Indiana Gov. Mitch Daniels last week ordered state agencies to craft a fiscal 2011 budget that spends 15% less than originally planned following a report that revenues are still short of projections.

It’s the third time over the last 12 months that Daniels has ordered cuts due to revenue shortfalls. Last November he ordered agencies to cut their budgets 10%. The state’s fiscal year begins July 1.

In a memo sent out last week, state budget director Chris Ruhl said in the first nine months of the fiscal year, revenue declined 9.4% from a year earlier and was $867 million less than expected. Total revenues for fiscal 2011 are expected to be lower than those collected in 2006, he said.

“As a result of these dramatic revenue declines, we are currently forecasting that all reserves will be consumed before the end of the FY10-11 biennium,” Ruhl said. “In addition, we will likely enter the FY12-13 biennium with a substantial structural deficit and without the benefit of federal stimulus funds.”

The state has two options, he said: cut spending or raise taxes. “The choice is clear,” he wrote. Ruhl directed all state executive branch agencies to propose fiscal 2011 budgets that include a reserve of 15% compared to their 2010 budgets.

All legislative and judicial agencies and separately elected officials were asked to voluntarily cut spending 15%.

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