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Indiana state budget

Indiana started a new budget biennium on July 1, 2011, with a $28.3 billion for the biennium passed by the legislature that Gov. Mitch Daniels signed into law on May 10, 2011.^[1] Highlights of the budget include that it does not raise taxes or fees, increases education funding and its creation of a taxpayer refund provision.^[2]

Indiana has a total state debt of approximately $ $38,710,138,000, when calculated by adding the total of outstanding official debt, pension and other post-employment benefits (OPEB) liabilities, Unemployment Trust Fund loans, and the budget gap. ^[3]

See also: The Indiana State Budget on State Budget Solutions

[edit] Fiscal Years 2012-13 State Budget

• See past state budgets

A report released on Aug. 3, 2011, by the State Budget Agency showed that the state had received $23 million more in tax revenues coming in than expected for the first month of FY2012, which is 2.3 percent more than was projected in an April forecast that legislators used when drafting the state budget.^[6]

On April 29, 2011, the Indiana state legislature approved a two-year budget of $28.3 billion total.^[7] Before passage of the budget, the state faced a $1 billion gap between the state's revenue and expenses, including the need to build up reserves by $500 million.^[8] Gov. Daniels signed the budget into law on May 10, 2011.^[2]

The budget freezes spending on universities and most state agencies and maintains current Medicaid and horse racing programs.^[7] It increases school funding over the biennium by approximately about $150 million, boosting spending by 0.5% in 2012 and 1% in 2013.^[7] The budget increases funding in key areas such as K-12 education, student financial aid, Medicaid and pensions, while reducing General Fund appropriations for most executive branch agencies by 15 percent compared to FY 2011 appropriations. The budget increases funding in key areas such as K-12 education, student financial aid, Medicaid and pensions, while reducing General Fund appropriations for most executive branch agencies by 15% compared to FY 2011 appropriations.^[9] The Appropriations in the FY2012 state budget can be found here. The state spends more than half of its budget on education.^[10]

The budget include a taxpayer refund provision that, if state reserves exceed 10 percent of budgeted spending, half the extra money will go to pension funds and the other half will be returned to taxpayers. The budget spends less than it takes in and should all go according to the plan, the state will end the biennium with $1 billion in reserves. ^[2]

Lawmakers designated $6.26 billion for FY 2012 and $6.31 billion for FY 2013 for K-12 tuition support from the General Fund. On a calendar year basis, K-12 tuition support was increased 0.5% for 2012 and 1.0% for 2013.^[9]

The Indiana State Budget Committee held hearings in November and December 2010.^[11] Committee Chair State Sen. Luke Kenley estimated that lawmakers will need to reduce current spending approximately $1 billion to avoid a tax increase.^[11]

State Budget Director Adam Horst said the state is spending about $13.9 billion per year in FY2011, and revenues in FY2012 will reach only $13.4 billion even with the projected growth.^[12] Revenue forecasts released mid-Dec. 2010 anticipated that the state will take in $13.4 billion in fiscal year 2012 and $13.9 billion in 2013.^[13] Those are increases over current revenues, but current spending is about $13.9 billion, meaning that if spending stays the same, Indiana will likely spend about $500 million more in the first year of the budget than it generates.^[13]

The Indiana Fiscal Policy Institute, a nonpartisan government research group, estimated that the state's deficit for FY2012 could hit $1.3 billion if the economy does not drastically improve or if deeper spending cuts are not made.^[14] The deficit is due in large part to increased teacher, police and firefighter pension payments as well as statutory increases in Medicaid.^[15]

[edit] Legislative Budget Proposal

Indiana lawmakers reached an agreement on a state budget on April 28, 2011, and planned to vote April 29, 2011, on a two-year, $28 billion state budget before the end of the session. The compromise includes no tax increases but also avoids large cuts to most programs. It increases K-12 education funding by 0.5 percent in 2012 and 1 percent in 2013. Pensions and Medicaid would also see increased funding. If current revenue forecasts hold up, a $1 billion surplus would remain at the end of the biennium.^[16]

The Senate Appropriations Committee approved on April 18, 2011, a $28 billion budget that would end the biennium with more than $1 billion in reserves, more than both the House version and the version proposed by Gov. Daniels. Under the Senate plan, schools would receive an additional $150 million in the budget cycle. The budget proposal also uses a performance-based formula to divide some higher education money among colleges meeting goals, ends a tuition freeze at state colleges, gives extra money to all school districts with at least 500 students as an incentive for smaller districts to consolidate, and freezes lawmakers' pay for two years. The proposal also includes creation of a committee to study the labor issues surrounding the five-week boycott from House Democrats earlier this session, including a right-to-work bill that would prohibit union membership from being a condition of employment.^[17]

On March 30, 2011, the Indiana House approved a $28 billion, two year state budget plan that that would maintain overall education funding level from FY2011 while shifting more money to growing suburban school districts. It now goes to the Senate for consideration. The budget has no tax increases. Nearly half of the state spending would go toward K-12 education, but it differs from the governor's proposal in that it does not restore school funding of about $450 million ordered by Gov. Mitch Daniels. It also rejects the governor's call for a 3% increase in funding for colleges and universities, instead maintaining the same funding amount from FY2011.^[18]

[edit] Right to Work and Legislative Walk Out

On Feb. 22, 2011, amid a protest by 4,000 against House Bill 1216 that would limit collective bargaining, Democrats in the Indiana House of Representatives did not show up, and instead followed the example of Wisconsin Senate Democrats and fled to Illinois.^[19]

The walk out by Democrats prevents action on the bill because a two-thirds majority needed for a quorum; Republicans hold 60 of the 100 seats in the House. Without the Democrats present, the House could not have a quorum.^[20] On March 3, 2011, Republican House members moved Thursday to fine missing Democrats $250 a day beginning on March 7, 2011, and increased that figure to $350 per day on March 21, 2011.^[21] On March 29, 2011, Republicans proposed some final changes to a bill that affects labor union jobs and wages, and the Democrats then returned to Indiana.^[21] The legislative session ends April 29, 2011.^[21] Democrats will have to pay more than $100,000 in fines, which will go into the House's budget.^[21]

The Democrats' absence prevented the House from voting on House Bill 1468, the so-called Right to Work bill that would give members of private-sector unions the right to opt out of unions and not pay dues.^[20]

In Indiana, all employees covered by a contract must belong to the union if a union bargains for a group of employees at a workplace.^[22] The bill would have barred unions and companies from negotiating a contract that requires non-union members to pay fees.^[23] The right-to-work bill died when it failed to clear the required legislative procedural hurdles.^[19] Republicans could attempt to reintroduce right-to-work and other bills by inserting the proposals into other bills later in the session, but risk triggering another stalemate.^[19] Gov. Daniels said at the end of 2010 that while he agrees philosophically with the legislation, lawmakers should not pursue it.^[23] Daniels said it was a big issue that needed a state-wide debate and noted no Republican had run on this in the November election.^[19]

Despite killing the bill that would have prohibited union membership from being a condition of employment, Indiana Democrats did not return to their home state. They remain in Illinois in an attempt to thwart other parts of Republican Gov. Mitch Daniels' agenda, including restrictions on teacher collective bargaining.^[24] The state Senate passed a bill that will narrow the scope of public school teachers' collective bargaining right, but the measure cannot take effect until it is voted on by the House, and that will not happen until lawmakers return.^[25] In the fourth week of their absence, the Democrats said that they want changes to bills that use tax dollars to fund private school tuition and which impact collective bargaining for labor unions, but Republicans said they will not negotiate any changes. Indiana requires a quorum of lawmakers present to pass all legislation.^[26]

[edit] Governor's Proposed Budget

Horst presented Governor Daniels' budget to the State Budget Committee on Jan. 13, 2011. The budget proposal calls for spending $13.76 billion in FY2012, and about $13.98 billion in FY2013. At the end of the biennium, the state will have a surplus of about $725 million, bolstered in part by shifting $200 million in unused accrued interest from the state’s Public Deposit Insurance Fund that has languished since the 1930s.^[27]

[edit] Education

Under the proposed budget, K-12 education funding will remain the same.^[27] The funding was not cut in part because of the cuts made in the prior two years, with schools having lost $300 million in state aid since the prior budget was enacted in 2009.^[13]

Senate Minority Leader Vi Simpson said schools face mounting health insurance and utility prices, coupled with inflation and other demands and thus need about a 2 percent increase in funding to handle rising cost^[13]

The governor's proposed budget cuts higher education funding by approximately 9%.^[27]

[edit] Medicaid

The governor's proposed budget increases overall Medicaid funding, but eliminates some optional Medicaid services such as dental care, hearing aids, podiatry services and chiropractic services.^[27]

The state Medicaid actuary projected Indiana's share of the program's costs will rise by about 25% in FY2011-12, which is $1.46 billion and $1.84 billion respectively, and by nearly 9%, or $2.00 billion, in FY2013 should services remain the same.^[12] Sen. Luke Kenley said the General Assembly likely will cut some optional Medicaid services rather than resort to raising taxes.^[12]

[edit] Corrections

The Department of Corrections requested a $667.4 million budget for FY2012, which is an increase of 1.3% from what the department spent in FY2011, but less than it requested for in the previous budget cycle, due to spending cuts ordered by Gov. Mitch Daniels.^[28] Rep. Peggy Welch, a member of the State Budget Committee and the budget-writing House Ways and Means Committee, told a hearing that prisons are "going to be a big issue in the 2011 session." ^[28]

[edit] Insurance Fund

Indiana's public deposit insurance fund (PDIF) was created after during the 1930s to replenish money invested by schools, cities and other public entities if a bank holding those funds failed and the Federal Deposit Insurance Corp. didn't cover the full losses.^[8] Because new state regulations provide another form of backup insurance, the governor state that using the PDIF as a source of revenue to fund other state expenses is "a perfectly appropriate suggestion."^[8]

[edit] Budget transparency

Article 4, Section 18 of the Indiana State Constitution requires that the “title” of a bill be read on three days in each legislative chamber prior to a final vote on the bill.

Indiana has a transparency website, the Indiana Transparency Portal (ITP). Lawmakers said that the website is intended compile Indiana budget data, spending reports and other financial information that previously had been spread across multiple sites.^[29] The website, however, does not include updated numbers on exactly what cuts have been made since Republican Gov. Mitch Daniels ordered millions of dollars in reductions after the budget was approved by lawmakers and has been criticized for not showing where taxpayer money goes under job incentives through the Indiana Economic Development Corporation.^[29]

In March 2011, the state added agency performance reviews to the ITP and more reports on local government spending.^[30]

See also: Evaluation of Indiana state website or Constitutional provisions regarding reading of bills or see sample transparency legislation at the Sunshine Standard

[edit] Government tools

Indiana has a database of contracts, available from the Indiana Department of Administration. The State's Active Contracts listing provides an up-to-date list of all professional services contracts in which the state is currently a party.

The following table is helpful in evaluating the level of transparency provided by Indiana Active Contracts:

Criteria for evaluating spending databases

State Database	Searchability	Grants	Contracts	Line Item Expenditures	Dept/Agency Budgets	Public Employee Salary
Department of Administration, Active Contracts	Y	N	Y	N	N	N
Indiana Transparency Portal	Y	N	Y	Y	Y	Y

• Line item expenditures are searchable.^[31]
• Contracts are available.^[32]
• State employee salaries are searchable.^[33]
• Department and agency budget documents are posted.^[34]

[edit] Support for creation of the database

Governor Mitch Daniels created the contracts website with an Executive Order in 2005.

[edit] Fiscal Years 2010 and FY2011 State Budget

Find the state’s FY2011 Comprehensive Annual Financial Report (CAFR) compiled by the state government here.

The state ended FY2011 with a $1.2 billion surplus. The surplus is the result of the state collecting $204 million more than it had projected and cuts to services and schools. Gov. Daniels said he plans to keep that money in savings rather than restore cuts made in recent years.^[35] The $1.2 billion surplus was just shy of the amount needed to trigger automatic tax refunds for Hoosiers. The automatic tax refunds kick in when the state has a surplus equal to 10 percent or more of general spending. The $1.2 billion figure amounted to 9.1 percent of spending.^[35]

The state collected $938 million in August, an 8.4% increase compared to a year ago according to the state Budget Agency.^[36] Overall, state revenue is still $2 million less than projected in the budget lawmakers passed in early 2009, and Budget Director Adam Horst predicted that by June 2011, that state's reserves will be $797 million below what was assumed in the budget as passed.^[36] In FY2010, Indiana collected $957 million less than budgeted. The state tapped into its rainy day fund of surplus money for nearly $500 million and reduced state spending by $785 million.^[37]

FY2011 General Fund Appropriations^[38]

However, the fall in revenues forced Daniels to make hundreds of millions of dollars in budget cuts, including: $150 million from higher education and $300 million from public schools. In the "2010 State of the State Address" Daniels emphasized the need to "streamline state government."^[39]

Another fiscal issue facing the state is the impact of the federal health care legislation. In a memo to state legislators on the budget committee dated March 26, 2010, Ryan Kitchell, director of Indiana's Office of Management and Budget, warned that the legislation would have an immediate $25 million impact on the state's budget.^[40]

Despite the state's looming deficit and failing revenues, Gov. Daniels said, "we will not make this recession worse by adding one cent to the tax burden of our fellow citizens." The General Assembly recently approved a ballot measure for the statewide 2010 ballot, widely supported by Gov. Daniels, which will let voters decide whether to amend limits on property tax bills into the state constitution.^[39]

In early July 2009 the Indiana General Assembly passed a two-year state budget narrowly avoiding a state government shutdown.^[41]

[edit] Budget Cuts

In FY2011, lawmakers cut state spending by approximately $600 million.^[14]

State agencies were instructed in April 2010 to cut their spending by another 5 percent during the fiscal year that begins July 1 after already chopping 10 percent a few months prior.^[42]

Some cuts included:

• The Department of Transportation said it has reduced payroll through attrition and without laying off any workers. The fiscal year 2010 budget allows for more than 4,300 workers, but the department is running with about 3,900 workers now. The Department has also reduced the motor pool fleet by nearly 300 vehicles over the last 3 years.^[43]

• The Department of Correction said among other changes that it has reorganized its facilities, decreased the amount of adult education school days and substituted vegetarian enriched meals instead of kosher meals for inmates.^[43]

• The Indiana War Memorials and White River State Park are using inmate labor to reduce costs of park maintenance.^[43]

• Indiana State Fair Commission lost $1.5 million of its $2.1 million state appropriation^[37], but fortunately derives the bulk of its $23 million budget from other sources. The fair increased the price of barn leases and charging for some parking. The fair is also using more volunteers at events^[43]

• The Indiana Office of Tourism Development's budget was cut by nearly 60%, from $4.4 million down to $2.6 million^[37]

• The Indiana Innovation Alliance, a partnership between Indiana University and Purdue University, lost its entire $10 million budget.^[37]

The state budget committee is also exploring the possible cost savings that would result from schools and public university employees joining the state's public employee health insurance plan.^[44]

[edit] Education

Education accounts for 54% of the state budget.^[15]

Gov. Daniels said that he believed that Indiana schools will not see deeper budget cuts in 2011.^[45] The Indiana Department of Education has notified school corporations they can expect the same funding for 2011 that they received in FY2010.^[46]

The FY2010-2011 budget included an education funding trigger that would give schools additional funds if the state collected more money than was expected in a May 2009 revenue forecast. Revenues for FY2010, however, fell $957 million short of previous expectations, meaning schools received no extra money.^[47]

[edit] Budget Background

The Indiana General Assembly meets annually and has a biennial budget. The governor submits the budget to the legislature in accordance with IC 4-12-1-9(a): Before the second Monday of January, in the year immediately after preparation, the budget report and the budget bill shall be submitted to the Governor by the budget committee. The Governor shall deliver to the house members of the budget committee such bill or bills for introduction into the House of Representatives.^[48]

Indiana is required to pass a balanced budget by statue stating that "no law shall authorize any debt to be contracted", except for "casual deficits" which must be covered by loans "as may be necessary to meet the demands of the state." Indiana law prohibits the state from carrying a deficit from one year to the next. State law creates a spending cap under Section 4-10-21-2, but an exemption from the State spending cap for appropriation exists under Section 4-10-21-7.^[49]

Indiana maintains seven major governmental funds: the General, Motor Vehicle Highway, Medicaid Assistance, Major Moves Construction, State Highway Department, Property Tax Replacement and Tobacco Settlement Funds. The State budgets all seven major funds in addition to more than fourteen other non-major funds.^[49]

[edit] Budget figures

The 2009-2011 state budget passed June 30, 2009 by the Indiana General Assembly during the 2009 regular and special sessions provides:^[50]

Total Funds

• $26.2 billion FY 2009 (listed as a comparison)
• $26.9 billion FY 2010
• $26.9 billion FY 2011

General Funds

• $14.4 billion FY 2009 (listed as a comparison)
• $13.6 billion FY 2010
• $14.1 billion FY 2011

General Fund 2009-10^[51]

Fiscal 2010 Tax Collections Compared With Projections Used in Adopting Fiscal 2010 Budgets (Millions)^[51]

The following table provides a history of Indiana's expenditures and gross domestic product (GDP).

• NOTE: The figures for FY 2009 won't be finalized until the end of the fiscal year.

See Indiana state budget (2008-2009) for more details.

[edit] 2009-2010 budget crisis

See also: State budget crisis, 2009-2010

Indiana faced a budget shortfall of approximately $1.8 billion for FY 2010. ^[53] The fall in revenues has forced Daniels to make hundreds of millions of dollars in budget cuts, including: $150 million from higher education and $300 million from public schools. In the "2010 State of the State Address" Daniels emphasized the need to "streamline state government."^[39][54]

Despite the state's looming deficit and failing revenues, Gov. Daniels said, "we will not make this recession worse by adding one cent to the tax burden of our fellow citizens." The General Assembly recently approved a ballot measure for the statewide 2010 ballot, widely supported by Gov. Daniels, which will let voters decide whether to amend limits on property tax bills into the state constitution.^[39]

Among the budget cuts announced by the governor in order to reduce the state's looming budget deficit were slaugherhouse inspections, however, on February 1 the governor reversed his decision. The planned cut included cutting the inspection budget by less than 50%.^[55][56]

[edit] Accounting Principles

Main article: Indiana government accounting principles

Indiana does not have a state controller, rather fiscal duties are split among the Office of Management & Budget (OMB), State Auditor and State Treasurer.^{[citation needed]}

Ryan Kitchell has been Indiana’s OMB Director since 2007.^[57] The Legislature, at the Governor's request, created a new organization within state government called the Office of Management and Budget ("OMB"). The OMB brings together the financial and auditing functions of Indiana. The Director of the OMB is the state's CFO.^[58]

Tim Berry has been Indiana State Auditor since 2007. The Indiana State Auditor is responsible for:^[59]

• Accounting for all of the State's funds
• Overseeing and disburse county, city, town, and school tax distributions
• Paying the State's bills
• Paying the State's employees
• Administrating Indiana’s Deferred Compensation Plan.

[edit] Stimulus

Indiana has received $2.9 billion in federal funding.^[60]

[edit] Public Employees

Main article: Indiana public employee salaries

Main article: Indiana public pensions

According to 2008 Census data, the state of Indiana and local governments in the state employed a total of 423,601 people.^[61] Of those employees, 310,202 were full-time employees receiving a net pay of $1,112,585,809 per month and 113,399 were part-time employees paid $106,724,434 per month.^[61] More than 59% of those employees, or 251,485 employees, were in education or higher education.^[61]

As of July 2010, the Indiana state government employed its smallest workforce since 1982. Special committee approval must approve any new hires.^[62]

State employees' salaries were frozen in 2009 and through 2010.^[62]

[edit] See Also

• Indiana taxpayer-funded lobbying
• Indiana public pensions

[edit] External links

• State Budget Solutions, Indiana
• Model transparency legislation from the American Legislative Exchange Council is available at this link.
• Indiana Policy Review Foundation
• Indiana State Budget Agency
• Indiana Government spending

[edit] Additional reading

[edit] References

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