INDIANAPOLIS – Indiana closed the fiscal year with $1.785 billion in its savings account amid continually disappointing corporate income tax collections.
State Auditor Tera Klutz and Office of Management and Budget Director Micah Vincent lauded the state's fiscal prowess.
“As the state's chief financial officer, I am pleased to report the State of Indiana remains financially strong.” Klutz said. “Indiana continues to adapt its spending to meet financial challenges that often occur.
“By continuing to live within our means and remain fiscally conservative, our state can be proactive, rather than reactive when faced with the realities of governing. I want to thank all the state officials for their diligent work, but I want to remind them, there is still work to be done. We must continue to work harder and smarter to ensure we are delivering services Hoosiers need in the most cost-effective manner.”
The fiscal year ran from July 1, 2017, to June 30, 2018.
The surplus is equal to 11.3 percent of the current year's expenditures. That percentage has dropped slowly from a recent high of 14.3 percent in fiscal year 2016. Some money went to roads, and Gov. Eric Holcomb recently dedicated $25 million to help the Indiana Department of Child Services.
“Once again, Indiana is ending the fiscal year in a solid position with strong June revenue, healthy reserves and a growing economy,” the governor said. “This is a tremendous achievement in light of serious needs in our Department of Child Services. Looking ahead to the upcoming budget year, we must remain vigilant and manage state resources carefully to maintain our position as the fiscal envy of the nation.”
Indiana sales and income taxes grew this year, but corporate tax revenues were $318 million less than the previous year and $100 million less than projected. It is the third year in a row that corporate tax revenue has dropped year over year.
This comes as lawmakers continue a phase-down of the corporate income tax rate. That reduction started in 2011, when the rate was 8.5 percent. As of July 1, it is now 5.75 percent, and it is scheduled to drop to 4.9 percent by 2021.
Vincent said corporate taxes are historically volatile and Hoosiers should be glad the state is relying less on the revenue stream. But it's unclear whether the revenue is down because of the economy or simply because the rate is reduced every year.
Indiana's balanced budget was made possible by $360 million in reversions – cases in which agencies don't spend all the money that is appropriated to them in the state budget.
Most of the reversions came from the Indiana Commission for Higher Education – about $250 million.
Vincent explained that the state had built up excess welfare funds – Temporary Assistance for Needy Families. But those dollars can only be spent on certain items. So budget officials sent the federal money to the higher education commission to use for needs-based financial aid for Hoosiers.
That freed up the commission to return $250 million in state dollars to the general fund, which replenished additional funds that were sent to the Department of Child Services.
In all, Holcomb gave an additional $302 million to DCS in fiscal year 2018 to help hire caseworkers handle exploding caseloads of abused and neglected children. Next year, the number is estimated to be about $200 million.
Vincent said that doesn't mean DCS is losing money. Instead, lawmakers had already added money to the DCS budget for fiscal year 2019. And additional federal money is available in fiscal year 2019.
“The state of Indiana's finances are strong. I am proud of my fellow lawmakers and thankful to Gov. Holcomb and his administration for practicing fiscal discipline as we make important decisions that affect Hoosiers across the state,” said Fort Wayne Senate President Pro Tem David Long.
“Moving forward, I am confident our leaders will continue to strike the right balance between funding important government services and maintaining reserves to protect taxpayers in the event of an economic downturn.”