The Journal Gazette
Sunday, January 05, 2020 1:00 am


Save, spend or invest surplus? It depends ...

Shortly after Democratic Gov. Frank O'Bannon boasted of Indiana's sound financial picture in his January 1998 State of the State address, the Republican secretary of state weighed in on a budget surplus exceeding $1.5 billion.

Sue Anne Gilroy said Hoosiers were misled to believe a large and growing state budget surplus was a good thing.

“This huge budget surplus does not belong to the governor; it belongs to the people,'' Gilroy said. “He should find a way to give it back now – all of it that is above the minimum necessary to safeguard our future. Return it to the pockets from which it came.

“In Wallace, Indiana – where I was born – you were taught if you find a wallet on the ground, you give it back to its rightful owner. I encourage the governor to take a similar approach as he contemplates what to do with the people's money.''

And in July of 1998, Republican Rep. Jeff Espich criticized O'Bannon's insistence on holding at least $1.1 billion in reserve to guard against economic downturn.

“I guess to the governor, the sky is always falling,'' Espich said.

“I'd rather see this money in the hands of the citizens of Indiana than sitting in the bank accounts of bureaucrats,” said GOP State Auditor Connie Nass in 1999.

Those public servants are now retired, and their Republican colleagues no longer clamor to return taxpayer money or question whether $2.27 billion, about 14% of state spending, is a prudent amount to keep in reserve. Instead, Gov. Eric Holcomb and Republican fiscal leaders are dismissing calls to address lagging teacher salaries, insisting money can be found elsewhere in school budgets. The only concession to a growing state surplus is a plan to spend $300 million in cash for projects already approved for bonding.

“We cannot count on revenues always exceeding what the professionals prognosticate,” Republican House Speaker Brian Bosma said last month. “You just cannot count on that because there are years when it has been woefully below expectations as well.”

“Unfortunately, the mindset of those in control of the purse has changed. Instead of giving money back to the taxpayers, we want to maintain a Triple A credit rating,” said Sen. Greg Taylor, D-Indianapolis, noting the state's constitutional requirement to pass and maintain a balanced budget is the primary factor in its credit rating.

Lawmakers were briefly in agreement on this subject. They passed legislation in 2011, triggering an automatic taxpayer refund if state reserves exceeded 10% of the total budget. A year later they pushed the total to 12.5%, then in 2013 they removed the tuition reserve fund total from the calculation, effectively killing the refund mechanism.

No one would argue the merits of maintaining a reasonable reserve. The Great Recession proved the state's fortunes can change quickly, and Indiana's reliance on manufacturing is worrisome in terms of continued economic strength. But tax dollars are collected to cover the cost of public services, including health care, education and infrastructure. In fiscal year 2018-19, the state recorded almost $897 million in reversions – money appropriated by the General Assembly but returned to the general fund by the Holcomb administration. That includes about $2.7 million from the Indiana State Department of Health, more than $40 million from the Family and Social Services Administration and $11.9 million from the Department of Education.

Is a reserve fund the best place for that money? Could those dollars be invested in human capital to better insulate the state from the next downturn?

 “The question for me is – what are we going to do with the reserves?” Taylor said last month. “I hope we do the right thing and invest those dollars in Hoosiers in a way that makes the future better for everybody.”

At issue

What do you think? Should the state hold onto a $2.27 billion surplus? Is it wise to keep so much in reserve, or should it be returned to taxpayers? Should Indiana invest surplus funds in education, infrastructure or other areas?

Share your thoughts by email:; or by mail: Letters to the editor, The Journal Gazette 600 W. Main St., Fort Wayne, IN, 46802.

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