Ind. spends savings, cuts budgets to balance books

INDIANAPOLIS – Indiana collected $957 million less in taxes than budgeted over the last 12 months, a gap that was closed by slashing spending and dipping into state reserves.

The state started the year with $1.3 billion in the bank and still had $830 million left in reserves as of June 30, state auditor Tim Berry said Friday after closing the books on the 2010 fiscal year.

But Berry had a message for lawmakers who will meet in January to work on a new two-year state budget: “Don’t get giddy.”

The current budget calls for $300 million of reserves to be spent in the 2011 fiscal year, which began July 1. So the state is really starting the 2011 fiscal year with a $530 million cushion.

Berry predicts that state reserves will dwindle to $188 million by the end of June 2011 — less than 2 percent of the state’s $12.9 billion budget for that year. And if economic growth is slower than the 5 percent gain expected in fiscal year 2011, it could bring the reserves to near zero.

Five percent growth from 2010 to 2011 seems optimistic, said John Ketzenberger, president of the Indiana Fiscal Policy Institute. Numbers released in fiscal reports Friday show that 2010 revenue fell more than 5 percent below 2009 numbers.

The administration of Republican Gov. Mitch Daniels says tax increases aren’t an option — even if revenues fall short of budgets again in the 2011 fiscal year. That could mean spending all of Indiana’s reserves and making more severe cuts.

“Staying in the black when most states are broke and cutting taxes while they are raising them is the best way to help Hoosier families through this recession and out-compete other states for the new jobs we need,” Daniels said in a statement. “Thanks to our agency heads and state employees who are helping us find new ways to stretch tax dollars and do more with less every day.”

During fiscal year 2010, Daniels ordered state agencies to spend 10 percent less than budgeted, and schools were cut $150 million. Those measures — along with using some previously dedicated funds to help prop up the state’s general fund — helped the state spend $784 million less than budgeted.

Berry said a disproportional amount of cuts came from state agencies compared to schools and higher education. Public schools get about 55 percent of the state’s money, but made up 21 percent of spending reductions. State agencies get about a third of the state budget and accounted for 61 percent of cuts.

Daniels has ordered state agency spending in fiscal year 2011 to drop 15 percent below budgeted numbers. Schools will be cut another $150 million and could face more cuts on top of that, although officials haven’t decided yet whether more reductions need to be made.

Democrats noted that the state stayed afloat in part by using money from the federal stimulus program passed in 2009. The budget includes more than $500 million for Medicaid and about $600 million for basic school spending.

“Since the report issued today failed to do so, I want to make sure that the people of Indiana realize that this budget survives thanks to support from the federal stimulus package that has often been attacked by the governor and his administration,” said House Speaker Patrick Bauer, D-South Bend.

Democrats also said they wanted more information on exactly what was cut in 2010. Information posted on the state’s website shows how much individual agencies spent, but doesn’t detail how the reductions were made.

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Online:

http://www.in.gov/sba/2550.htm