By Eric Bradner, Evansville Courier & Press
INDIANAPOLIS - A recent GOP state budget proposal spends too much and relies too heavily on short-term federal aid, Gov. Mitch Daniels said this morning.
Daniels on Friday met with reporters for the first time since Republicans who control the Senate unveiled their two-year, $28.1 billion spending plan that uses federal stimulus money to boost K-12 education spending by 1.9 percent in 2010 and 2.1 percent in 2011.
"It just adds up to too much," Daniels said. "It does not squarely face reality."
Rather than spending on areas such as university building projects and funding increases for education, Daniels said the state should tuck enough money away now to protect education and vital services from budget cuts two years later if the economy hasn't improved.
"At times like this, every family and every business is re-examining its priorities and postponing things" and the state should too, he said.
Lawmakers are working to craft the state's next budget before their scheduled April 29 adjournment.
Daniels said he didn't disagree with the budget's priorities, and that he's prepared to accept almost any combination of policies a final budget agreement between the Senate and Democratic-led House contains.
The problem, he said, is that spending levels are simply too high.
Daniels called the GOP proposal awash in an "ocean of federal stimulus money." He's afraid that by including $2 billion of federal stimulus dollars in the proposal, lawmakers will create problems when the stimulus money runs out in two years.
The Senate Republican budget's architect, Appropriations Committee Chair Luke Kenley, R-Noblesville, said his plan left a structural deficit of $336 million after two years, and that lawmakers hope state tax revenues rebound enough to cover that deficit. However, he said using stimulus money does create a cliff Indiana could fall from when the money runs out.
Daniels said that cliff is higher than the Senate thinks. He said the structural deficit is at least $600 million. And, he said, evidence shows tax collections might not rebound as quickly as lawmakers hope.
Sales tax revenues are down and capital gains taxes are non-existent; therefore, Daniels said, state revenue will return slowly.