INDIANAPOLIS – Indiana's tax collections have missed estimates every month so far this fiscal year – creating a $140 million hole in the budget.
The projections – created by a bipartisan technical team of fiscal experts – have been off by more than 2 percent over the first five months of the fiscal year.
That plus a shortfall in education funding means lawmakers and Gov. Eric Holcomb's administration have to find ways to save money.
The majority of the deficit comes from corporate income taxes, which state lawmakers are still phasing down slowly.
House Speaker Brian Bosma said he thinks it comes down to corporate tax planning. He said many companies had prepaid and now the state has received twice as many refund requests from businesses than last year.
“Some corporate leaders have indicated properly they are postponing revenues until after the first of the year with the hope that the federal government gets its act together and gives a dramatic tax cut at the corporate level,” he said. “It's not the first time we've been through a shortfall ... it'll be manageable. We've got a healthy surplus and we'll be good.”
He noted that budget cuts might be necessary if the gap grows but “if it's $150 million short, well that's not such a big deal.”
The annual budget is about $15.6 billion. Indiana has about $1.8 billion in reserves.
Indiana Democratic Party Chairman John Zody said Statehouse Republicans claimed the lower corporate tax rates would be offset by more revenue.
“The cracks are starting to show,” he said. “It's anyone's guess what's driving this but Statehouse Republicans sold Hoosiers on tax cuts that would raise incomes, grow businesses and by association, offset lost revenue. Those promises haven't materialized.”
Micah Vincent, head of the Indiana Office of Management and Budget, said the corporate rate reduction was built into the state revenue forecast and isn't directly related to the drop in tax collections.
And he said the state is already preparing for the losses.
“At the onset of the budget, we asked most agencies to put aside 3 percent of their budgets as a strategic management reserve,” Vincent said. “We're looking at every available option to address this shortfall, and we're working with state agencies to address the gap.”
These are generally called reversions. The easiest way to reach them is to cut staffing but programs can sometimes be reined in as well.