Pharos-Tribune

January 6, 2013

Legislature enters budget session with cash surplus

By Maureen Hayden
CNHI Statehouse Bureau

INDIANAPOLIS — The Indiana General Assembly starts its 2013 session Monday in some unfamiliar but welcome territory: Flush with more than $1 billion in new revenue to spend — plus $2 billion in reserves — while crafting the state’s two-year budget plan.

It’s an envious place to be, following a series of recession-era budget cycles that forced the Legislature and outgoing Gov. Mitch Daniels to make some painful cuts in spending on education and other public services.

But don’t expect a spending spree.

While there are already plenty of ideas for how the extra money should be spent — including a call for a 7.5 percent increase for the state’s public universities and a cry from K-12 schools for more dollars — the budget gatekeepers are urging caution.

Republican House Speaker Brian Bosma, of Indianapolis, has been warning his fellow lawmakers that a sputtering economy means the “fiscal fog is thick” and a key budget gatekeeper, Senate appropriations chairman Luke Kenley, has vowed to maintain his reputation as a fiscal conservative.

“Lawmakers have worked hard in recent years to put our fiscal house in order, and we must continue down that path in 2013 ...,” said Kenley, R-Noblesville. “We want to continue to stimulate job growth while, at the same time, guarding against future economic instability.”

Meanwhile, the new House Ways and Means chairman, state Rep. Tim Brown, R-Crawfordsville, has said more money in the state coffers likely means a boost in funding for some programs that suffered past cuts. But without giving much detail, he’s also said they need to be “strategic restorations of what we’ve had to cut in the past.”

The most recent fiscal news is rosier than it’s been in more than five years. The state’s revenue forecast, released in December, predicts state government will receive more than $27.9 billion in taxes and other revenue sources over the next two years. That’s almost $1.3 billion more than the state took in during the past two years.

Much of that increased revenue is coming from state sales and income taxes. There has been a steady decline in gaming revenues, though. The November 2012 monthly revenue report showed Indiana casinos saw eight straight months declining revenue. It’s a trend not likely to be reversed as more casinos in the neighboring states of Illinois, Michigan and Ohio come on line.

The drop in gaming dollars may prompt Indiana lawmakers to reconsider some of the tight rules they’ve imposed on the state’s casino operations. State Rep. Ed Clere, R-New Albany, has called for his fellow legislators to re-examine the number of gambling licenses it allows and the locations where gambling is allowed.

The Legislature has been averse to opening the state up to more gaming. But at a legislative preview conference late last year, the powerful state Senate president David Long, R-Fort Wayne, said the Legislature needs to do something to reverse the drop in gambling revenues by making Indiana’s casinos more competitive.

One of the budget fights unfolding involves a campaign pledge made by Republican Gov.-elect Mike Pence. His call for a 10 percent cut in personal income tax has met with resistance from legislative leaders of his own party.

If passed, it would mean about $500 million drop in revenues for the state. And it would come on the heels of two significant revenue cuts made last year by the Legislature: a reduction in the corporate income tax rate and a 10-year phase-out of Indiana’s inheritance tax.

Another big budget issue involves the state’s cost of implementing the federal Affordable Care Act, also known as Obamacare. There are some significant unknowns, including how much money the state will be obligated to pay as more Hoosiers are expected to be covered under Medicaid, a joint state and federal program that provides health care for the poor and disabled. The state spent more than $1.4 billion on Medicaid in fiscal year 2012. That amount is expected to rise to $2 billion by 2015.



Maureen Hayden covers the Statehouse for the CNHI newspapers in Indiana. She can be reached at maureen.hayden@indianamediagroup.com.