Triple-A Indiana starts shaping its next budget

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Indiana is projected to collect roughly $828 million in extra revenues over the next two years but the increase will barely cover spending the state may need to allocate to its child services department and Medicaid in the two-year budget that starts July 1, 2019.

The state’s revenue forecast for the next two years, unveiled on Monday, shows increases of $442.8 million in fiscal 2020 and $386 million in fiscal 2021 in the state’s general fund.

The Department of Child Services has asked for an additional $286 million per year from the general fund, to bring its total budget to $965 million per year for the next two fiscal years to keep up with increased costs due in part to significant increases in child abuse and neglect cases related to the state's opioid epidemic, high employee turnover, insufficient drug treatment programs and legal costs.

The state will need to increase Medicaid spending by roughly $120 million per year as a result of scheduled reductions in the federal share of Healthy Indiana Plan and the Children's Health Insurance Program expenses.

Sen. Ryan Mishler, R-Bremen, Chair of the Senate Committee on Appropriations, said DCS may need to find ways to be more efficient and reduce the amount the department is requesting. He said lawmakers need to meet with DCS officials and find a way to be more efficient and lower that number.

“The funding DCS is requesting could take up a large part of the new revenue the state is projected to receive, which will make it very difficult as we work on the budget as a whole,” Mishler said.

The Indiana General Assembly convenes in January to begin drafting the next two-year budget.

“With this information, we will work to introduce a budget that continues Indiana’s strong fiscal position and maintains the reserves needed to withstand a downturn in the economy,” said Indiana Office of Management and Budget Director Micah Vincent. “There is a lot to consider as we prepare the governor’s budget submission in January.”

The increased DCS spending and Medicaid spending would leave little to tackle the increased K-12 spending Gov. Eric Holcomb supported as part of his agenda for 2019.

"There will be some amount of increase of K-12," said Rep. Tim Brown, R-Crawfordsville, chairman of the budget-writing House Ways and Means Committee. "But then we'll have to look at other areas, as far as what they asked for versus what's available."

One possible source of additional revenue is the $1 billion payment the state received in October for allowing the company that operates the Indiana Toll Road to impose a one-time truck toll hike well in excess of the usual annual rate increase.

The bulk of the resources the state gets in the deal will fund highways. The remaining funds – approximately one-fifth of the total – will be spent on rural broadband, recreational trails and subsidies for international flights. Holcomb announced the agreement Sept. 4. No legislative approval was needed.

Bosma said he supports Holcomb’s plan to use that money to finish key road projects, expand rural broadband access and other efforts to improve Indiana communities, but “there’s some discussion about the appropriation of these funds.”

Sen. Karen Tallian, D-Ogden Dunes, supports reallocating those funds paid to the state. "It's not the governor's authority to appropriate money, is it?" Tallian asked. "The last time I looked that (authority) belonged to the Legislature."

Tallian also said the state could spend a portion of its approximately $550 million Medicaid reserve fund and halt the planned reduction in the corporate income tax rate to save another $70 million.

Indiana holds triple-A ratings from the three largest rating agencies.

In November, voters approved an amendment to the Indiana Constitution requiring lawmakers to pass balanced budgets unless two-thirds of the members of both chambers vote to suspend the requirement. The measure passed by 72% to 28% vote. The amendment will go into effect for the next two-year budget cycle, which extends from July 1, 2019, to June 30, 2021.

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State budgets State tax revenues Toll revenue bonds Healthcare industry State of Indiana Indiana