Indiana officials projecting big jump in budget surplus
INDIANAPOLIS (AP) — Indiana officials on Thursday projected booming growth in the state budget surplus, setting up a debate during the upcoming legislative session over possible tax cuts.
A report presented to the State Budget Committee forecast tax collections growing nearly $1.9 billion, or 10.4%, more for this fiscal year than what was expected when the current state budget was approved in April. That would push the state’s budget surplus to a whopping $5.1 billion by the end of next June.
Some members of the Republican-dominated Legislature were already pushing for tax cuts before the new projections as the $3.9 billion in cash reserves the state had this past June triggered Indiana’s automatic taxpayer refund process resulting in anticipated $125 payments to all individual income tax filers next year.
House Republican leaders have said they were looking at plans for the legislative session that starts in three weeks that would cut the state’s 3.23% individual income tax rate or expand credits to reduce what income taxes are owed, while top Senate Republicans are more cautious in the wake of the COVID-19 pandemic recession.
“This revenue forecast I think supports our position,” House Ways and Means Committee Chairman Tim Brown said. “We look forward to how citizens that worked hard deserve a break.”
Even with the big tax revenue jump, the Senate’s top budget writer said he was worried about consumer spending will slow in coming years and lead to drops in sales tax collections, which make up about half of state government’s general revenues.
Senate Appropriations Committee Chairman Ryan Mishler said he wanted to wait on tax changes until the Legislature takes up a new two-year state budget in 2023 and was hesitant to reduce the state surplus before seeing whether the revenue growth would be sustained.
The prospect of such a large surplus was unthinkable some 18 months ago as the state’s economy was reeling from widespread business shutdowns and job cuts early on in the pandemic. That downturn knocked Indiana’s surplus down by more than one-third in just four months to $1.4 billion in June 2020.
“Look how fast we went through our reserves during the COVID recession,” Mishler said. “So if it wasn’t for some of the federal money, we still wouldn’t have had enough.”
Mishler pointed out that the state would not just be stockpiling the extra cash as current state law would direct $2.6 billion of next year’s projected surplus to teacher pension fund obligations. The revenue report projected that even with such a payment the state’s cash reserves could be $4.1 billion — or 22% of planned state spending — in June 2023. Such a balance sheet would prompt another taxpayer refund without any new legislative action.
Republican Gov. Eric Holcomb’s top budget advisor also sounded leery of a quick action on tax cuts, recalling the wild swings in the national economy over the past couple years.
“We’ve all been very careful with how we’ve used our fiscal resources,” said Cris Johnston, director of Indiana’s Office of Management and Budget. “I think it’s the opportunity to deliberate on what we do with these financial resources.”