INDIANAPOLIS – Ever-increasing prices at the pump and grocery store checkout line aren’t the only places where Hoosiers can see the impact of inflation – state building projects are also feeling the budgetary strain.
Pent-up demand for delayed services and supply chains disrupted by the COVID-19 pandemic continue to drive inflation upward, reaching 8.6% over the previous year, according to U.S. Department of Labor data.
Especially hard-hit sectors include construction and labor costs, pushing the prices for capital infrastructure projects above the projected costs lawmakers budgeted for in 2021.
House Speaker Todd Huston, R-Fishers, said budget writers will need to prepare for the 2023 session when inflation will put pressure on the budgets of state agencies.
“Everybody’s already coming to us. The cost of road projects is up 50% in the last three months. What we’re seeing in bids, we’re seeing state infrastructure projects, buildings (and) those types of things, through the roof,” Huston said in late May.
Indiana Law Enforcement Academy sees 22% cost increase
Many of those projects, still in the design phase, won’t have updated price tags for weeks.
But the Indiana Law Enforcement Academy was farther along in the process and offers a warning to legislators crafting the 2023 budget, with costs coming 22% over initial estimates, or $15.5 million more than the $70 million requested.
Timothy Horty, executive director of the Indiana Law Enforcement Academy, said they calculated the project’s cost in 2019 without knowledge of the economic fallout of COVID-19.
“Materials and labor costs skyrocketed and made the budget process more complicated,” Horty said.
Horty will need to make a request before the State Budget Committee on Wednesday, where state fiscal leaders will decide whether to transfer funds from discretionary accounts to cover inflated costs.
Timothy Horty (Photo from Indiana Law Enforcement Academy)
The law enforcement academy proposal would add dorm capacity for the academy, which trains officers from across the state. Rather than three pupils per room, each room will host two students with an overall capacity for 400 students.
“Those are awfully close quarters and the pandemic showed us it’s not particularly safe to put that many students in one room,” Horty said.
Additionally, the project will expand the state’s only emergency vehicle track, adding more roadway with interstate exchanges, roundabouts and other safety hazards.
“The roadway is the number one killer of law enforcement officers in this state,” Horty said. “I’m trying to get away from classroom training and move to more scenario-based training … these young men and women need this hands-on training.
“We want them to make mistakes here and not in their home communities.”
Indiana National Guard may delay projects
For government buildings, specifically, the design and approval process can take years. On average, the Indiana National Guard said it saw a 35% increase over original estimates to repair roofing on several armories.
“In the past 18 months or so, upwards of 75% of the projects the Indiana National Guard facilities program have bid have busted,” said Steven Hines, construction and facilities management officer of the Indiana National Guard. “Our estimates on re-roofing seven armories this year were accomplished in 2019 with no way of predicting the difference in today’s costs.”T
He said they may postpone or cancel 20% of their projects to fund the remaining projects, a temporary fix.
“This is a solution for now, but deferring the projects increases ad hoc repairs, and can strain our annual budgets,” Hines said. “Several projects have been downsized in an effort to save when possible.
“Ultimately, the work must get done, so we continue to adjust our estimates based on today’s market variables for the future and look for alternative methods of accomplishing our mission.”
Impact yet to come for Westville, other projects
Some projects haven’t progressed far enough to see the impact of inflation, such as the Westville Correctional Facility, which the Indiana Department of Correction said would receive a new cost estimate in the coming weeks.
In 2021, lawmakers approved $400 million for the facility, located in LaPorte County, the largest capital improvement project included in the budget.
Annie Goeller, chief communications officer of IDOC, said the full cost of the Westville project won’t be calculated until they finish the design and development phase.
Lawmakers approved a $550 million capital reserve account for state building projects, not including the above proposals. Eligible projects include: the State Archives Building, the combined campus for the School for the Deaf and the School for the Blind and Visually impaired, State Park Inns at Potato Creek and Prophetstown, cyber security infrastructure and a new Indiana State Police post and lab in Evansville.
According to Cris Johnston, director of the Indiana Office of Management and Budget, none of those projects have bids. However, he said “firms helping with those efforts are sending cautionary signals to prepare for rising costs.”