CHICAGO — Indiana stands out “like a peony in a parking lot” among the states for the relatively small size of its budget problems, Gov. Mitch Daniels said in his annual state of the state address Tuesday night.

In last year’s address, the Republican governor warned lawmakers not to dip into the state’s vaunted $1.3 billion reserve fund, but this year he said it would be necessary to tap the account to get through the next year and a half. As of last month, Indiana had suffered 14 straight months of revenue declines and Daniels had ordered five rounds of budget cuts.

Hours before the speech, the Senate joined the House in passing a measure that will give voters the chance to decide whether to make recent property tax caps permanent by making them part of the state’s constitution. The measure will appear on the November ballot.

Daniels praised lawmakers for the move, which he has pushed since the property tax caps became law in 2008. The measure is part of his effort to make Indiana one of the lowest-taxing states in order to attract homeowners and businesses from neighboring states.

In what was his fifth state of the state address, Daniels said Indiana enjoys a solid financial position when compared to other states.

“Across America, forty-nine other addresses are being given, almost all under conditions far more grim than those we confront,” he said. “They have seen their credit ratings downgraded and their borrowing costs soar. Indiana has a triple-A credit rating for the first time ever, saving millions in interest costs for our cities, schools, and universities. We will be using our carefully built reserves to get us through this next year and a half. Any reserves most other states had have long since disappeared.”

Daniels pushed lawmakers to advance bills that would eliminate the “antiquated” system of township government, cutting more than 3,000 elected offices and transferring their duties to counties. The General Assembly has already abolished the office of township assessor and moved its duties to a single county-wide office.

“The exact same principal applies to poor relief and fire protection, still handled as they were in 1848,” Daniels told lawmakers. He suggested that those resources be moved to the county level, along with the power to tax to raise money for them. He also proposed saving $70 million through a variety of measures, including combining administrative oversight of the state’s two pension funds.

Daniels remarks this year did not mention a long-standing proposal to either sell the state lottery or securitize its revenue in order to finance a college scholarship fund. Last year, amid the credit market freeze, he postponed the plan to sell bonds backed by lottery revenue and said he would revisit it when the market improves.

Democratic lawmakers generally said they were disappointed with the speech. Democratic House Speaker Patrick Bauer said Daniels should have introduced new job-generating intiatives. “I do wish he had said more about job creation and worker preference for Indiana workers,” Bauer was quoted as saying in local media accounts.

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