Indiana state budget (2011-2012)

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The state ended fiscal year 2012 with a reserve balance totaling $2.15 billion, an amount equal to 15.9 percent of expenditures. The state received $383 million, or 2.8 percent, more in revenue than it anticipated in fiscal year 2012, and it spent $275 million less than was anticipated in the budget that was passed in April 2011.[1]

The surplus money was set to flow back to the state, with $360 million used to further strengthen INPRS pensions and another $360 million slated to go toward the Automatic Taxpayer Refund, meaning that each taxpayer would get more than $100 in 2013.[1][2]

A report released on August 3, 2011 by the State Budget Agency showed that the state had received $23 million more in tax revenues than expected for the first month of fiscal year 2012, which was 2.3 percent more than was projected in an April forecast that legislators used when drafting the state budget.[3]

Budget as passed

On April 29, 2011, the Indiana state legislature approved a two-year budget of $28.3 billion total.[4] 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.[5] Governor Mitch Daniels signed the budget into law on May 10, 2011.[6]

The budget froze spending on universities and most state agencies and maintained then-current Medicaid and horse racing programs.[4] It increased school funding over the biennium by approximately $150 million, boosted spending by 0.5 percent in 2012 and one percent in 2013.[4] The budget increased 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.[7] The appropriations in the fiscal year 2012 state budget can be found here. The state spent more than half of its budget on education.[8]

The budget included a taxpayer refund provision that, if state reserves exceeded 10 percent of budgeted spending, half the extra money would go to pension funds and the other half would be returned to taxpayers. The budget spent less than it took in and, provided everything went as planned, the state was expected to end the biennium with $1 billion in reserves.[6]

Lawmakers designated $6.26 billion for fiscal year 2012 and $6.31 billion for fiscal year 2013 for K-12 tuition support from the General Fund. On a calendar year basis, K-12 tuition support was increased 0.5 percent for 2012 and one percent for 2013.[7]

The Indiana State Budget Committee held hearings in November and December 2010.[9] Committee Chair State Sen. Luke Kenley estimated that lawmakers would need to reduce current spending approximately $1 billion to avoid a tax increase.[9]

State Budget Director Adam Horst said the state was spending about $13.9 billion per year in fiscal year 2011, and revenues in fiscal year 2012 would reach only $13.4 billion even with the projected growth.[10] Revenue forecasts released mid-December 2010 anticipated that the state would take in $13.4 billion in fiscal year 2012 and $13.9 billion in 2013.[11] Those were increases over then-current revenues, but then-current spending was about $13.9 billion, meaning that if spending stayed the same, Indiana would likely spend about $500 million more in the first year of the budget than it would generate.[11]

The Indiana Fiscal Policy Institute, a nonpartisan government research group, estimated that the state's deficit for fiscal year 2012 could hit $1.3 billion if the economy did not drastically improve or if deeper spending cuts were not made.[12] The deficit was due in large part to increased teacher, police and firefighter pension payments, as well as statutory increases in Medicaid.[13]

Education spending

For fiscal year 2012, Indiana devoted 32.3 percent of its total spending to K-12 education, down from 34.0 percent in fiscal year 2009.[14]

Fiscal year Total spending[15] Education spending[16] Percent education spending
2009 $51.2 billion $17.0 billion 33.2%
2010 $51.7 billion $17.2 billion 33.2%
2011 $52.3 billion $17.6 billion 33.6%
2012 $18.4 billion $25.3 billion 33.8%

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 included no tax increases but also avoided large cuts to most programs. It increased K-12 education funding by 0.5 percent in 2012 and one percent in 2013. Pensions and Medicaid also saw increased funding. If then-current revenue forecasts held up, a $1 billion surplus would remain at the end of the biennium.[17]

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 used a performance-based formula to divide some higher education money among colleges meeting goals, ended a tuition freeze at state colleges, gave extra money to all school districts with at least 500 students as an incentive for smaller districts to consolidate, and froze lawmakers' pay for two years. The proposal also included creation of a committee to study the labor issues surrounding the five-week boycott from House Democrats earlier in the session session, including a right-to-work bill that would prohibit union membership from being a condition of employment.[18]

On March 30, 2011, the Indiana House approved a $28 billion, two year state budget plan that would maintain overall education funding level from fiscal year 2011 while shifting more money to growing suburban school districts. It then went to the Senate for consideration. The budget included no tax increases. Nearly half of the state spending was slated to go toward K-12 education, but it differed from the governor's proposal in that it did not restore school funding of about $450 million ordered by Gov. Mitch Daniels. It also rejected the governor's call for a three percent increase in funding for colleges and universities, instead maintaining the same funding amount from fiscal year 2011.[19]

Right-to-work and legislative walkout

On February 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.[20]

The walkout by Democrats prevented action on the bill because a two-thirds majority was needed for a quorum; Republicans held 60 of the 100 seats in the House. Without the Democrats present, the House could not have a quorum.[21] On March 3, 2011, Republican House members moved to fine missing Democrats $250 a day beginning on March 7, 2011, and increased that figure to $350 per day on March 21, 2011.[22] On March 29, 2011, Republicans proposed some final changes to a bill that affected labor union jobs and wages, and the Democrats then returned to Indiana.[22] The legislative session ended April 29, 2011.[22] Democrats had to pay more than $100,000 in fines, which went into the House's budget.[22]

The Democrats' absence prevented the House from voting on House Bill 1468, the so-called "Right to Work" bill that would have given members of private-sector unions the right to opt out of unions and not pay dues.[21]

In Indiana at the time, all employees covered by a contract were required to belong to the union if a union bargained for a group of employees at a workplace.[23] The bill would have barred unions and companies from negotiating a contract that requires non-union members to pay fees.[24] The right-to-work bill died when it failed to clear the required legislative procedural hurdles.[20] Republicans could have attempted to reintroduce right-to-work and other bills by inserting the proposals into other bills later in the session, but risked triggering another stalemate.[20] Gov. Daniels said at the end of 2010 that while he agreed philosophically with the legislation, lawmakers should not pursue it.[24] 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.[20]

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 remained in Illinois in an attempt to thwart other parts of Republican Gov. Mitch Daniels' agenda, including restrictions on teacher collective bargaining.[25] The state Senate passed a bill that would narrow the scope of public school teachers' collective bargaining rights, but the measure could take effect until it was voted on by the House, and that would not happen until lawmakers returned.[26] In the fourth week of their absence, the Democrats said that they wanted changes to bills that used tax dollars to fund private school tuition and which impacted collective bargaining for labor unions, but Republicans said they would not negotiate any changes. Indiana requires a quorum of lawmakers present to pass all legislation.[27]

Governor's proposed budget

Horst presented Governor Daniels' budget to the State Budget Committee on January 13, 2011. The budget proposal called for spending $13.76 billion in fiscal year 2012, and about $13.98 billion in fiscal year 2013. At the end of the biennium, the state would 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 had languished since the 1930s.[28]


Under the proposed budget, K-12 education funding would remain the same.[28] 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.[11]

Senate Minority Leader Vi Simpson said schools faced mounting health insurance and utility prices, coupled with inflation and other demands and thus needed about a two percent increase in funding to handle rising costs.[11]

The governor's proposed budget cut higher education funding by approximately nine percent.[28]


The governor's proposed budget increased overall Medicaid funding, but eliminated some optional Medicaid services such as dental care, hearing aids, podiatry services and chiropractic services.[28]

The state Medicaid actuary projected Indiana's share of the program's costs would rise by about 25 percent in fiscal years 2011 and 2012, which was $1.46 billion and $1.84 billion respectively, and by nearly nine percent, or $2.00 billion, in fiscal year 2013 should services remain the same.[10] Sen. Luke Kenley said the General Assembly likely would cut some optional Medicaid services rather than resort to raising taxes.[10]


The Department of Corrections requested a $667.4 million budget for fiscal year 2012, which was an increase of 1.3 percent from what the department spent in fiscal year 2011, but less than it requested for in the previous budget cycle, due to spending cuts ordered by Gov. Mitch Daniels.[29] 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."[29]


  1. 1.0 1.1 year 2012_year_end_close.pdf Indiana Auditor of State, "Indiana State Government Reports $2.15 Billion Reserve Balance," July 12, 2012
  2. The Indianapolis Star, "Even with hefty surplus, budget questions loom for Indiana," July 29, 2012
  3. Businessweek, "Indiana tax revenues better than expected for July," August 3, 2011
  4. 4.0 4.1 4.2 The Louisville Courier Journal, "Indiana lawmakers pass two-year state budget," April 29, 2011
  5. [The Chicago Tribune, "Ind. governor, lawmakers eyeing insurance fund," December 29, 2010]
  6. 6.0 6.1 Forbes, "Ind. gov signs 80 bills into law, including budget," May 11, 2011
  7. 7.0 7.1, "List of Appropriations," accessed March 18, 2014
  8. The Boston Globe, "Ind. senators consider changing tax refund," Jan. 19, 2012
  9. 9.0 9.1 Businessweek, "Annual Indiana budget hearings to begin Wednesday," November 12, 2010
  10. 10.0 10.1 10.2 Bloomberg, "Ind. may cut Medicaid services to check costs," December 15, 2010
  11. 11.0 11.1 11.2 11.3 Bloomberg, "Indiana schools hope to avoid cuts in next budget," December 17, 2010
  12. Businessweek, "Report: Ind. government finances in big trouble," September 10, 2010
  13. The Journal and Courier, "Where would Statehouse candidates cut state budget?" October 3, 2010
  14. State Budget Solutions, "Throwing Money At Education Isn't Working," September 12, 2012
  15., "Indiana Government Spending Chart - Total Spending," August 4, 2012
  16., "Indiana Government Spending Chart - Education Spending," August 4, 2012
  17. The Courier Press, "Indiana lawmakers reach consensus on state budget," April 28, 2011
  18. Businessweek, "Senate panel OKs new budget with more school money," April 18, 2011
  19. Businessweek, "Indiana House backs GOP state budget plan," March 31, 2011
  20. 20.0 20.1 20.2 20.3 NPR "State Budget Fights - Wednesday, Feb. 23rd Edition," February 23, 2011
  21. 21.0 21.1 The Wall Street Journal, "Indiana Democrats Block Action on Union Bill," February 22, 2011
  22. 22.0 22.1 22.2 22.3 "Indiana Democrats return, now back to work" March 29, 2011
  23. The Wall Street Journal, "Political Fight Over Unions Escalates," February 22, 2011
  24. 24.0 24.1 The Indianapolis Star, "Exodus: Dems trigger Statehouse showdown," February 22, 2011
  25., "Wis. stalemate: Deal struck, cops sent to Dem homes," February 24, 2011]
  26. Reuters, "Several U.S. states consider union limits," February 25, 2011
  27. The Indianapolis Star "Indiana House Democrats begin their 4th week of walkout" March 14, 2011
  28. 28.0 28.1 28.2 28.3 The Indianapolis Star, "Daniels presents state budget; cuts target higher ed, Medicaid," January 13, 2011
  29. 29.0 29.1 Businessweek, "Ind. lawmakers face choices to rein in prison cost," November 30, 2010