Indiana is on track to end fiscal 2008 June 30 with between $1 billion and $1.2 billion in reserves despite slightly smaller than expected collections in some tax categories, budget director Chris Ruhl said in an interview last week.
Part of that surplus comes from a new sales tax increase that took effect April 1, though the state did not begin to collect revenue until May 1. The sales tax hike to 7% from 6% was implemented to help offset a state-wide decline in property taxes due to recent reform legislation.
The revenue is so far on track to generate its expected $900 million a year, having generated $150 million over the last two months, Ruhl said. The increase comes despite a smaller-than-expected increase in sales tax growth, which grew between 2.5% and 3% last year, slightly lower than the historic average.
Corporate income taxes and gaming taxes both declined significantly last year, though individual income taxes continued to come in “very strong” with 5% growth across the state, according to Ruhl. The drop in casino taxes is due to a myriad of factors, including a new casino in neighboring Michigan, and rising gas costs cutting into volume, he said.
The state ended fiscal 2007 with a $1.2 billion surplus and expects to close out fiscal 2009 with at least a $1.2 billion surplus.
“We’ve got a pretty good surplus and we’re building our reserves,” said Ruhl, noting that Indiana implemented a round of cuts in January that shaved up to $85 million off expenses.