By Patrick B. McGuigan

INDIANAPOLIS — In wide-ranging remarks and a lively exchange with reporters from across America, Indiana Gov. Mitch Daniels made the case for the lively brand of pragmatic conservatism that has made him the subject of thousands of news stories and garnered him what is now a 70% approval rating.

As Oklahoma faces a rising financial crunch and a possible special session that could lead to “spending down” some of the state’s Rainy Day Fund, Daniels’ words on government spending habits and behavioral patterns may be instructive to policymakers in the Sooner State.

Daniels described himself as an enthusiastic reader who is “very discouraged about the decline of newspaper readership.” He said he recognized “the quality of journalism is as erratic as the quality of public service,” and lamented the loss of Robert Novak, who he described as “hard-bitten, impossible to con and hard working. He should be remembered not for his opinions, but for his reporting, including a stint as a statehouse reporter here in Indiana.”

The Hoosier State, as he described it, is “still solvent, and we had a modest increase in spending” for government last year. The state is one of the few in the nation with a surplus, but a $1.3 billion cushion essentially eroded to $1 billion in the most recent budget. He predicted that regardless of national or regional recovery, “Indiana will have fewer dollars to work with in 2011 than in 2007.” As is the case with journalism business models, government, Daniels said, “cannot stay the same.”

When a reporter asked him to share Indiana’s “secret” to fiscal solvency in a time of recession, Daniels joshed, “We spent less money than we took in.” Speaking seriously, he said the state had eliminated an estimated $700 million to $800 million in “structural deficit” and “more or less” froze spending as a whole. In his first year in office, a tax amnesty was “spectacularly successful” in getting one time money that was used to pay back state government debts and not for any new spending. While Gov. Daniels experienced a substantial decline in popularity early in his tenure, his approval ratings recovered and now match exceed those of a handful of other popular chief executives, including Oklahoma’s Brad Henry.

The challenge to change government operations remains, Daniels said. “How can we deliver services at lower cost?” He also said some sacrosanct areas of spending must be examined for efficiency and purpose: “Entitlements eat the budget,” a situation that cannot forever be ignored. Speaking of broad economic concerns, Daniels said he is concerned some federal stimulus spending has “taken care of long-standing wish lists” rather than actual economic stimulus. Still ahead in his final term, Daniels said, is a tough look at government economic incentive packages in terms of effectiveness.

In the end, “the business environment is crucial.” What Daniels described as “the sand box” – the business prevailing culture a state offers to businesses — is more important than up-front incentives and direct subsidies for operations or relocations.

Daniels, a Republican, also observed President Barack Obama “ran a brilliant campaign in Indiana” – but only narrowly won the state after outspending John McCain $18 million to $2 million.

Daniels came to politics as an aide to U.S. Sen. Richard Lugar. In the 1980s he worked for President Ronald Reagan. He was elected governor of Indiana in 2004 with 54% support, then reelected in 2008 with 57% backing.

The 2009 Capitolbeat conference was held August 20-22 at the Hyatt Regency in downtown Indianapolis.

Sponsors for the Capitolbeat conference included the Pew Center on the States, Lumina Foundation, Eli Lilly, Wine & Spirits Wholesalers of America, the Annie E. Casey Foundation, Franklin Center for Government & Public Integrity, the Alzheimer’s Association and National Wine & Spirits Corporation. Vendors included Midwest Democracy Network, State and Federal Communications and the Death Penalty Information Center.