(STATEHOUSE) July 1, 2004 – Indiana’s Republican fiscal leaders expressed their concern about the state’s deteriorating financial condition as they await the final revenue numbers for the fiscal year that ended June 30. Those numbers should be released in the next two weeks.
State Representative Jeff Espich (R)-Uniondale, the Ranking Member of the House Ways and Means Committee and State Senator Robert Meeks, (R)-LaGrange, Chairman of the Senate Budget Subcommittee, discussed the state’s current economic and fiscal situation and called on their colleagues in the legislature and the Governor to focus on job creation and exercise spending restraint.
Sen. Meeks cautioned against drawing overly optimistic conclusions from the recent string of months in which state revenue collections have exceeded targets. "Despite the seemingly good news on state revenues over the past three months, total annual collections are still expected to fall short of budget by $70 million in the 2004 fiscal year," said Meeks.
He noted that the state's reserve balances have declined dramatically from their high of over $2 billion at the end of fiscal year 1998. Based on still unofficial estimates, Sen. Meeks thinks that the state's reserves could dwindle to only about $300 million by the end of the current two-year budget cycle on June 30, 2005.
"$300 million is only enough to operate Indiana state government for about 10 days," Meeks added.
While the dramatic recent decline in state reserves illustrates the fiscal challenges facing the legislature and the next Governor in 2005, when the next two-year state budget must be crafted, it does not tell the whole story. Meeks noted that the state has made aggressive use of fund transfers, cost shifts, and accounting maneuvers in recent years to bolster the bottom line. Over $750 million in payments to public schools, public universities, and local governments have been delayed. Additionally, over $875 million has been transferred from the Build Indiana Fund and $345 million transferred from other dedicated funds to supplement the State General Fund. Also, costs totaling about $560 million have been shifted from the State General Fund to the Tobacco Settlement Fund and the Teacher's Pension Stabilization Fund. Altogether, the extraordinary measures taken will have supplemented the State General Fund more than $3.1 billion by the end of fiscal year 2005.
"I don't think we have any more rabbits to pull out of our hat," said Meeks.
Meeks and Espich agreed that new solutions must be explored. Espich noted that on this first day of the new fiscal year, the state is already facing a $750 million structural budget deficit (i.e., on-going spending demands in excess of on-going revenues).
"We must revive Indiana's weakened economy to solve this problem in the long-term,” said Espich, who then presented information showing that Indiana's economy has persistently lagged the nation since 1996. Espich acknowledged that both the 2002 tax restructuring act and the jobs initiative, enacted in 2003, have been positive steps, but warned that those steps alone may not be sufficient to significantly improve Indiana's economic growth.
"If we don't improve our economic standing nationally, Indiana will become a second-rate state and the type of budget problems we have today could haunt us forever," he added.
Regarding specific actions for addressing the fiscal problem, Espich outlined reversion targets (i.e. savings), totaling over $360 million, set by the Governor at the last official revenue forecast update on January 12 of this year. Espich challenged the Governor to meet or exceed these targets and to present a plan outlining how he will do it.
"I’ve already asked the Governor for a reversion plan, and so far he has not provided one. I hope if I keep asking he will eventually do it just to shut me up," suggested Espich.
Rep. Espich also mentioned attempts to curtail spending that have been ignored. In the 2004 legislative session, House Republicans proposed a bill to restrict annual appropriations to 99 percent of projected revenue collections. The bill did not receive a hearing in the Democrat controlled House.
“Republicans have continually pushed for spending discipline and we will continue to do so while we work to reinvigorate the economy to create jobs and grow our way out of this fiscal crisis,” concluded Espich.
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Tony Samuel
Communications Director
Indiana House Republican Caucus
Jamie Jorczak
Communications Director
Indiana Senate Majority Caucus