DALLAS – Indiana must keep its books balanced and its reserves well-funded, Indiana Gov. Eric Holcomb said, calling the state government's strong fiscal health a "bedrock" of its appeal for businesses.
"This sets us apart from many other states, keeps us in a good position to withstand a future economic downturn and encourages businesses to locate and stay in Indiana," Holcomb said late Tuesday in his first State of the State address.
Indiana 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.
Holcomb reiterated plans to invest $1 billion over the next 10 years to promote the state as the "capital" of innovation and entrepreneurship.
The plan is similar to one proposed by his predecessor, vice president-elect Mike Pence. However Holcomb wants to fund half of the plan with funds from a trust fund that was set up years ago from proceeds of the Indiana Toll Road lease. Pence's proposal called for tapping the Indiana Public Retirement System. Holcomb's proposal was included in the fiscal 2018 and 2019 budget proposal he unveiled last week.
The trust fund, established with proceeds from the 2006 Indiana Toll Road lease, currently must be invested in products with extremely limited risk. Lawmakers must approve converting the trust to support entrepreneurship in the state. Interest generated from the Next Generation fund annually, which is about $20 million, is used for road funding now and that would continue under Holcomb's plan.
Holcomb is also looking to venture capital investment tax credit transferability as a way to fund the proposal. Indiana has a $12.5 million venture capital tax credit program that benefits only investors with tax liability in the state. Holcomb wants out-of-state investors to be able to sell their tax credits to people and companies that have tax liability in Indiana to generate more money for companies based in the state.
He's also calling for continued state spending of $30 million a year to go toward the fund and a $100 million investment by the state over 10 years in partnerships with higher education and research institutions that would educate and support entrepreneurs.
Holcomb once again addressed support for the state's infrastructure plan for the next 20 years, which includes investing in several new highway projects.
The rookie Republican governor reiterated his support for a range of options to fund investments —including fuel tax increases, new tolling options, fees for alternative-fuel vehicles and creative public-private partnerships.
Holcomb has said he supports the plan put forward by House Republicans earlier this month. The $1.2-billion-per-year transportation funding proposal would raise the state gasoline tax and require transportation planners to study the tolling of Indiana's interstate highways. The 20-year plan would raise the state gasoline and diesel taxes by 10 cents per gallon, levy a new vehicle fee of $15 per year dedicated to transportation infrastructure improvements, and add a $150 per year registration fee for electric vehicles.
"The fact is, existing sources of revenue are just not keeping up," Holcomb said. "I'm a believer that every time you ask a taxpayer for a dollar, you better be darn sure you need it and are going to use it effectively for its intended purpose. And, here's a case that if we ask Hoosiers to invest a little more to meet the need, the return is going to be well worth it—for them, for our communities, and for our economy."
Senate Democratic Leader Tim Lanane, D-Anderson, was critical of what he called the lack of direction or leadership in Holcomb's address. "Essentially, these are speaking points he made in his inauguration speech," said Lanane in a statement. "What this address left out is what is most telling. I wish the governor had provided state lawmakers, public officials and constituents with more direction. In a time of great political uncertainty on the federal level, Hoosiers expect their governor to lead on the issues that matter to them."
Lanane was also skeptical of the GOP plan saying he doubted that Indiana's citizens would accept paying the higher gas taxes "while corporations and financial institutions are in the middle of an eight-year tax-rate decrease."
He also questioned how the state plans to deal with a congressional repeal of the federal Affordable Care Act which would impact 400,000 Hoosiers.