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.
"Every time I vote on a bill I consider how this affects Hoosiers financially," said Rep. Dick Dodge (R-Pleasant Lake). "My main objective is to keep the government out of your pocket. Having these savings are vital to our state's budget. We need this money to be prepared for what may come. Most importantly we have these savings without raising Hoosier taxes. Instead, state employees, general assembly members and Hoosier families made tough decisions, made sacrifices and were dedicated to prudent financial management.
"I am especially proud of all the Hoosier families that have been able to tighten their belts and fight through this weak economy."
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
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
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.