Over the past several years, the State of Indiana successfully executed fiscal responsibility by managing its revenues. Last week, it was announced that Indiana has $830 million in its savings account. This money was accumulated by controlling state spending. Responsible fiscal discipline is needed since federal stimulus dollars will disappear in the next budget cycle. In fact, 35 states raised taxes this year to cover their loss of income; however, Indiana was one of the few that did not. I am pleased we were able to maintain some level of savings. This is possible because of tight financial management resulting from tough decision making. We must continue to manage the state's finances to get through the recession. Nobody knows when this recession will end or if it will get worse. It is obvious that we cannot depend on a constant level of state revenues because they are difficult to predict. Our only way of not falling into a budget deficit is to continue monitoring Indiana's spending with strict management-like most Hoosier families are doing. Unlike Indiana, the federal government took a different route; they borrowed money since they didn't have savings or a reserve account. Over the past few years the federal government racked up more than $13 trillion dollars in debt and has obligated future generations to pay it. What was the fed's solution? Borrow money from China and increase taxes. When Governor Daniels visited China, it wasn't for them to take on Indiana's debt, but rather to encourage economic development in Indiana. According to an article released by the Associated Press last week, China is the largest foreign holder of U.S. Treasury securities. This is dangerous. Now concerns are being raised that China could begin to shift money away from U.S. Treasury securities, which could raise the cost of financing America's soaring budget deficits. Indiana's situation of income vs. expenditures is something every household takes into consideration. For example, if a family has $1,500 in monthly income and $2,000 in monthly expenses. Their options are to reduce spending, pull money out of their savings to cover the gap or to borrow money that they would eventually have to pay back at a higher rate. Unfortunately, spending down savings is the temporary solution at this time. Essentially that is what has happened to Indiana. Due to the recession, revenue (or income) has been down. The state was able to trim some of its expenditures however Indiana still needs to dip into their savings account to cover the difference. Other states have had to raise taxes in order to cover the difference. It's because of economic times, like we are in now, that it's so important to have a savings account and an effective management strategy. Indiana is one of 15 states that did not raise taxes. There are two fundamental items wrong with raising taxes in an economy like this: families are unable to afford a tax increase and it harms our job creating economic development. The amount in Indiana's savings does not mean that we are in the clear. Indiana will have to continue to be fiscally responsible in order to prevent a general tax increase. Just like any Hoosier household, Indiana must live within its means. Hosier families have done an excellent job of making tough financial decisions and making sacrifices, and I applaud them for that. I hope by being one of the few states in the black, we will continue to attract more businesses, create more jobs and get us out of this recession more quickly. More later, Bill Friend
-30- |
