Indiana state budget (2008-2009)
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Indiana faced a decline in state revenue that resulted in a $763 million deficit for fiscal years 2009 to 2011. The state budget committee projected that Indiana would spend $13.305 billion while taking in $12.542 billion in revenue.[1] At the time, Gov. Mitch Daniels said, “We will adjust our spending to preserve a balanced budget in the state of Indiana. These are only the first and hardly the last of the hard decisions that need to be made.”[2]
Despite the state's increasing unemployment and the urging of lawmakers to use the state's surplus, $1.2 billion, Gov. Daniel's said that the surplus must be preserved at all costs in case the recession drags on and that money is needed even more down the line. "Until someone can show us persuasively how long this is going to last and how deep this recession is going to get, we're simply not going to do that," he said. [3] The governor has already called for pay freezes in 2009, a 3 percent cut of the executive agency budget, which already had been cut by 7 percent for FY 2009 and a ban on out-of-state agency travel.[1]
[edit] Finalized budget
In early July 2009 the Indiana General Assembly passed a two-year state budget narrowly avoiding a state government shutdown.[4] The last time that the government had to shut down the government because officials were unable to pass the state budget was during the Civil War.[5]
The Democratic House voted 62-37 and the Republican Senate passed it 34-16 approving the $27.8 billion budget.[4] The final budget was approved without touching the billion dollar surplus in the rainy day budget.[6] In the final budget agreement, legislator's avoided cutting the state education budget. Some individual schools, however, will still see budget cuts but Gov. Daniels noted that that is because of declining enrollment and not because of statewide budget cuts.[7] In budget negotiations, Democrats added $54 million to ease the cuts made due to the decline in enrollment.[8] Republican lawmakers agreed to the increase in school funds so long as the $1 billion in reserve funding remained intact.[9]
Indiana ended fiscal year 2009 in the black with the aid of federal stimulus funds and after Gov. Daniels cut $530 million from the 2009 budget passed in 2007.[10] Gov. Daniels described the final budget bill a "compromise that has its defects" but added that he is pleased that the bill includes limited spending.[9]
[edit] Impact of budget woes
- Main article: State budget crisis, 2009-2010
- The unemployment rate hit 9.2 percent, the highest rate since the 1980s,[11] in January compared to 7.8 percent in December. In January the national unemployment rate was at 7.6 percent. Employment dropped in transportation and wholesale sectors in Indiana in January. According to the Indiana Department of Workforce Development declines in manufacturing have severely impacted the state. [12]
- Preliminary numbers show nearly 320,000 Indiana residents were looking for work in January - compared with 260,000 in December and 155,000 a year earlier. More than half of the state's counties had unemployment rates in January of 10 percent or more. [11]
- In light of the state's budget crisis the Governor called for a postponement of complete state funding for full-day Kindergarten. [13]
[edit] Budget background
The state of Indiana has a biennial budget meaning that each budget includes two fiscal years. The budget process, therefore begins on even-numbered years. Each state agency submits their requests for the next to years to the Governor. State revenue forecasts are made annually in December, prior to the convening of legislative sessions, and again in April, prior to final legislative approval and enactment of appropriations. [14]
The revenue forecasts are prepared by the Indiana Economic Forum and the Revenue Forecast Technical Committee. After reviewing both the revenue forecasts and agency requests, the Governor submits his recommended budget to the Legislature, where the bill passes through the House and then the Senate for adjustments and approval. After the budget bill has been adopted by both chambers, it goes to the Governor for signature or veto. The Governor must sign the bill or veto it in its entirety. A gubernatorial veto may be overridden by a majority vote in both the House and Senate. [14]
Even though the Legislature reviews the biennial budget in odd-numbered years there can be changes made to the budget on even-numbered years, for example, if revenue projections change. [14]
[edit] Budget figures
The following table provides a history of Indiana's expenditures and gross domestic product (GDP).
| Fiscal Year | Expenditures (billions) | GDP (billions) |
|---|---|---|
| 2000 | $31.2 [15] | $194.4 [15] |
| 2001 | $33.8 [15] | $195.2 [15] |
| 2002 | $36.3 [15] | $205.0 [15] |
| 2003 | $37.8 [15] | $215.4 [15] |
| 2004 | $39.3 [15] | $228.3 [15] |
| 2005 | $42.0 [15] | $232.8 [15] |
| 2006 | $44.0 [15] | $238.7 [15] |
| 2007 | $46.1 [15] | $246.4 [15] |
| 2008 | $48.2 [15] | $254.4 [15] |
| 2009 | $50.5* [15] | $262.7* [15] |
- NOTE: The figures for FY 2009 won't be finalized until the end of the fiscal year.
[edit] Ideas about why the crisis exists
- Indiana collected $622 million in revenues in February 2009; $42 million less than predicted in the December fiscal forecast and 10 percent below February 2008 collections. Tax collections have fallen below predicted forecast numbers since December 2008. In total state tax revenue is down about $600 million from what lawmakers approved for spending in FY 2009. [11]
- For FY 2009 income tax revenue are already 5 percent below the 2008 level. The state has not experienced such levels since 1980 and 2002. The December forecast predicted that Indiana would take in about $900 million less, a 7 percent reduction, from taxes during FY 2009 than previously expected. [16]
[edit] Proposed actions
[edit] Governor Mitch Daniels
"There is not going to be new money for anything,” Gov. Daniels said. However, despite declining state revenue Daniels said that there won't be any tax increases for the state of Indiana. [13] His current budget proposal to balance the state budget calls for: a 3 percent cut of the executive agency budget, which already had been cut by 7 percent for fiscal 2009; a 3 percent reduction of spending on grants and subsidies such as planning projects and publications; a ban on out-of-state agency travel unless approved by state budget officials; capital spending and hiring restrictions; no raises for Daniels and state employees in 2009. [17] The pay freeze includes legislators, judges and other state office holders.[1] In Daniels’ plan, there are no calls for cuts in elementary and secondary education, Medicaid, public safety or highway and infrastructure improvements. Daniel's also called for a limit on property taxes. "We have to do all we can to see that the last brick in the protective wall, the wall protecting Hoosier taxpayers, is put in place," Daniels said of his efforts to amend the Indiana Constitution to include tax caps.[18]
In addition to Gov. Daniels' budget cuts, Daniels recommended several government reforms including measures to eliminate township government, force changes in county government structure and consolidate smaller school districts. However, on March 10, 2009 a House committee defeated Daniels' proposal with a 7 to 1 vote.[19] The bill, said Daniels, would make a "major difference for long term good of our state." [20]
[edit] Republicans
Republicans said that they are against using the state's surplus or "rainy day" fund to help with FY 2009's budget deficit or the FY 2010 predicted deficit. The state’s economic situation could get worse before it gets better, they said. [16] Some lawmakers have also suggested changing the state's budget process from a two-year budget to a one-year budget. However, House minority leader Brian Bosma and Rep. Jeff Espich said that the proposal could lead to a full-time Legislature that would draft a new budget every year which in turn would likely lead to more spending and tax increases to pay for it. [21]
[edit] Democrats
With a budget deficit and increasing unemployment rate, Democrats said that they urge the Governor to use the state's surplus to help close the gap and improve employment throughout the state. "We have a crisis, no question about it. And we need to work together, and we need to admit this is probably the greatest crisis in, I don't know, how many years," said Speaker of the House Rep. Pat Bauer. [3] In addition state Democrats have suggested that Indiana change the budget process from a two-year budget to a one-year budget. Lawmakers said that now is an appropriate time to change the policy because the economy is in the tank, state tax collections have been coming in well below projections, and there are too many financial uncertainties to pass a multibillion-dollar budget that covers two years. "We have had a tremendous fall off a cliff and we don't know how far it will go or if (the economy) it will come back," said Bauer. "We are just not prepared to do a second year because we don't know what numbers we will have. It's like reading in the dark." [21]
[edit] Property tax limits
Taxpayers in Indiana held a Statehouse rally on March 10,2009 urging lawmakers to vote this year for a proposal that could lead to property tax limits in Indiana's Constitution. In order to amend the constitution, a resolution must past two consecutive, separately elected Legislature and then be approved in a statewide general election. The Legislature approved the proposal in 2008. Should the proposal be accepted again voters will have a chance to vote for or against the amendment in 2010.[22] The bill, which is currently on the House floor for consideration, was accepted by the Senate in 2009. However, some Indiana citizens believe that the legislators should approve not only a cap on property tax but completely repeal property taxes. Gov. Daniels said that the bill is critical to homeowners and others seeking predictability in today's unstable economy. "Think of how much more important it is now when people are hurting," he said. "There is no reason for delay." [23]
[edit] Economic Stimulus Package
Indiana is expected to receive between $4 and $6 billion from the $787 billion economic stimulus package. [24] [25] All told, the federal stimulus plan would create or save 75,000 jobs in Indiana, based on White House estimates.[26] However, in February 2009, Gov. Daniels said that he isn't sure that he will take the stimulus funds because he said accepting federal dollars could cost their states in the long run. Currently the federal plan says the state must expand the unemployment program to part-time and low income workers. But when those federal dollars run out, the state will have to pick up the tab. [27]
On March 3,2009 the state launched a website to provide information about the federal stimulus package and use of the funds in Indiana. [28] [29]
According to preliminary reports Indiana is expected to receive:[30]
- $1.4 billion for Medicaid
- $1.3 billion towards education
- $650 million for roads and bridges
- $400 million for nutrition
- $100 million toward weatherization
- $100 million toward water quality
- $100 million for housing
- $80 million for public transit
- $70 million for energy
- $70 million for employment services
- $40 million for child care
[edit] Budget transparency
Indiana currently has no statewide, official spending database online. Although Indiana House Bill 1280 would have placed spending information online, the bill died during the 2009 regular session.[31]
[edit] Economic Stimulus Transparency
- The Economic Recovery and Reinvestment Act of 2009 designated $787 billion to be spent throughout the U.S. Of that $787 billion stimulus package, it is estimated that 69%, or over $541 billion, will be administered by state governments.[32]
- It is estimated that Indiana will receive at least $3 billion in federal funding.[33]
- The economic recovery website for Indiana is available here.
[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:
| State Database | Searchability | Grants | Contracts | Line Item Expenditures | Dept/Agency Budgets | Public Employee Salary |
|---|---|---|---|---|---|---|
| Indiana Active Contracts |  | | |  | | |
[edit] Limitations and Suggestions
[edit] Support for creation of the database
Governor Mitch Daniels created the contracts website with an Executive Order in 2005.
[edit] Public employee salary information
Thanks to www.indystar.com, citizens have a public employee salary database available to them, found at this link.
Salaries of Purdue University employees are updated annually at High Ed Salaries.
The Better Government Association offers this database of selected public payrolls. The BGA database includes employee salaries for the Indiana Inspector General, the Indiana State Police, and the states of Indiana, Illinois, and Missouri.
[edit] See Also
Indiana taxpayer-funded lobbying
[edit] External links
- 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
- Governor Mitch Daniels,"2009 State of the state address," January 13,2009
- South Bend Tribune,"State budget passes, is signed," June 30, 2009
[edit] References
- ↑ 1.0 1.1 1.2 Business First: "Hoosiers join in budget slashing," Dec 11, 2008
- ↑ JournalGazette.net,"Daniels cuts state spending," Dec 12, 2008
- ↑ 3.0 3.1 The Indy Channel,"Lawmakers squabble over how to reverse state jobless rate," March 9,2009
- ↑ 4.0 4.1 Chicago Tribune, INDIANA: State shutdown averted, July 1, 2009
- ↑ The Los Angeles Times,"States brace for shutdowns," June 30, 2009
- ↑ Indiana News Center, New Indiana State Budget: Billion Dollar Reserve Protected, July 2, 2009
- ↑ Associated Press,"Daniels Pleased With Final Budget," July 1, 2009
- ↑ Indiana Economic Digest,"Daniels signs two-year budget after Indiana lawmakers reach accord," July 1, 2009
- ↑ 9.0 9.1 WSBT,"Not all local lawmakers happy with Indiana's new state budget," July 3, 2009
- ↑ Courier-Journal,"Indiana finishes year in the black," July 17, 2009
- ↑ 11.0 11.1 11.2 WTHR-TV,"Indiana's jobless rate hit 9.2 percent in January," March 7,2009
- ↑ The Indy Star,"Indiana's unemployment rate hits 9.2%," March 6,2009
- ↑ 13.0 13.1 Governor Mitch Daniels,"2009 State of the state," January 13,2009
- ↑ 14.0 14.1 14.2 State of Indiana,"The Budget Process," retrieved March 11,2009
- ↑ 15.00 15.01 15.02 15.03 15.04 15.05 15.06 15.07 15.08 15.09 15.10 15.11 15.12 15.13 15.14 15.15 15.16 15.17 15.18 15.19 US Government Spending,"Indiana State and Local spending," retrieved March 10,2009
- ↑ 16.0 16.1 Courier-Journal,"Indiana tax revenue falls short of projections," March 6,2009
- ↑ Governor Mitch Daniels,"Daniels suggests Indiana public employees forego 2009 pay raises," December 23,2008
- ↑ The Star Press,"Daniels defends streamlining during discussion in Lafayette," March 7,2008
- ↑ Courier-Journal,"Ind. House panel rejects local government reform," March 10,2009
- ↑ WNDU,"Government reform movement on the move," February 17,2009
- ↑ 21.0 21.1 Associated Press,"Indiana debate:Should budget be for 1 or 2 years?," February 23,2009
- ↑ WIBC,"Daniels joins rally pushing for vote on property tax caps," March 10,2009
- ↑ Associated Press,"Daniels:No reason to wait on prop. tax cap vote," March 10,2009
- ↑ Associated Press,"Indiana's Stimulus Take: $4 Billion," February 13,2009
- ↑ Indy Star,"Indiana will get $6B in stimulus funds," February 13,2009
- ↑ American Recovery and Reinvestment Act,"Estimated job effect," retrieved March 10,2009
- ↑ WSJV,"Gov. Daniels may not take stimulus money, laid off workers want it now," February 26,2009
- ↑ State of Indiana,"State launches federal stimulus website," March 3,2009
- ↑ Associated Press,"Indiana creates web site to follow stimulus money," March 3,2009
- ↑ State of Indiana,"What will Indiana's portion of the stimulus money go toward?," retrieved March 10,2009
- ↑ Bill Status, House Bill 1280 (2009)
- ↑ National Taxpayers Union, "A Letter to the Nation's Governors: Ensure Transparency and Accountability by Posting Stimulus Expenditures Online," March 10, 2009
- ↑ Wall Street Journal, "Stimulus Spending by State"
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