[r23] Rep. Friend: Good Fiscal Year End (7/16/2010)

This responsible fiscal discipline was needed since the 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 who did not.

"I am please we're able to maintain some level of savings," said Rep. Bill Friend (R-Macy). "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. Who knows when it will end or if it will get worse so we must stay on top of this.

"We can't rely on state revenues so we must maintain our tight management. State employees and Hoosier families have done an excellent job of making tough decision and making sacrifices. I hope by being one of the few states in the black, we will continue to attract more businesses and get us out of this recession more quickly."

Income vs. Expenses

This is an issue of income vs. expenditures, something that every household takes into consideration.  For example, 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 their temporary solution.

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.

Not Behaving like Washington, DC
The Federal Government took a different route; they ended up borrowing money since they didn't have any in savings or their 'reserve' account.  Over the past few years the Federal Government racked up over $13 trillion dollars in debt and has not had the money to cover this debt.

Their 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 within Indiana.

According to an article released by the Associated Press today, China is the largest foreign holder of Treasury securities. Now concerns are being raised that China could begin to shift money away from Treasury securities. It is expected that the shift could raise the cost of financing America's soaring budget deficits.

Indiana, a Cut Above
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 job creation and 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, too, must live within its means.

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