CHICAGO — Indiana drained nearly half of its prized $1.3 billion reserve fund last year to offset revenue collections that tumbled more than $1 billion below original budget projections.

The triple-A rated state started its two-year 2010-2011 budget period last July with $1.3 billion in reserves, and ended fiscal 2010 last month with $830 million, state auditor Tim Berry said at a press conference Friday after closing the state’s books for the fiscal year.

Gov. Mitch Daniels has repeatedly warned that the state would be forced to drain all of its reserves by the end of June 2011 — the end of the current budget period — if revenues continue to decline.

Barry said the state was relying on the remaining reserves to make it through fiscal 2011.

Indiana’s revenues have dropped a total of 14.3% since 2008, Berry said.

Despite the news, Berry and Daniels said by ending the year in the black the state was doing well compared to others.

Berry said Indiana spent less in 2010 than it did in 2009 — marking the first year-over-year spending reduction in the state’s “modern history.” Appropriations totaled $13.7 billion last year compared to $14.6 billion in 2009.

“Indiana is in an enviable position, one of just a few states maintaining reserves, while not raising taxes or cutting education and public health programs,” Berry said. “While not out of the woods yet, Indiana is positioned to withstand the continued economic downturn.”

The state relied on just under $900 million of federal stimulus funds and at least $530 million in state agency cuts last year to balance the current $28 billion, two-year budget.

The spending reductions came from several rounds of cuts ordered by Daniels, including freezing salaries and deferring all state agency capital projects. Indiana does not issue general obligation debt.

Total revenue in fiscal 2010 was down $1.03 billion, or 8.8%, from the May 2009 forecast on which the current two-year budget was based. The current budget estimated 2% growth in tax revenues, while actual collections are 7.5% below 2009 levels, the auditor said.

Just under half of the state’s budget funds K-12 education. The revenue declines mean that local school districts will not receive any extra cash this year. The current budget stipulates that if state revenues exceed a certain amount, school systems would receive half of the surplus.

“Staying in the black when most states are broke, and cutting taxes while they are raising them, is the best way to help Hoosier families through this recession and out-compete other states for the new jobs we need,” Daniels said in a statement issued after the auditor’s press ­conference.

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