Governor Calls For Budget Cuts As Tax Revenues Drop
December 10, 2013 — TheStatehouseFile.com
INDIANAPOLIS – Republican Gov. Mike Pence ordered universities to cut their state spending by 2 percent and said Monday he will sell a plane as part of a larger plan to account for lower-than expected tax receipts.
Pence will also require state agencies to cut their budgets by an additional 1.5 percent and delay planned spending on the Indiana Biosciences Research Institute.
Combined, the steps are projected to save the state about $57 million in the current fiscal year, which ends on June 30.
So far this year, tax receipts are down about $141 million from projections and are lower than during the same period last year. The state spends about $15 billion annually and at the end of the last fiscal year had about $2 billion in cash in its reserves.
“Fiscal integrity is the foundation of prosperity,” Pence said in a statement. “The cost-saving measures we are implementing today will ensure that Indiana remains fiscally sound during these uncertain times.”
The announcement comes just days after Pence said he will ask the General Assembly to approve significant new spending and more than $1 billion in tax cuts, most of which will hit local governments, not the state.
Pence wants to fund a preschool voucher program for low income children. Senate Appropriations Chairman Luke Kenley, R-Noblesville, has estimated that would likely cost at least $200 million a year.
Pence also wants to spend $400 million for roads that the General Assembly had previously set aside for future projects. And he’s proposed to phase out the tax on business inventory, which helps to fund local governments, schools, libraries and other services.
Kenley said last week that those spending requests should be considered in 2015 in the context of a larger budget debate. Lawmakers wrote the current two-year budget earlier this year.
But Pence’s budget director – Brian Bailey – said in a memo to state agencies that new cuts are necessary to “boost the state’s bottom line.” They include:
– Requiring state universities to reduce spending by 2 percent, which will save about $26.5 million through the end of the fiscal year.
– Requiring state agencies to make an additional 1.5 percent in spending cuts for a savings of $25 million. Agencies already had been ordered to cut 3 percent from the amount the General Assembly had appropriated.
– Selling a King Air plane that has been used by the governor’s office. The plan is expected to fetch $2.5 million.
– Delaying $2.5 million in spending on the Indiana Biosciences Research Institute, a new collaboration of government, universities and private industries meant to focus on the life science industry.
Al Diaz, the executive vice president for business and finance at Purdue University, said, ”We will immediately begin the process of assessing what this means to Purdue University.” Officials at Indiana University did not immediately return a message seeking comments about the governor’s order.
The cuts come on top of $110 million savings the budget agency ordered in earlier this year. Those changes included agency cuts and some shifts in spending among funds.
Pence and lawmakers will get a better look at the state’s financial situation next week when a bipartisan committee of fiscal experts presents a revenue forecast that will cover the current and next fiscal year.
That report is designed to help lawmakers make decisions about spending and taxes during the 2014 session of the General Assembly. At the end of the last fiscal year nearly six months ago, the state had about $2 billion in cash on hand.
Since then, however, sales and income taxes have not met projections. Also, an arbitration panel ruled the state would receive $63 million less in tobacco settlement payments, a decision the attorney general has appealed.