Former Gov. Mitch Daniels' Newsroom

Contact: Jane Jankowski
Phone: 317/232-1622

For Immediate Release: Jul 12, 2006
Governor orders K-12 school debt fully repaid

INDIANAPOLIS (July 12, 2006) ? Governor Mitch Daniels today ordered the state to fully repay the debt owed to K-12 schools ? $160 million ? yet this month. The decision to repay the funds follows Tuesday?s announcement that the state has its first balanced budget in eight years and its first true surplus in three years.

State government began delaying payments to K-12 schools, higher education and local governments several years ago during a prolonged period of deficit spending and currently owes $622.1 million to those entities and $50 million to the Public Deposit Insurance Fund.

In January, Daniels directed that half of delayed payments to schools ? $156 million ? be repaid, utilizing proceeds collected through the successful tax amnesty program. The Indiana General Assembly also has authorized the repayment of $176.5 million to higher education and municipalities ($40 million, higher education; $136.5 million, municipalities) during the current fiscal year which ends June 30.

?It was wrong for the state to paper over its deficit spending on the backs of schools. Now that we have restored the state to solvency, it?s important to pay these debts back as fast as we possibly can and continue practicing fiscal responsibility so no future state government is tempted to use this unfair tactic again,? said Daniels.

Pursuant to authority granted in the 2005 budget bill, the delayed payment will be made this month, and future distributions will return to 12 equal monthly installments.

Daniels and State Auditor Connie Nass closed the fiscal books for 2006 on July 11. For Fiscal Year 2006, revenue exceeded expenditures by $371 million. In the previous fiscal year, spending had exceeded revenue by $201 million, and the state began FY06 with a projected budget deficit of $131.6 million. However, performance for FY06 was $502 million better than plan, through a combination of controlled spending and increased revenue, and the state moved from a deficit to surplus.

The state ended FY06 with a General Fund/Property Tax Replacement Fund combined balance of $1.089 billion, and liabilities no longer exceeded assets.