STRAIGHT FROM THE SENATE

FISCAL RESPONSIBILITY KEEPS STATE SOLVENT

State leaders exercised considerable spending restraint during the 2010 fiscal year, enabling Indiana to remain in the black despite significant revenue declines resulting from the ongoing global recession.

When Indiana government closed fiscal year 2010 books on June 30, total revenue for the year was down $957 million, or 7.3 percent, from what forecasters had planned for when lawmakers crafted the state’s current two-year budget in 2009. While revenues for the months of June and July improved over the same period last year, total base revenues for fiscal year 2010 were lower than totals for fiscal year 2005 – a five-year step backward in tax collections.

Conservative spending by Gov. Mitch Daniels and supported by legislative Republicans enabled Indiana to weather the economic storm better than most states and allowed us to end the fiscal year with cash in reserve. For the first time in modern history, Indiana spent less money during the most recent fiscal year than in the prior year.

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Most of the savings was achieved by reducing state agency budgets by nearly 10 percent. Modest reductions were also made to K-12 and higher education funding. State government continued to flat-line employee pay and freeze hiring for all but essential personnel.

Indiana Senate leaders led by example, exceeding the governor’s 10 percent savings target, reducing the Senate’s fiscal year 2010 budget by 13.9 percent, or $1.9 million, in addition to cuts already made in previous years and during the most recent budget-writing session.

While Indiana’s fiscal responsibility has enabled the state to preserve some of its budget reserves, the ongoing economic sluggishness will continue to present state leaders with challenges in the future.

State reserves total $831 million and are now less than the projected revenue shortfall, expected to be $1.2 billion for fiscal year 2011. This will make crafting a new state budget challenging as we work toward the 2011 legislative session.

The first month of the new fiscal year saw modest revenue improvements over the same period last year, but totals remained $72 million below the budgeted amount and $15 million below the most recent revenue forecast. Sales tax revenues have increased on a year-to-year basis for five consecutive months, but we must remember this follows a decline that lasted 16 months. There is still a long road ahead, one that will require continued fiscal restraint.

To help address the continued shortfalls, Daniels has already ordered an additional 5 percent reduction to state agency budgets in fiscal year 2011, bringing total reductions to 15 percent.

Senate Republicans remain committed to crafting a fiscally responsible budget next year in order to protect funding for K-12 and higher education as much as possible. However, we must not and will not raise taxes upon our fellow Hoosiers to pay for these shortfalls. Such actions would kill the economic recovery we are trying to foster, and would be an insult to hard working Hoosier families that are already struggling to keep their heads above water in these tough economic times.

senator.long@iga.in.gov