STATEHOUSE - For several years, the State of Indiana has successfully executed fiscal responsibility with taxpayer's hard earned dollars. Today the announcement was made that Indiana has $830 million in their savings account. This reserve money was able to be saved by reigning in state spending.
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; Indiana was one of the few who did not.
"Indiana has handled this financial storm in the best possible way," said Rep. Bob Behning (R-Indianapolis). "The only way to ride out the rest of it is with fiscal responsibility."
Income vs. Expenses
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 chosen by many government entities.
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 order to prevent a general tax increase. Just like any Hoosier household - Indiana, too, must live within its means.