Strategic Foresight Report An Exploration of Indiana’s Future Fiscal Landscape In 2027 October, 2017 About the Author: Sam Miller is founder of Provoyant Foresight and also serves on the faculty of the Mendoza College of Business at the University of Notre Dame leading courses in strategic foresight, innovation, and entrepreneurship. Sam holds an MS in Engineering (Product Design & Development) from Northwestern University, an MBA (Strategy) from the University of Michigan, and a BA (Economics) from the University of Illinois. He is a member of the Association of Professional Futurists and the World Future Society. Provoyant Foresight helps organizations in their pursuit of strategic insights. Provoyant’s workshops and exploratory research position their clients to better understand emerging opportunities and create resilient strategies to act amid uncertainty. http://provoyantforesight.com/ About the Indiana Fiscal Policy Institute: The Indiana Fiscal Policy Institute (IFPI), formed in 1987, is a private, not-for-profit government research organization. The IFPI’s mission is to enhance the effectiveness and accountability of state and local government through the education of public sector business and labor leaders on significant fiscal policy questions, and the consequences of state and local decisions. The IFPI makes a significant contribution to the important, on-going debate over the appropriate role of government. The IFPI does not lobby and does not support or oppose candidates for public office. Instead it relies on objective research evidence as the basis for assessing sound state fiscal policy. http://indianafiscal.org/ 1 Acknowledgements Provoyant Foresight would like to thank the following Indiana fiscal policy professionals for their contributions to the research in support of this foresight project. Indiana Fiscal Policy Institute John Ketzenberger John Grew Pete Rimsans David Bottorff State of Indiana Fiscal Policy Experts Jason Dudich State Budget Director, Gov. Eric Holcomb Justin McAdam OMB General Counsel, Gov. Eric Holcomb Adam Horst Former Budget Director, Gov. Mitch Daniels Kathy Davis Former Budget Director, Gov. Evan Bayh and Lieutenant Governor of Indiana Ken Kobe Former Budget Director, Gov. Robert Orr David Reynolds Fiscal Analyst, Indiana State Senate Susan Preble Fiscal Analyst, Indiana State Senate Erik Gonzales Fiscal Analyst, Indiana State House of Representatives Ben Tooley Fiscal Analyst, Indiana State House of Representatives 2 Executive Summary As it celebrates the 30th anniversary of its launch in 1987, the Indiana Fiscal Policy Institute seeks to conduct an exploratory glimpse into future scenarios for the Indiana fiscal landscape in the year 2027. Taking a systems view of emergent change, this assessment categorizes evolving trends and potential disruptions into six “Change Domains”: Health & Wellness Infrastructure Jobs & Economic Growth Education Public Safety Demography & Society An examination of historical and emerging change across these six change domains reveals the existence of two residual uncertainties that may define the context of future scenarios. These two uncertainties are: Whether adoption of automation technologies will destroy or create jobs Whether the system will become more concentrated or more distributed Assessment of the interaction of these two uncertainties reveals four alternative scenarios each of which present exploratory questions for consideration for both revenue and appropriations: “Oligopoly” in which the system becomes more concentrated and jobs are destroyed by technology. Corporate profitability and worker displacement skyrocket. Ultimately, tax policy common ground is established (enabled by abundant taxable profits) and Universal Basic Income (UBI) is established as a safety net for the structurally unemployed. “Precariat” in which large companies thrive and new technology adoption creates abundant new knowledge worker jobs to replace those made obsolete. Employers shift their HR policies toward independent contract work making employment abundant, but precarious. Continuous retraining and lifetime learning become the norm to prepare workers for “gigs.” “Start-Up” in which fast moving entrepreneurs and mid-sized companies outcompete the slower large companies, creating broad economic growth from the grass-roots level. Large companies divest and downsize into regional enterprises to become more nimble and the entire system – education, energy, healthcare, government, etc. behave more entrepreneurially. “Self-Reliance” in which jobs are destroyed by technology and a distributed system structure shifts the emphasis toward self-reliant models such as urban agriculture and barter. Trust in the system suffers and citizens seek greater control over their own well- being. 3 Introduction "Time is asymmetrical for us. We can see the past but not influence it. We can influence the future but not see it.” Stewart Brand, founder, Global Business Network Planning for uncertain change involves a high degree of ambiguity. The challenge is not so much in answering questions about the future, but rather in framing the proper questions to ask. This exploratory assessment of future change is intended to help Indiana fiscal policy decision makers and other stakeholders frame insightful questions about potential future scenarios and the role future fiscal policy can play in improving economic prosperity and quality of life for Indiana residents over a 10-year time horizon – to the year 2027. The emphasis of this exploration is the convergence of technological and economic change. In order to best understand these two categories, we will view change from a systems perspective. Disruptions are often created by forces that lie outside of our main area of focus, accordingly this exploration will engage peripheral vision – to include factors that may indirectly influence the fiscal landscape of the state of Indiana. The system is categorized into six “Domains of Change” as follows: Health & Wellness Education Infrastructure Public Safety Jobs & Economic Growth Demography & Society “The farther back you look, the farther forward you are likely to see,” Winston Churchill. This exploration will look back to 1987, the year of the founding of the Indiana Fiscal Policy Institute, and explore how change has unfolded across the six domains of change. This will serve as a springboard for exploring the evolution of these forces into the future. This foresight report is exploratory and is not intended to be predictive. It seeks to help stakeholders imagine a range of plausible future scenarios to create a deep understanding of future system dynamics. Four alternative scenarios will be presented to create “memories of the future” that can serve as a backdrop for “wind tunnel testing” fiscal policy concepts. As Bob Johansen of the Institute for the Future says, ““Even a forecast that never happens is worthwhile if it provokes insight for you.” The insights of this report are intended as conversation starters, to spark ideas and debate around possible policy innovations to enable forward-thinking decision making. Finally, this report will neither recommend nor advocate for any particular policy. The outcomes of this report are intended to serve as ideation prompts to help decision makers craft anticipatory and resilient fiscal strategies for an uncertain future. 4 Six Domains of Change The essential factors in the future of the State of Indiana Understanding the status and trajectory of emergent change across six critical categories will be crucial for fiscal policy planners to understand and guide the State toward preferable outcomes for our citizens, our businesses, and our leaders. This examination looks not just at the patterns of change in each domain, but also at the interrelationships and patterns amongst them. These cross-impacts can be re-enforcing, serving to amplify the forces of change, or they can be contradictory serving to constrain change and prolong the status quo. This exploration will begin with a historical timeline across the six change domains, providing a glimpse of the journey from 1987. A deeper dive into the current forces at work in each domain is then presented, followed by alternative scenario narratives exploring four distinctive futures and exploratory questions for the fiscal landscape of the State of Indiana. 5 Timeline 6 Health & Wellness Forces of Change AFFORDABLE ACCESS Fewer Uninsured The number of uninsured Americans fell from 44 million in 2013 / 16.6 percent (the year before the rollout) to 28 million (10.4 percent) in 2016. Gallup finds the uninsured population in 2016 at the lowest level since it began measuring. Much of this growth came from self-funded plans (driven by the Affordable Care Act’s individual mandate) and through expanded participation in Medicare. Fewer Options, Rising Premiums Insurers are pulling out of exchanges. According to a Kaiser Family Foundation analysis, 31 percent of counties will have just one insurer this year, up from just 7 percent last year. Policy uncertainty regarding enforcement of the individual mandate and regarding cost-sharing subsidies is driving insurer decision making - building in an “Uncertainty Tax.” ACA premiums are set to rise 15 percent in 2018 according to Congressional Budget Office. Many participants, however, will receive subsidies to offset this increase. Patient Empowerment New customer-facing technologies and business models are empowering patients