Indiana tax collections and state spending appear to be returning to normal levels after several years of wild swings caused by the effects of and response to the COVID-19 pandemic.
State finance leaders recently closed the books on Indiana's 2024 budget year that ran from July 1, 2023 through June 30, 2024.
During the 12-month period, the $21.5 billion in general fund revenue was just $14.6 million, or 0.1%, short of the goal set by the December 2023 state revenue forecast, according to the State Budget Agency.
Data show year-over-year growth in personal income tax receipts and interest earnings helped Indiana hit its revenue target, notwithstanding reduced collections from the state's 7% sales tax and its corporate income tax.
In all, the state spent $421.4 million less than it took in during the 2024 budget year.
Indiana's budget reserve totaled $2.6 billion as of June 30, or 11.9% of projected expenditures for the 2025 budget year, according to the State Budget Agency.
That reserve balance relative to the next year's spending is in line with historical trends since Republicans took control of both chambers of the Indiana General Assembly in 2011.
It's also higher than the 9% balance at the end of the 2020 budget year, when COVID-19 prevention measures cratered state revenue, but well below the 21% and 29% reserve balances at the end of the 2021 and 2022 budget years when federal COVID-19 aid to Indiana dramatically grew state resources.
"In fiscal year 2024, Indiana continued its long practice of sound fiscal management and prudent approach to budgeting," said Joseph Habig, acting state budget director. "The results of maintaining an annual surplus and healthy reserve levels ensure that Indiana's priorities will be funded today and tomorrow."
At the same time, the State Budget Agency is projecting Indiana's reserve balance at the June 30, 2025, end of the current budget year is poised to drop to 10.4% due to a projected 4.6% increase in state spending and just 3.6% state revenue growth.
Some state lawmakers are concerned state spending, particularly Medicaid health care costs, may rise even higher in the months ahead and create an immediate financial management challenge for the new governor set to be chosen by Hoosiers at the Nov. 5 general election — even before the governor has a chance to pursue any promised tax cuts or spending increases.
"We must remain disciplined in order to maintain our state's positive fiscal standing in the coming years," said state Sen. Ryan Mishler, R-Mishawaka, chairman of the Senate Appropriations Committee. "The current rate of growth in Indiana's Medicaid spending is not sustainable and could adversely affect other aspects of our state's budget."
"As we look forward to the 2025 legislative session, we should consider using the upcoming budget session to regroup and ensure our state is on a sustainable financial path as we go forward."
On the other hand, state Rep. Greg Porter, D-Indianapolis, the top Democrat on the budget-writing House Ways and Means Committee, attributed the state's limited resources to Republicans repeatedly boosting funding for charter schools and private school vouchers.
"I encourage my colleagues across the aisle to consider the growing mismatch between our revenue and spending priorities. We can't continue underfunding our social programs. We're already the second-worst state for quality of life," Porter said.
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