CHICAGO — In a nice surprise, Indiana ended fiscal 2011 with $1.18 billion in its reserves, around $1 billion more than expected.
The unexpected surplus is not due to rising revenues, but mostly to unspent dollars in the two-year budget that ended June 30. The triple-A rated state drained nearly half of its prized $1.3 billion reserve fund in 2009 to offset revenues that fell $1 billion below expectations.
Republican Gov. Mitch Daniels at the time repeatedly warned that the state would have to drain the rest of the fund if revenues did not recover.
But after several rounds of cuts, salary freezes, and postponing or cancelling all capital projects, agencies returned $1.06 billion to the state at the end of the fiscal year, Indiana auditor Tim Berry said at a press conference Thursday.
“For those who believe that raising taxes is the only way out of a fiscal crisis, I say take a look at the Hoosier State,” Berry said.
A top Democratic legislative official called the revenue report a gimmick.
House Democratic Leader B. Patrick Bauer, of South Bend, said Republicans’ “obsessive need to maintain a $1 billion surplus” comes at the cost of major cuts to schools and other important services.
Daniels will hold a press conference Friday morning to discuss the fiscal year closeout.
In a statement released yesterday, he noted that rising income tax revenue helped drive the surplus.
“With the national economy still limping badly, and downside risks still abounding, it is reassuring to have a safety margin that other states would love to have,” Daniels said.
For the 2010-2011 period, the state received $1.34 billion, which was 5% less revenue than anticipated in the two-year budget passed in June 2009, the auditor said. But it also spent 5.5%, or $1.52 billion, less than was included in the budget.
Officials expected to end fiscal 2011 with $188 million in the reserve fund, but were able to put more aside after state agencies returned $1.06 billion and May and June revenues continued the recent rising trend.
Indiana does not issue general obligation or tax-supported debt, but does have $3.1 billion of outstanding appropriation-backed bonds.
Debt service for the appropriation-backed bonds totaled 2.5% of the state’s general fund expenditures in fiscal 2010 — considered a moderate level by rating analysts.
Like most states, Indiana has enjoyed an uptick in revenues so far this calendar year. As of May 30, all of the state’s revenue sources were up so far this year compared to last year, except for riverboat gambling collections.
Individual income tax collections were up 17.3% compared to last year, a dramatic increase that officials attributed in part to employment growth.
Nearly $1 billion of Indiana’s appropriation debt was issued for the state’s new stadium and convention center, which is home to the National Football League’s Indianapolis Colts.
That $987 million of debt is backed by a variety of levies, including hotel and car-rental taxes, food and beverage taxes, and admission taxes.
