DALLAS-- Indiana closed out fiscal 2017 with a budget surplus for an eighth consecutive year although its healthy reserves dipped.
The state budget agency office reported a structural surplus of $42 million and $302 million in its rainy day fund for a total $1.77 billion in various state reserve accounts when fiscal year 2017 ended after June 30. That’s about $400 million less than the year before.
Office of Management and Budget Director Micah Vincent said the drop was partially due to a one-time draw down of funds for state’s new long-term road funding plan.
“That was a one-time expenditure into roads, as can be seen. We now have a long-term, robust roads plan with those needs going forward,” Vincent said.
The road plan calls for approximately $4.7 billion in new spending over the next five years. The plan also provides an additional $342 million annually to support Indiana cities, towns and counties for local road projects by 2024.
The road funding package that passed in April raises the state’s gasoline tax and relies on other tax and fee hikes while phasing out the diversion of tax revenue from fuel purchases to generate $1.2 billion in new annual revenue transportation spending once fully phased in by 2024. The new state law also allows Indiana to pursue federal approval to toll its interstate highways.
In its report on fiscal 2017 revenues, the State Budget Agency Office said the year ended with a structural surplus of $42 million and total reserves of $1.77 billion. The reserves are made up from surpluses in several funds: $302 million from the general fund, $577 million for Medicaid, $544 million in rainy day funds, and $348 million for tuition support.
“For more than a decade, Indiana’s leaders have worked to create and maintain a world-class economy with balanced budgets, AAA credit ratings and healthy reserves,” Office of Management and Budget Director Micah Vincent said. “This year’s fiscal closeout is further confirmation that all Hoosiers benefit from our state’s position as a national leader in fiscal responsibility.”
The state spent $218 million less than expected on Medicaid and about $144 million of that was reverted to the general fund. The remaining $74 million held back in a special federal Medicaid fund due to uncertainty in health care funding from the federal government.
State Auditor Tera Klutz said research shows a reserve of between 10% and 12% is needed to weather economic downturns. “Indiana has worked hard to spend less than we take in, invest in our priorities and retain resources in the event of an economic downturn,” Klutz said.
The state expects $15.7 billion in general fund revenue in the next fiscal year and $16.3 billion in 2019. Gov. Eric Holcomb signed the state’s new $32 billion, two-year budget in April. The budget funds key provisions in Holcomb’s agenda including increased direct flights at Indiana airports, freeing up some funds in a $500 million trust to foster entrepreneurship and regional economic development efforts, and providing $9 million for pre-kindergarten education. “
“With more than a decade of balanced budgets and healthy reserves behind us, we must remain vigilant to maintain our position as the fiscal envy of the nation,” said Holcomb in a statement. “To do that, we must continue managing our state’s finances carefully, diversify our economy and grow our workforce.”
Indiana holds triple-A ratings from the three largest rating agencies.