Indiana Gov. Mitch Daniels earlier this week warned lawmakers they may need to cut $1 billion from the budget when he calls them back to work in a special session following news that April revenue shows a $255 million shortfall.

Legislators adjourned last week after failing to pass a new budget. Daniels has not said when he will call a special session and says he wants revised revenue projections for this year and the next budget cycle before lawmakers return.

The latest results show sales taxes were $37 million below projections for April and 12% below collections for the same period last year. Year-to-date sales tax collections are 4% below last year. Income taxes are $173 million below estimates and 31% below collections for the same period last year. If the shortage continues at the same clip, the state would face a $1 billion deficit for the fiscal year.

“Regrettably, in the month of April, revenues were not as bad as we projected — they were worse,” Daniels said in a statement. “They were $255 million below the forecast made for the legislature just over two weeks ago. That is a very large miss, undoubtedly going to be repeated in the last two months of this fiscal year.”

The governor said Indiana may be forced to dip into the $1.3 billion reserve, describing such a move as “inevitable.” He had previously resisted efforts to dip into the reserve.

Daniels, a Republican, primarily blamed the Democrats for the failure to pass a budget on time. But he suggested he would have vetoed the proposed $28 billion budget — much of which was crafted by Senate Republicans — even if it had passed, as it ignored falling revenue and would have meant an “obliteration” of reserves.

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