Daniels Outlines Plans

In his state of the state speech last week, Indiana Gov. Mitch Daniels detailed his proposed $28.3 billion two-year budget and said he would postpone a college scholarship plan that was to be financed either through the sale of bonds or leasing the lottery.

Daniels also warned lawmakers not to give in to the temptation to spend the state’s recently rebuilt $1 billion reserve fund despite a tough economy and pushed a plan to make recent property tax caps a part of the state constitution.

A week after introducing a $28 billion 2010-2011 budget that includes no tax increases and across-the-board agency cuts, Daniels told lawmakers that in passing a final budget they must reject the use of “gimmickry,” such as delaying payments to schools, using pension fund money, and other practices that should be “left in the museum of bad government.”

He urged lawmakers not to dip into reserve funds, while noting that the state will bring in nearly $1 billion less than expected in the current fiscal year and that the decline could continue through the next budget cycle.

Daniels also said he would postpone his plan to offer college tuition to select Indiana high school graduates in light of the financing difficulties. A plan to finance the program through leasing the Hoosier Lottery fell through when the U.S. Justice Department late last year issued an opinion — requested by Indiana — saying a state must maintain majority ownership of its lottery.

A second financing option, the sale of bonds backed by lottery revenues, will be put on hold due to the credit markets, Daniels said.

“External events intervened,” he said. “First, a startling and frankly senseless federal legal opinion cast a cloud over our preferred financing option. Then the collapse of world credit markets, and the decline of Hoosier Lottery revenues, makes our backup approach impractical for now. I intend to revive it as soon as favorable conditions return.”

Daniels also told lawmakers they should push forward with a plan to make the state’s recent tax cut caps permanent by making them part of the state’s constitution. Voters would need to approve the change.

The proposed two-year budget includes a $14.1 billion spending plan for fiscal 2010 and a $14.2 billion one for fiscal 2011. Officials expect to collect $12.57 billion of revenue in fiscal 2010 and $13 billion in fiscal 2011.

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