Indiana governor wants to use rainy day money in place of bonds
Indiana Gov. Eric Holcomb plans to ask lawmakers to use $300 million from the state’s rainy day fund to pay for capital projects instead of using debt.
Paying for the capital projects in cash would save the state $100 million of interest, the Republican governor said Thursday. He plans to ask lawmakers to make the swap early next year.
“We have an opportunity to reduce our ongoing costs by paying cash rather than borrowing for several projects approved by the Indiana General Assembly in this year’s legislative session, Holcomb said. “Paying for capital projects now maintains Indiana’s low debt burden and avoids lease obligations over the next 25 years.”
Holcomb’s plan followed the state's announcement of a $410 million surplus in its rainy day fund. That means that the state now has an ongoing reserve balance of nearly $2.3 billion, or 14% of annual spending, according to the Office of Management and Budget.
The boost is attributed to a 5.4% increase in state tax revenue from last year. Tax collections were higher than expected nearly across the board led by an 8.9% bump of $77.2 million from corporate income and 1.7% of $99 million from individual income.
Holcomb said he and Republican House and Senate leaders agree a sufficient state reserve is $2 billion, or 12.2% of spending, which would remain after putting aside money for the projects.
“Using this additional revenue to pay for one-time investments and capital projects around the state is a responsible and prudent use of taxpayer dollars,” Rep. Todd Huston, R-Fishers, said.
“The fiscal closeout statement released today demonstrates that Indiana’s economy continues to thrive,” Sen. Ryan Mishler, R-Bremen, said. “That means we now have a healthy bottom line that gives us the financial flexibility to pay for some of the projects we included in the budget with cash, rather than long-term financing.”
Holcomb wants to spend $73 million for the Purdue College of Veterinary Medicine teaching hospital, $50 million for the swine barn at the Indiana State Fairgrounds and $60 million for Ball State University STEM and Health Professions facilities.
He is also asking for $78 million to be allocated to the department of transportation’s U.S. Highway 31 project.
Democratic lawmakers say those projects were already appropriated in the new state budget and they would prefer to see the money go to new spending initiatives.
“Raising teacher pay, addressing beach erosion issues, funding the mortgage foreclosure program — these are all things that we could have done with our $2.3 billion surplus,” Sen. Karen Tallian, D-Ogden Dunes, said in a statement. “Instead of paying for those things in the first place, the governor chose to store money away and deprive our state of much needed improvements. Now he’s using the excess revenue to fund projects that have already been funded! I wish I could say I’m surprised, but I’m not.”
Holcomb signed the state’s latest two-year budget in April. The budget approved $34 billion in spending and included a 2.5% increase in education spending but none of the funds go directly to teacher pay raises. Education advocacy groups had been seeking a 9% increase in education funding to boost the state's average teacher pay to the midpoint of surrounding states.