Our Indiana Budget: The Money Going Out

Friday, May 24, 2013

Our Indiana Budget: The Money Going Out

In my last column, I spent time highlighting “ the money coming in” to be used in the Indiana budget –what is derived from taxes and fees – paying special attention to several tax cuts enacted by the Indiana General Assembly. This week, I focus on the spending side of the budget – the money going out.

As one who believes in limited government and individual liberty, I find the spending side of the budget challenging. Government is not known to be the most efficient organization, and there always seems to be room for spending cuts. Further complicating the matter is that there is no end to the short-term good deeds that could be done with the money Hoosiers pay into taxes.

Lobbyists represent every interest and program imaginable, some of which have merit. But, every spending decision must also take into account that the money being spent is first taken away from someone else, who would be the poorer if the state spends their money. Also, to be added into the budget spending blender is that the long term needs of the State must be given priority, and the urge to pick winners and losers among industries and interest groups, which has seemingly overwhelmed our federal government in Washington, must be avoided.

So, when determining prudent budget expenditures, it was important to first clearly limit the State’s spending by setting aside the kind of reserves that history has shown are necessary to get through difficult economic times. This necessary reserve equated to about 12 percent of operating revenue with an overall structural balance close to $300 million. The $30 billion state budget appropriates every funding mechanism for the state and the function of government from education to health care to public safety.

The next step was to take into account the fact that this was an unusual budget cycle. For the past several years, like most of us, Indiana had to tighten its belt, prioritizing key areas of growth while not spending money the state didn't have in reserves. The policy decisions that were made weren't so much about the merit of particular programs, but rather the decisions were based on the economic reality of the country’s slowed growth.

This budget cycle, revenues increased beyond pre-recession levels, providing cautious optimism for the Legislature. The projected growth of the state over the next few years has provided greater flexibility for strategic investments to prudently be enacted.

Accordingly, our budget allowed for several adjustments. For instance, education funding was increased by approximately $390 million over the biennium, exceeding pre-recession spending levels. About $13.8 billion will be spent on education over the two year cycle – proposed historic investment in Indiana’s future. In addition, $300 million will be allocated to the Tuition Reserve Fund, helping to ensure Indiana’s schools have the necessary funding to continue operating in case of another economic recession.

Infrastructure funding also received attention this session, which I was pleased to see. For decades, our road funding was configured on volume-based taxes on gasoline, $0.18 per gallon, which was placed in a special road fund. In recent years, the automobile industry has evolved to offer alternative fuel sources and more efficient vehicles, leading to less revenue being generated from the gas tax, which has put a strain on road and bridge funding for improvement and upkeep.

To remedy this issue, the budget devotes 15 percent of the sales tax associated with gasoline into the road fund. Also important to note, funding for the State Police and the Department of Motor Vehicles was moved from the road fund to the General Fund. The net effect of these changes increases road and bridge funding by $215 million per year. A special projects account was also created for long term highway projects like completing I-69 from Evansville to Indianapolis.

The budget also reduces taxpayer funded debt by repaying $128 million in bonds owed on two state facilities and by looking ahead to pay cash for nearly $225 million in state and university capital projects, saving taxpayers nearly $160 million.

Overall, this budget is a great framework for Indiana to grow and prosper. All of the priorities set by our caucus have received a shot in the arm for the betterment of each Hoosier community. Education and road funding saw the biggest increases an investment in the short and long term needs of the State of Indiana.

All around the country, states are trying to simply get their revenue in line with expenditures. We are blessed to be in a situation where our budget is balanced; solid reserves are being maintained; taxes are reduced; funding is being restored or exceeding pre-recession levels; and priorities such as education and roads are receiving greater attention. We can all be proud to call ourselves Hoosiers, and there are many great things to look forward to in the years to come for our state.


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.