INDIANAPOLIS – State budget officials have ordered agencies to cut at least 15% from their fiscal year 2021 budgets as a result of lost revenue due to the COVID-19 pandemic.
State Budget Director Zac Jackson sent a memo Thursday directing the “reserve policy.” Essentially it means all agencies must identify 15% of their individual budgets to hold back and not spend.
“I know these budget reductions will not be easy,” he said in the memo.
The new fiscal year starts in July, and it is unknown how much Indiana tax revenues will be impacted by the economic shutdown.
April revenues were down about $1 billion, though much of that was related to delaying the tax filing deadline.
“Unfortunately, we expect to continue to miss our revenue forecast for the remaining 14 months of this biennium,” Jackson said in the memo. “This projected loss of revenue puts a significant strain on the State's financial resources.”
To maintain critical programs, Jackson directed all agencies to create a fiscal year 2021 spending plan with a reserve of 15%. The hold-back is to be applied to all functions of the agency, including grants and distributions. It impacts both General Fund and all dedicated fund programs.
This is on top of budget-tightening that the Indiana Office of Management and Budget ordered in late April, including a strategic hiring freeze, travel restrictions and limited overtime.
Each agency must submit a new strategic plan by June 8 that will show how it will manage staffing and expenses to meet the reduction.
If the entire fiscal year 2021 state budget was cut 15% – including other branches of government that Gov. Eric Holcomb doesn't control – it would be about $2.6 billion.