Indiana Returns to Belt-Tightening Mode
With revenue 2.5% short of projections, Pence orders cuts to close gap
Indiana tax collections are falling short of projections so far this fiscal year, and the state is tightening its belt again.
The state took in $77 million less than expected last month. It's the fourth shortfall in five months, and the second time the state has missed its target by $50 million or more. Office of Management and Budget director Chris Atkins says officials don't expect enough of a comeback the rest of the fiscal year to meet the original target.
Governor Pence had already asked state agencies to withhold 3% of their budgets. He's now ordering them to trim spending further, to 4.5%. The administration says it will also withhold 2% of university appropriations and will sell the state plane.
Atkins says the administration needs to maintain the state's current $2 billion reserve as a firewall against a possible recession, to avoid cuts to essential services. The $2 billion represents about one-eighth of state spending.
Atkins says ordering the cuts now gives universities and state agencies enough time to implement savings for the second half of the year.
The new cuts along with the 3% reserve ordered earlier would save the state $172 million. That's enough to put the state in the black if the forecast proves accurate the rest of the way, but about half what it would take to meet the projection if shortfalls continue at the current pace.
Pence announced a 2014 legislative agenda last week which calls for a second individual income tax cut, elimination of the business personal property tax, and additional spending on preschool and roads. Atkins says the administration will lay out a plan to fund those priorities in 2015, when the next budget is written. He says the new round of savings is designed to get the state through the seven months remaining in this fiscal year.
Rep. Terry Goodin (D-Crothersville) says Pence is doing what's necessary by trimming spending, but says the cuts show the governor's pronouncements about a strong Hoosier economy need more substance. He says Pence's 2014 agenda is a step toward Democrats' playbook in seeking to build the economy by putting money in consumers' pockets and building Indiana's infrastructure.