Rep. Dermody's goal to pass budget that is structurally balanced, no new taxes
Every two years the General Assembly is tasked with proposing a budget for the state of Indiana. The budget gets its start on the House Ways and Means Committee. As a member of the committee, I know we have made it our priority to adopt a budget without increasing taxes and to bring the budget back into structural balance.
We face many challenges when putting together the budget. One problem that many other states are also experiencing, due to the nationwide recession, is the drop of revenues that we once had. Over the last three years, the state has received over $3 billion less than the state budget expected. This is due to several reasons that many times are unforeseen. And many of those reasons feed into each other. For example, in this recession, unemployment rises, meaning the state gets less in income taxes than originally expected. As a result of their unemployment, people do not buy as much as they once did, meaning that the state also receives less in sales taxes. This is just one example of the many issues that make our job challenging.
The expected revenue for the 2011 fiscal year (FY) is slightly less than state revenue five years prior in 2006. Inflation over the last five years means that a dollar today in 2011 does not go as far as a dollar did in 2006, so that means we have much less to work with today than we did five years ago. Estimates show that state revenue will continue increasing over at least the next three years, however, so many of the actions and cuts we have been taking this year will hopefully only be temporary.
While we won't be at the same level of revenue as we were in 2008 again until 2012, we are heading in the right direction. We will have to make further reductions in the upcoming budget, but there are still reasons to be optimistic.
The economy and our state tax revenues are improving. We are working together to make appropriate spending reductions so Indiana can weather the recession. Our plans will allows us to strengthen the economy without jeopardizing the long-term health of the state, and also to avoid a tax increase that would be counterproductive to the state's economic recovery.
The current budget proposal in the House Ways and Means Committee does not include any tax increases. With that proposal we must create a structurally balanced budget. Also, the budget needs to have at least 5% in reserve, which experts agree is the absolute minimum that a state should keep in reserve. This will allow Indiana to continue to lead the nation out of this recession.
House Republicans pledged not to raise any taxes. While raising taxes would bring in more revenue to the state, it would stifle economic growth by putting a larger burden on our already-struggling families and businesses. This proposed plan would effectively put the state budget on a "spending freeze," meaning that the state is not budgeting out any more money in 2012 and 2013 than it did in 2010 and 2011. Many states would make up for this by raising taxes, but Indiana is in good enough shape to do without a tax increase. Instead, this proposal simply reapportions where funds go, putting an emphasis on K-12 and public safety. In fact, this plan would have the state back on track to where how much the state takes in would be more than how much the state spends in 2013. That's without any tax increases and without using gimmicks used by some other states. The proposed budget would:
- not increase taxes
- not incorporate payment delays on outstanding loans
- continue to make necessary contributions to pension funds
- maintain a sufficient amount of money in reserves to protect taxpayers
- achieve a balanced budget by the 2013 fiscal year
Some states have stopped paying back loans as a means of saving money in the short term, and 26 states are not making the necessary payments to their pension funds. The new tax hikes that Illinois just passed are expected to bring in approximately $6.8 billion per year to the state out of the incomes of families and businesses, but the first $8 billion will be needed to pay back their backlog of unpaid loans. In contrast, with our budget proposal, Indiana would be able to continue paying our loans so that something like this will not have to happen to Hoosier families.
A large part of our proposed plans to bring jobs back to Hoosiers is through a quality education. To change our economy, we have to change our education system. While higher education would experience a budget cut in his proposed budget, K-12 education would be flat lined. We feel that having a highly educated workforce is critical to bringing more jobs to Indiana. If we stifle our K-12 education system through budget cuts, we would effectively stifle our state economy.
While it is unfortunate that tough times require tough decisions, it's important that we keep our priorities in order and work with what we have. Difficult decisions will have to be made to ensure that taxes do not have to be raised in the near future. It will be a challenge but we will work diligently to make the best decisions for Hoosiers and our state.
I'll be sure to keep you updated on the progress made on the budget and other top issues discussed in the House this session.