The Evansville Courier & Press
Indiana Gov. Mitch Daniels took office a little more than four years ago, and, in relatively short order, performed a remarkable budgetary feat, balancing the state budget in two years.
The former White House budget director came into the governor's office facing a long-standing deficit in excess of $600 million, plus more than that amount in unpaid debts to local government units. It wasn't pretty getting there, but Republican Daniels managed to give Indiana its first balanced budget in eight years, plus repayment of the money owed to public schools, higher education and other arms of local government.
Not only did he lead the elimination of the deficit, but in doing that, he began to eliminate long-standing impediments to growth of a sluggish state economy.
And he did all of this while expanding child protective services and while creating the $3.8 billion Major Moves highway building initiative through the lease of the Indiana Toll Road.
Unfortunately, for all this progress, Daniels now faces the question, can he do money magic a second time?
That's right. Thanks to an ugly national recession that is dragging down states everywhere, Indiana finds itself facing a deep deficit once again. Because of that recession, it will be much more difficult this time for Indiana to recover.
But at the least, we believe, Daniels' administration has set the right priorities for what spending will be reduced and what areas of state responsibility will be protected from cuts.
What Daniels is dealing with in establishing spending priorities is an updated revenue forecast that projects a $763 million shortfall between $13.305 billion in spending and $12.542 billion in anticipated revenue for fiscal year 2009.
That bleak picture has caused Daniels to order that state employee pay raises not be paid in 2009; that executive branch agencies cut budgets by 3 percent to go with a 7 percent cut ordered earlier; that no out-of-state travel be allowed unless approved by the state budget agency; that there be other spending restrictions; and that Daniels, other statewide officeholders, judges and legislators forego pay raises.
As for those priorities we mentioned, Daniels said that state payments to K-12 public schools will not be affected by the budget cutbacks.
He said no one will lose Medicaid coverage. And, he said, public safety will not be affected.
Likewise, as he pointed out, highway infrastructure improvements are separate from the state general fund and will continue.
Of course, it was reported earlier last week that investment income from Major Moves is $220 million less than projected two years ago because of the same sour economy that is affecting the state general fund.
Even so, the Indiana Department of Transportation said Interstate 69 construction, which started this summer at the Evansville end, will continue unabated.
INDOT said some highway projects may have to be delayed because of the reduced income, but I-69 will not be one of them.
So it seems that the Daniels administration is attempting to make the best of a bad, bad situation. But remember, as well, that in Daniels' property tax reduction package approved by the Legislature last session, the state agreed to take over approximately $1.2 billion in school operating costs and child welfare costs paid by local governments.
That will be a problem not only for the administration, but also for the Indiana Legislature, which will be writing a new, two-year budget in the 2009 session.
Rep. Dennis Avery, D-Evansville, who serves on the State Budget Committee and who will have a hand in the drafting of the state budget, acknowledged the task will be extremely difficult.
Daniels has proven his mettle as a budget hawk, and we're not sure there is a better governor in America today at confronting fiscal issues.
Whether that is enough for today's powerful and growing economic storm remains to be seen.