The state of Indiana is starting its new budget year on the right foot.
Data released Friday by the State Budget Agency show Indiana's general fund revenue exceeded the estimate by $38.3 million, or 2.6%, in July — the first month of the state's 2025 budget year.
Personal income tax receipts contributed the most to the monthly state surplus, with the collection of Indiana's 3.05% income tax, primarily through payroll deductions, generating $470 million.
According to the State Budget Agency, that was $33.1 million, or 7.6%, more than anticipated by the December 2023 state revenue forecast.
At the same time, revenue from Indiana's 7% sales tax came in below expectations in July. The $879 million in sales tax receipts was $19.5 million, or 2.2%, lower than predicted, data show.
The budget agency cautions Hoosiers that both of the state's top revenue categories can be highly volatile on a month-to-month basis and revenue results are best viewed over an extended period of time.
In all, Indiana took in $1.5 billion in general fund revenue in July. The general fund pays for education, public safety, health care and nearly everything state government does.
Data show last month's state revenue haul actually was less than Indiana's July 2023 general fund revenue total by $81.1 million, or 5.1%.
However, the year-over-year dip primarily was due to a "fifth Friday" effect last year, where some Hoosier workers got three paychecks last July and only two paychecks this July — shifting income tax withholding to another month.
"Historically, the number of Fridays affects the timing of payments from month to month, and the revenue impact has typically been between 10% to 20% greater whenever a month has the fifth Friday compared to the more common four Fridays in a month," the budget agency said.
Similar payment timing issues likely were responsible for the 37.3% year-over-year growth in July corporate income tax revenue that hit $29.1 million last month, according to the State Budget Agency.
Data show during the 2024 state budget year that ran from July 1, 2023 through June 30, 2024, the $21.5 billion in general fund revenue was just $14.6 million, or 0.1%, short of the goal set by the state revenue forecast.
Overall, 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 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.
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.
An updated state revenue forecast is due to be issued in December, shortly before the state's new governor and Hoosier lawmakers convene in January for a four-month legislative session primarily focused on crafting Indiana's next two-year spending plan.
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