Indiana state budget (2008-2009)
- 1 Finalized budget
- 2 Impact of budget woes
- 3 Budget background
- 4 Ideas about why the crisis occurred
- 5 Proposed actions
- 6 Budget transparency
- 7 See also
- 8 External links
- 9 Additional reading
- 10 References
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. 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.”
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 dragged on and that money was 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. The governor called for pay freezes in 2009, a 3 percent cut of the executive agency budget, which already had been cut by 7 percent for fiscal year 2009, and a ban on out-of-state agency travel.
In early July 2009, the Indiana General Assembly passed a two-year state budget narrowly avoiding a state government shutdown. The last time that the government had to shut down because officials were unable to pass the state budget was during the Civil War.
The Democratic House voted 62-37 and the Republican Senate voted 34-16 to approve the $27.8 billion budget. The final budget was approved without touching the billion dollar surplus in the rainy day fund. In the final budget agreement, legislators avoided cutting the state education budget. Some individual schools, however, still saw budget cuts; however, Gov. Daniels noted that this was because of declining enrollment and not because of statewide budget cuts. In budget negotiations, Democrats added $54 million to ease the cuts made due to the decline in enrollment. Republican lawmakers agreed to the increase in school funds so long as the $1 billion in reserve funding remained intact.
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. Gov. Daniels described the final budget bill as a "compromise that has its defects," but added that he was pleased that the bill included limited spending.
Impact of budget woes
- See also: State budget crisis, 2009-2010
- The unemployment rate hit 9.2 percent in January 2009, the highest rate since the 1980s, 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 severely impacted the state.
- Preliminary numbers showed 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.
- In light of the state's budget crisis, the governor called for a postponement of complete state funding for full-day kindergarten.
- See also: Indiana state budget
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 requests for the next two 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.
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.
The following table provides a history of Indiana's expenditures and gross domestic product (GDP).
|Fiscal year||Expenditures (billions)||GDP (billions)|
- NOTE: The figures for FY 2009 had not been finalized at the time this data was compiled.
Ideas about why the crisis occurred
- 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 had fallen below predicted forecast numbers since December 2008. In total, state tax revenue was down about $600 million from what lawmakers approved for spending in fiscal year 2009.
- For fiscal year 2009, income tax revenue was already 5 percent below the 2008 level. The state had 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 fiscal year 2009 than previously expected.
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 wouldn't be any tax increases for the state of Indiana. His proposal to balance the state budget called for: a 3 percent cut of the executive agency budget, which already had been cut by 7 percent for fiscal year 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; and no raises for Daniels and state employees in 2009. The pay freeze included legislators, judges and other state office holders. In the governor's plan, there were no calls for cuts in elementary and secondary education, Medicaid, public safety or highway and infrastructure improvements. Daniels 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.
In addition to his 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 the governor's proposal with a 7 to 1 vote. The bill, said Daniels, would make a "major difference for long term good of our state."
Republicans said that they were against using the state's surplus, or "rainy day" fund, to help with fiscal year 2009's budget deficit or the fiscal year 2010 predicted deficit. The state’s economic situation could get worse before it gets better, they said. Some lawmakers 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.
With a budget deficit and increasing unemployment rate, Democrats urged 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. In addition, state Democrats suggested that Indiana change the budget process from a two-year budget to a one-year budget. Lawmakers said that this was an appropriate time to change the policy because state tax collections were coming in well below projections and there were 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 would have. It's like reading in the dark."
Property tax limits
Taxpayers in Indiana held a rally on March 10, 2009 urging lawmakers to vote 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 legislatures and then be approved in a statewide general election. The legislature approved the proposal in 2008. Should the proposal be accepted again voters would have a chance to vote for or against the amendment in 2010. The bill was accepted by the Senate in 2009. However, some Indiana citizens believed that legislators should approve not only a cap on property tax but completely repeal property taxes. Gov. Daniels said that the bill was 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."
Economic stimulus package
Indiana was expected to receive between $4 and $6 billion from the $787 billion economic stimulus package. All told, the federal stimulus plan would create or save 75,000 jobs in Indiana, based on White House estimates. However, in February 2009, Gov. Daniels said that he wasn't sure that he would take the stimulus funds because, he argued, accepting federal dollars could cost the states in the long run. The federal plan mandated that the state must expand the unemployment program to part-time and low income workers. Daniels was concerned that, when those federal dollars run out, the state would have to pick up the tab.
According to preliminary reports Indiana was expected to receive:
- $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
As of 2009, Indiana had 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.
Economic stimulus transparency
- The Economic Recovery and Reinvestment Act of 2009 designated $787 billion to be spent throughout the nation. Of that $787 billion stimulus package, it was estimated that 69%, or over $541 billion, would be administered by state governments.
- It was estimated that Indiana would receive at least $3 billion in federal funding.
Indiana has a database of contracts, available through the Indiana Department of Administration. The state's active contracts listing provides an up-to-date list of all professional services contracts to 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|
Support for creation of the database
Governor Mitch Daniels created the contracts website with an Executive Order in 2005.
Public employee salary information
- See also: Indiana state government salary
- 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
- Governor Mitch Daniels, "2009 State of the state address," January 13,2009
- South Bend Tribune, "State budget passes, was signed," June 30, 2009
- Business First: "Hoosiers join in budget slashing," Dec 11, 2008
- JournalGazette.net, "Daniels cuts state spending," Dec 12, 2008
- The Indy Channel, "Lawmakers squabble over how to reverse state jobless rate," March 9,2009
- 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
- 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
- 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
- Governor Mitch Daniels, "2009 State of the state," January 13,2009
- State of Indiana, "The Budget Process," accessed March 11,2009
- US Government Spending, "Indiana State and Local spending," accessed March 10,2009
- 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
- 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 would get $6B in stimulus funds," February 13,2009
- American Recovery and Reinvestment Act, "Estimated job effect," accessed 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 would Indiana's portion of the stimulus money go toward?," accessed 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"