, that in particular. So it’s just what I’m saying is we gotta look at the whole, you know, look at the whole picture and be concerned about the proportions in the base because those kinds of shifts end up affecting other people. Thank you. Follow up question. Thank you. So can you mention the young farmer? So can they write off their property taxes as a cost of doing business? There is a provision that they can write off. I think it’s just the. No, I mean, they, well, yes, they do. They can expense that, but they still have to have the cash to pay it. I mean, they expense it on an income tax. There’s an offset on their income tax, not on their property tax. So they still have to pay it. Thank you. Thank you. Other questions. Senator Clora, thank you for your presentation. Just a couple of clarifying questions. What is the percentage of family owned farms versus business owned farmed? Actually, the percentage of family owned, what we would, a lot of people term that as small farmers, but it is like in the over 90% and it may be as high as 95% are actually family owned. The rest that are corporate owned. In most cases in Indiana, those are corporations. They’re family corporations. They’re just using that as a different sort of, it could be a succession structure. It could be other things that have influenced their method of, you know, their model for ownership. If I look at this data by acreage, what is the percentage of acreage owned by Hoogers who live and reside in the state versus corporations from. Offset of the state. I don’t know that number, but I think that’s an important number to have in mind, because that is another thing that is on my mind. I appreciate you. That would be helpful, because I was thinking, if we’re going to give tax relief, I’m very supportive of supporting Hoodra farmers. I think it’s something we need to double down on and help them. I just would like to be more informed of how much of the tax relief would go to national corporations that don’t exist and that don’t reside in Indiana. They just own the land. And the profit margins that we might subsidize by that tax relief will go to headquarters outside of the state. Well, honestly, I think that probably rather as much as corporations that you would deal with. There’s a lot of out of state owners of farmland that have been in their family for generations. And so then they move away. And so if you look at. Although this isn’t part of the reason that we look at net operating and cash rent, is that about the ownership of farmland separated from the farmer who owns it is about 50 50. But that doesn’t mean that in that 50% that is not owned by the farmer, that those are all out of state. So I just need to see if I can find that. That would be helpful. Thank you. But thank you for that question. Further questions. Representative Delaney? Yeah, Katrina, could you restate that last point so I can make sure it’s clear about 50% of the farmland in the state is owned by people who actually operate the land. Correct. And the other 50% is owned by someone else. Correct. Could be a relative ancestor, an heir. It could be. It could be. It could be. It could be me. I did have some. It could be prudential. Who allegedly owned half of northwest Indiana at one point. Okay. All right. So I wanted to understand that. Now, the dilemma I’m having is that this is the only form of property that’s taxed on this basis, which is this complex formula we have where we decide that the average acre is $2,200 or whatever. Right. Would you agree that the agricultural industry, in that sense, is a favored industry in terms of state tax policy? No. I mean, if. Well, I have to say that, but no, I don’t think you have to say no. Yes. The reason I would say, I’m not on a comedy tour, but, you know, so the reason I would say that is that the decision in the town of St. John allowed for a different one based on the character characteristics of the property or that that is the prerogative of the General assembly. So, but I would also say from our point of view, the properties that are, that are, well, first of all, my members, I mean, we have the tax caps and they, you know, we did not support those. Those are supposedly the solution for everything. Farmers don’t get much of any relief from that. And then that is, there are a lot of other taxpayers who benefit from that policy decision. In addition, as you parse through and say, I’m going to give somebody a deduction versus an exemption or so forth, those are favors, I mean, a favored status, right? So, no, I don’t think that we’re the only one. In addition to the fact that the law has for quite a while now recognized the, that there are other types of property in particular apartments, which I don’t think you’re just necessarily discussing today, but end up turning out to be kind of a problem based on their net operating income and valuing that way. So, no, I don’t think that we’re unique, but we are a market value news state, and this is a market value news system. So it’s a pretty generally, I mean, if we were the only state that did this, it would be different, but we’re not. I mean, it’s very common across the country. Well, I’m very careful here. I don’t want to be seen to pick on the farmers. Notice my careful words. Okay, but let’s look at it from the perspective of local government. In a small community that’s struggling, it doesn’t have much industry anymore. The car dealers are gone. There’s one Walmart store instead of 20 grocery stores. It goes on and on and on and on. So a fundamental part of their tax structure is the ag sector. There’s no question about that. Where do they go? If they don’t go to the AG sector to get money to support their schools or their roads or whatever else they need, who else have they got? Well, I mean, property tax is not the only revenue stream that has been authorized for local government. Over the course of the time that local option income taxes have been allowed since the 1970s, we have aggressively, and I mean very aggressively, worked to encourage and, you know, support local entities going to that system and supplementing and offsetting increases in their, in their property taxes. So I think that’s one element. The other thing that I would say is that in rural communities, we’re worried. One of our primary goals, if you look at our stuff, is rural vitality. So this is a discussion that we have to have internally. And my members are not for, hey, we don’t want to pay anything because they want a decent school. They want a nice town where they can go in and have a burger or go to the grocery store. They don’t want to have to drive 15 miles to go to Walmart to buy their groceries. So I don’t think it’s just as easy as like, well, we are only relying on farmers, but I mean, it’s just a reality. I’m just looking at how much my members can absorb. Like, you know, like I said, a 16% increase, then it’s a ten, and then this year it’s another 27%. Nobody. I mean, if homeowners were doing that, people would have their hair on fire. The dilemma I face in looking at it is the contrast between the asset value and the value we put on the books. So we’re saying it’s worth 2000 and no thinking farmer would sell their ground for $2,000 an acre. And this is, that’s sort of a show stopper when you’re trying to analyze the situation. I think it’s a problem. I don’t know whether we should adjust for the fact of the value somehow, the actual market value. But I see a problem here, and I see why other taxpayers would figure that you’re perhaps being treated a little too kindly. Well, yeah, that’s just an opinion that people might have. Well, I’ve got people to represent, and I’m worried about, I guess I would point out, is that you’re not taking into consideration in a rural community where you have a very small town with very low av. And so that’s one thing, but it isn’t the farm. I mean, farmers in many small rural school districts are the primary taxpayers. And so to say that they’re being cheated, I’m guessing that they don’t really think they’re cheating the system. They certainly don’t think that because they’re paying for the majority of services out there and they’re living with it and they’re generally satisfied with their schools. I understand. I’m just trying to figure how we can deal with this. And I think it’s part of this broader question of whether the state needs to put state revenue into subsidized property taxes in certain communities. And that might be communities that are heavily agricultural based and they’re small town based. That might be. That’s what I’m doing. By the way. You don’t want a reference from me, but you really don’t. But you’re a great and honest witness. Remember that. Okay. But I think the thing I would say too, is you got away from property tax replacement credit, but there was a reason for that. To buy down bills for places where, and you looked at all what levies got it and what levies didn’t. I mean, that was my job when I worked at, I went through every single levy for every single unit and said this gets PTRC and this doesn’t. But you have, I mean, you know, it’s just like your priorities. You’re going to have to decide what the connection is between state and local. So I understand what you’re saying. Just, the only note I would leave you is just remember we’re a market value in you state. I got it. Okay. Thank you. All right. Thank you. Other questions. Representative Jordan? Well, I guess we started this commission under Chairman Holdeman and Chairman Thompson saying we have a clean slate. It’s just fascinating. I’m not going to pontificate too long, but being a 7th generation Marshall county, you know, the thought behind property tax as it’s grown from where it was years ago, the thought was fairly simplistic. It supports the school and it supports the roads and your little community and it supports the fire department and other things. I don’t want to get into fire departments right now, but you might need to talk about that. Yeah. Yeah. But now it’s gotten the point almost where, you know, Representative Delaney said, maybe they’re a favorite industry, but coming from a rural county, it’s become renting. It’s almost like you’re renting your own land as you pay these taxes that I think are fairly high. It’s just the elderly that own their homes are paying rent almost as they continue their property taxes. I think if anything from this commission is, you know, this property tax system has kind of grown up and has tentacles in every direction, both in the payment, the complexity. And I guess it’s one of my hopes that that’s the one we really try to really take on because of just how it’s grown over time has become just inconsistent and almost painful for that young farmer, et cetera, so. Well, and I guess, well, my response to that is it is really complicated. It is. Even on the levy side, it’s way more complicated than when I worked for the state 25 years ago. And that I understand it, but I don’t know how they’re, I mean, just the complications that I ASbO had to do in terms of limit the scope so that they could make that understandable. I mean, the tax haves, have really added a lot of complications. I don’t mean to just dump on that, but we always are trying to fix this or fix that. And so a lot of that comes from that. And as far as the local process, I’m not sure that it’s very satisfying to taxpayers, but it would go without saying that property taxes are not my members farmers favorite kind of tax. And so, you know, we’re here pointing out the issue to let you know that it really, we need some sort of an intervention is all I’m really saying. So anyway, thank you. Thank you. I appreciate it. I believe last, we have limited public testimony, and we’d like to talk about the topics that are at hand. I would welcome that at this point hearing none anymore. Parting comments from members of committee before we leave. Well, thank you. And thank you for the presenters and the public for being here. And with that, we’ll stand adjourn.