Indiana surplus forecast renews debate over teacher pay

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A new revenue forecast for Indiana says the state will collect $250 million more over the next two years than was anticipated in April when lawmakers adopted the latest two-year state budget.

The updated forecast projects Indiana will end its current budget year on June 30, 2020, with $2.37 billion in reserve and $2.55 billion saved the end of the 2021 budget year.

“With this updated information, the state of Indiana can continue its strong fiscal position, protect our AAA credit ratings, fund our priorities, maintain the necessary reserves, and plan responsibly for the future,” Indiana Office of Management and Budget Director Cris Johnston said in a statement.

The better-than-expected forecast has added fuel to the debate between Republicans and Democrats over how to use the extra money.

The state finished the last fiscal year with $300 million more than expected. In July, Gov. Eric Holcomb asked to use that extra revenue to pay for previously approved state construction projects in cash instead of bonding for the funds. Holcomb said paying cash instead of borrowing for construction projects will save the state four-million dollars a year in interest payments and it avoids committing the state to long-term expenses with one-time money.

Democrats said they'll lobby to spend the latest windfall to boost teacher pay when the Indiana General Assembly convenes in January.

Senator Karen Tallian, D-Ogden Dunes, has said that, with interest rates low, bonding for the projects would free up millions of dollars for other priorities.

"We demand that this extra revenue be invested in worthwhile and needed programs, and that it not just disappear into the black hole we call Indiana's bloated surplus,” Tallian said. “It's time to show Hoosiers where our priorities really lie."

Sen. Ryan Mishler, R-Bremen, Chair of the Senate Committee on Appropriations, said the forecast means the state “will be on firm financial footing as we look to the 2021 budget session.

“Conversely, in the event of an economic downturn, it means we will be able to maintain the strong reserves we need to guard our state against cuts to critical government services like K-12 education and public safety,” Mishler said.

State Rep. Tim Brown, R-Crawfordsville, chairman of the budget-writing House Ways and Means Committee, noted the extra money amounts to just 0.75% of the state's annual budget, and the revenue forecast has a plus-or-minus 2% margin of error, so the money may not materialize at all.

Brown said the additional dollars don’t change anything for the upcoming 2020 legislative session, which is not a budget-writing year.

The extra revenue largely stems from the state's marketplace facilitator tax, requiring nearly all online retailers to collect sales tax on purchases made by Hoosiers. Legislators passed a law this year extending sales taxes from online purchases to marketplace facilitators, like Expedia or Amazon, that sell goods and services online on behalf of other entities to collect and remit sales tax to the state.

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, though 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.

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