Forecast foretells slimmer state budget, but Indiana Democrats bristle

By Patrick Guinane, Times of Northwest Indiana
patrick.guinane@nwi.com

INDIANAPOLIS | State budget talks took a frugal turn Wednesday with release of a new revenue forecast suggesting that the two-year, nearly $30 billion spending plan that failed last month was about $1.1 billion too big.

Democrats assailed the new projections, which are on par with the spending restraint Republican Gov. Mitch Daniels has advocated. But GOP lawmakers put a positive spin on the tumbling tax collection targets, saying Indiana can use federal stimulus dollars to at least continue funding schools and other priorities at current levels.

"We sort of have a manageable problem here," said Senate Appropriations Chairman Luke Kenley, R-Noblesville. "That (failed) budget reflected an increased level of spending, and I think the reality is hitting us now that we're closer to a flat-line situation."

Bipartisan staff for the State Budget Committee, a House-Senate panel, predicted state tax collections for the fiscal year that ends June 30 will finish 7.5 percent below last year, for a loss of nearly $1 billion. Next year, revenues had been expected to grow about 1 percent, but the new forecast projects a 1.1 percent decline from July through June 2010 before a 4.7 percent increase in the fiscal year ending in June 2011.

"A critical first step towards building a good budget is a reasonable, realistic revenue forecast and we believe we have that at this point," said Chris Ruhl, the governor's budget director.

Daniels pressed for a revised forecast after last month's actual tax collections came in $255 million below projections lawmakers received April 17.

The governor chided lawmakers for using the earlier revenue estimate to craft a budget proposal he said was at least $1 billion out of balance. That spending plan failed overwhelmingly in the Democratic-controlled House on April 29, the final night of the four-month legislative session, necessitating a special session expected to start June 15.

The new forecast released Wednesday reduced revenue targets by $444 million for the final months of the current budget year, $332 million for fiscal year 2010 and $316 million for 2011. It sets the stage for a two-year budget that spends roughly $27 billion in state money and $2 billion in one-time stimulus dollars.

"I would say that this is a great forecast for all of the people that wanted to take a meat ax to education and job-creation efforts," complained Rep. Scott Pelath, a Michigan City Democrat and top lieutenant to House Speaker Pat Bauer. "Certainly if you do the forecast enough times you end up getting the answer that you want."