Our Indiana Budget: The Money Coming In
Having recently wrapped up the “long” session of the Indiana General Assembly, I thought it might be helpful to review our state’s budget for the next two years. One unique aspect of Indiana’s budgeting is that we work on a two-year cycle, which makes for more efficient government and better long-term planning.
As everyone knows, there are essentially two parts to a valid budget – how much money you have coming in, and how much money you have going out. This week’s focus is on the money coming in.
Unlike our counterparts in Washington, D.C., in Indiana we are not in a position to “print” money or borrow to meet our obligations, even if we were so inclined. Therefore, we are quite careful about ensuring that we understand what revenue - taxes and fees - are likely to come in over the next budget cycle and beyond.
To get our figures as accurate as possible, an outside firm is retained to help craft revenue forecasts, and our state’s own budget folks spend much time analyzing data and trends. The result is that, again, unlike our federal government, the House, Senate and governor, encompassing both Republicans and Democrats, generally agree on Indiana’s forecasted revenue, which is used as the basis for our budget decisions.
The April forecast shows that over the next two years, under current policy, Indiana is likely to bring in approximately $ 30 billion in revenue, with growth being seen between 2014 and 2015 at $ 14.7 billion and $ 15.3 billion, respectively. Even with some increases in funding for roads and education, Indiana anticipates having a structural surplus of $275 million at the end of 2015. This means that revenue exceeds expenses, and we have a true budget surplus – a fact that not many states can brag about in these tough economic times.
Indiana’s budget provides that given this surplus, the state can afford to take a number of steps to help Indiana businesses compete with the rest of the country, and at the same time provide tax relief to the folks who pay Indiana taxes. The largest tax relief package in state history was passed this year in the budget. Once fully implemented, Hoosiers will get to keep more than $650 million of their hard-earned money. I would always rather see more money in the hands of Hoosiers instead of sitting in state coffers.
The tax relief package completely repeals Indiana’s inheritance tax. While not all Hoosiers pay this tax, for those that do this is a huge change. Quite simply, businesses and farms are sometimes sold because the heirs cannot afford the taxes. Since Indiana is (or was) one of only seven states to still have an inheritance tax, repealing it will take away the incentive for citizens likely to be liable for an inheritance tax to find another state to live in as they move up in years.
The budget also continues the implementation of lowering Indiana’s business and financial institutions tax by 2 percent.. Millions of Hoosiers are employed by Indiana businesses, and we can expect that lowering these taxes and increasing the bottom line will help both employers and their employees while encouraging new businesses to choose Indiana for their home.
Finally, the budget calls for a phase in of a 5 percent reduction in personal income taxes. While Indiana already has comparatively low income tax rates, this reduction sends a message to the rest of the country that Indiana is doing just fine, and we intend to keep government in check. The budget also leaves in place current law regarding what happens if Indiana is to have an unexpected, material surplus. If such a surplus comes into fruition, then taxpayers can expect an “automatic refund” as they experienced recently.
We are very blessed to live in a state that has had, and continues to have, prudent management of its budgets. While most states are struggling to make ends meet, and some states –like Illinois and California—are pathetically in debt and behind on their obligations, Indiana is in a position to keep taxes low and provide the kind of stimulus our state needs to emerge from a prolonged recession.
In the next column, I will highlight the spending for the next two years. Here too, there is good news for Hoosiers who care about paying off long-term bonds, having an ample budget for public education and taking care of our roads.
State Rep. Tom Washburne serves as Vice Chairman of the Judiciary Committee. He also serves on the Financial Institutions Committee and the Select Committee on Government Reduction. Rep. Washburne represents the entirety of Gibson County and portions of Knox, Pike, Vanderburgh and Posey counties.