DALLAS – A new revenue forecast for Indiana says the state will collect about $300 million less in general fund revenues than had previously been anticipated next year, though the projection for the following two years is up $1 billion.
The 2% drop in projected 2017 general fund revenue from a prior December 2015 forecast was largely attributed to a $265 million expected drop in sales tax revenue due to lower gas prices, budget analysts said Thursday.
"While a drop in 2017 revenue may require difficult decisions ahead, we are pleased with the robust growth projected in 2018 and 2019 and will remain both optimistic and committed to work with the General Assembly to craft yet another honestly balanced budget this session," said Gov.-elect Eric Holcomb.
The new forecast projects Indiana tax revenue – made up largely of sales and income taxes – to grow 2.9% in fiscal year 2018 and 3.9% in fiscal year 2019.
That would bring in a total of $1 billion in projected new revenue during that time.
The optimistic forecast comes as legislators prepare to discuss the state's two-year state budget next January. The current budget, which ends on June 30, spends about $30 billion.
The extra revenue is expected to go to priority items such as new highway spending, combating opioid addiction and expanding the state's preschool pilot program for low-income students.
House Ways and Means Chair Rep. Tim Brown, R-Crawfordsville said that the optimistic forecast isn't necessarily mirrored by the economy because "there's so many things on the horizon that could derail this forecast."
State Sen. Karen Tallian, D-Portage, the top Democrat on the Senate Appropriations Committee, called the growth numbers "fairly weak" and pointed out that in the 1990s when Democrats were in control, Indiana had over 5% revenue growth throughout the entire decade without tax increases.
"It is clear Indiana won't have a lot of extra money to put into the next budget," Tallian said in a press release. "The spin on these numbers is all about what you compare it to. If you look at what we previously forecasted, we are really more flat than growing. Obviously, we have to look at the actual receipts between now and April.
"Whether Democrats or Republicans are in charge of state government, it's in our culture to responsibly manage the state's fiscal condition. During the great recession, the state's budget was balanced through the use of reserves, agency cuts, and the relief that came from federal stimulus funds. The revenue growth numbers forecast today are fairly weak in the time of national economic expansion."
Lawmakers will receive an updated forecast in April, just before they finalize the new state budget.
The state closed out fiscal 2016 with a structural surplus of $50.6 million, $545 million in its rainy day fund, and a total of $2.24 billion in various state reserve accounts.
Revenue in the fiscal year that ended June 30 finished $111.3 million below a revised forecast and $78.5 million below revenue collected in fiscal 2015.
Indiana holds triple-A ratings from the three largest rating agencies. S&P Global Credit Ratings reaffirmed Indiana's AAA credit rating in April and Fitch Ratings reaffirmed the state's AAA credit rating in June.