INDIANAPOLIS – Indiana's revenue forecast was better than expected Wednesday, but don't plan on any major new spending as lawmakers framed the future budget as essentially a flatline endeavor.
“I think we still have to be cautiously optimistic,” said Senate Appropriations Chairman Ryan Mishler, R-Bremen. “We have to be very conservative in some of our decisions.”
The State Budget Committee received an economic forecast and revenue forecast that clarifies how much money the state will have to spend in the next two-year budget running from July 1 to June 30, 2023.
Revenue is expected to drop 3% in the first fiscal year but grow in the second fiscal year. Over the biennium, the state could take in about $361 million more than what was budgeted for the current two-year spending plan.
But that doesn't take into account an expected increase in expenses in the Medicaid program.
“I think the economics of the situation right now are that we are recovering in the state of Indiana and doing well. But the future is a little bit variable and unpredictable,” said House Ways and Means Chairman Tim Brown, R-Crawfordsville.
The state's largest annual expenditure is for K-12 schools. Gov. Eric Holcomb did not cut school funding this year, but it's not likely that schools will see much of an increase in the new budget. State agencies and higher education were cut.
“The way today is playing out as a flatline is a win, even in K-12 when other states are making drastic cuts,” Mishler said.
State budget officials used Indiana's budget surplus to close the fiscal year in July in the black. But the surplus dipped to $1.4 billion.
Taxes were delayed into the current year, which has allowed that fund to be replenished. The projection is a $2.3 billion surplus when the fiscal year ends in June.
“Indiana's years of fiscal discipline have allowed us to weather the pandemic and continue providing vital government services to Hoosiers during the toughest of times,” said Cris Johnston, head of the Indiana Office of Management and Budget. “While our lives and our revenues are not back to normal, our prudence allows us to responsibly construct a budget that will be presented in January.”
Thomas Jackson, principal economist for IHS Markit, said a reduced virus spread should allow for a much quicker recovery than after The Great Recession.
He expects state gross domestic product to return to its pre-pandemic peak early next year and state payroll employment to fully rebound by mid-2022.
Jackson said one key to recovery is helping people who are falling behind on mortgage and rent.