Indiana Governor Orders 4th Round of Cuts This Year

CHICAGO — Indiana has suffered 14 straight months of falling revenues, prompting Gov. Mitch Daniels to again ordered a round of spending cuts — this time targeting higher education and contributions to employees’ deferred compensation accounts.

It’s the fourth time this year that Daniels has ordered cuts to help offset persistently declining revenue. Last month he asked state agencies to postpone all capital projects and cut their budgets by 10%.

If revenues continue to decline, the triple-A rated state will end up draining its vaunted $1.3 billion reserve fund by next summer, Daniels said.

A recent review of Indiana by ­Standard & Poor’s praised it for actively ­managing expenditures in the face of economic challenges.

“We’re trying to address the shortfalls as they occur in the hopes that the disappointment in revenues will come to an end,” Daniels said at a press conference Friday morning after the release of the latest revenue numbers.

“But it’s only fair to say that, given the pattern of 14 straight months, it’s not very likely that suddenly revenues will jump to catch up with this forecast or even with last year,” he said. “There’s no way to promise that these will be the last changes that we have to make.”

November’s general fund revenue fell $144 million below projections made in May. So far this year revenue has come in $475 million below forecast.

The state has collected $606 million less than during the same period last year, officials said.

“If the shortfalls continue we will probably stagger to the end of our two-year budget cycle having used all of our reserves,” Daniels said. The government already used $300 million of the $1.3 billion reserves to balance the current budget.

The governor, who has said he would ask the state’s economic forecast firm to review its models, called the May forecasting numbers “dramatically flawed.”

Daniels said he expected more realistic projections in an update due later this month.

“I have empathy for those on the forecasting committee — the world changed dramatically and they lost complete touch with reality,” the governor said. “But all we’re asking for is accuracy and they missed by billions of dollars. The General Assembly deserves to know how much money there is to work with.”

Daniels said he would cut general fund spending on higher education by $150 million, or 6%. Higher education makes up 13% of the budget. He also said he would defer the state’s weekly contributions to employees deferred compensation retirement accounts and would introduce a cost-cutting bill to the legislature.

The bill would include a proposal to combine the administration of the Public Employees Retirement Fund and the Teachers’ Retirement Fund. The move would save up to $50 million a year in administrative and management costs, officials said.

Meanwhile, the General Assembly this month is holding a series of hearings on key issues before its formal session begins Jan. 5.

A top legislative priority will be the effort by Daniels and Republican lawmakers to make recent property-tax caps part of the state constitution.

The Senate Tax and Fiscal Policy Committee and the House Ways and Means Committee will both hold hearings this month to consider a bill and a resolution that would make the tax caps permanent.

Enacted last year, the law limits ­property tax bills to 1% of assessed value for residences, 2% for rentals, and 3% for commercial properties. The law has lead to a decline in property tax ­revenue for most local governments across Indiana.

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