INDIANAPOLIS — The state’s budget forecasters are delivering discouraging news, estimating a shortfall of nearly $300 million in tax revenues from what they predicted just eight months ago.
The updated estimate comes less than two weeks after Republican Gov. Mike Pence ordered state agencies and universities to cancel $51 million in planned spending because of missed revenue targets.
The $297 million adjustment, disclosed to the State Budget Committee on Friday, represents a small dent in a two-year budget of just over $14 billion. But it’s enough to make fiscal leaders wary of granting Pence an ambitious wish list of more tax cuts and new spending on early childhood education.
“The revised downward forecast may be reflecting an abundance of caution, and I certainly hope that’s true,” said Senate Appropriations Chair Luke Kenley, a Republican from Noblesville who is a key gatekeeper to the biennial budget that runs until June 30, 2015.
But Kenley said he’s not willing to gamble on that, and cast serious doubt that the Legislature would reopen the budget process for the governor when it goes into its 2014 “short” session in early January.
The revised forecast delivered to the budget committee, made up of fiscal leaders from both the House and Senate, estimates about 2 percent less revenues from the state’s major tax sources. That includes $179 million less in sales tax than originally anticipated for 2014, and another $199 million less for 2015. Sales taxes are a major source of funds for local school districts.
In light of Kenley’s resistance to opening the budget in 2014 — a sentiment echoed by House Ways and Means Chairman Tim Brown of Crawfordsville — Pence has called on lawmakers to defy their fiscal leaders.
Earlier this week, the governor again called for a measure to reduce income taxes on families with children as part of what he calls a plan to promote marriage and childbearing in Indiana.
Pence wants to increase the amount of earnings not subject to income tax from $1,000 per child to an unspecified, higher amount that would grow automatically based on inflation.
He’s also called on the Legislature to eliminate the business personal property tax, expand the state’s school voucher program for early childhood education for low-income children, and release $400 million in road funding set aside during the 2013 legislative session.
Kenley said the items on Pence’s wish list “were all important issues and worthy of discussion.” He added: “I don’t think we’ll see any real action on these until we get to 2015.”
Kenley also said one of his priorities in the 2015 budget session will be restoring the $26 million in funding that Pence is pulling back from the state’s public colleges and universities in 2014.
Kenley said college and university administrators had pledged to hold the line on tuition increases in return for more state dollars.
“I think they’ll stand by that if we can reinstate their funding for 2015,” he said.
The revised budget forecast came on the same day that Pence announced a drop in Indiana’s unemployment rate. The jobless numbers dropped to 7.3 percent in November, though more than one-third of Indiana’s counties remain above that number. The state’s unemployment rate also continued to exceed the national average of 7 percent.
Indiana gained a record 25,300 private-sector jobs in November. The gains were broad-based and spread across all sectors except leisure and hospitality, which was flat.
Pence said the numbers are welcome news.
“The continued downward trend in unemployment and the significant growth in private sector jobs demonstrate that Indiana’s economy is strong and growing stronger every day.”
Maureen Hayden covers the Statehouse for the CNHI newspapers in Indiana. She can be reached at email@example.com. Follow her on Twitter @MaureenHayden