The Journal Gazette
Thursday, July 16, 2020 3:00 pm

State had $882 million deficit, relied on surplus to stay in black

NIKI KELLY | The Journal Gazette

INDIANAPOLIS – Indiana budget officials drew down the state surplus to be able to close Fiscal Year 2020’s books in the black.

"Our strong reserves have sustained Indiana through the initial surge of the pandemic, and in light of the unexpected economic circumstances, the State is able to continue to offer essential services when our residents need it most," State Auditor Tera Klutz said. "Responsible fiscal leadership leaves Indiana with a 9% reserve as we head into a new fiscal year facing more economic uncertainty."

The pandemic hit the fourth quarter revenues hard – a total loss of $1.4 billion in expected tax revenue for the year. Some of that will still be paid this month because of the deferred tax deadline. But some is lost due to economic shutdown.

The fiscal year – which ran from July 1 to June 30 – had a deficit of $882 million, meaning the state spent that much more than it took in.

Cris Johnston, head of the Indiana Office of Management and Budget, said the state used a variety of measures to mitigate the loss. For instance, agencies reported $373 million in reversions – or spending cuts. The majority of that came from the Family and Social Services Administration, which received additional Medicaid match dollars from the federal government. That meant the state didn’t have to spend as much of its own dollars.

Gov. Eric Holcomb’s administration also halted the spending of $291 million in cash on higher education building projects. And it drained the Medicaid reserve fund of $578 million.

Overall the surplus – which is made up of the Medicaid reserve fund, the Rainy Day Fund and the Tuition Reserve Fund – went from having $2.27 billion to $1.4 billion.

"Facing a global pandemic, Indiana has had to preemptively reduce government spending for the next year, and further cuts might be needed," Senate President Pro Tem Rodric Bray said. "I am thankful Indiana’s fiscal discipline has allowed us to save our…surplus for a day when it is truly needed."

He added that Indiana still faces huge health and economic challenges in the months ahead "but today we find ourselves in a strong position to tackle those challenges."

Johnston said a new state revenue forecast will be done in September so that it more accurately reflects the current economy.

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