INDIANAPOLIS - With Indiana's tax revenues crippled by the national economic downturn, the state's Republican lawmakers are proposing using federal stimulus money to prop up the state's budget over the next two years in hopes of weathering the recession and averting massive spending cuts.
Education spending would increase slightly under a budget proposal Sen. Luke Kenley, R-Noblesville, unveiled Wednesday.
Kenley, who chairs the Senate Appropriations Committee, said the stimulus money gives Indiana two years of breathing room to see if the economy recovers before the state is forced to further slash funding.
"If we did not have the federal stimulus money, we would have significant cuts in every single area of state government," Kenley said.
The spending plan his committee will vote on this morning uses $823 million in stimulus money to replace current cuts and boost K-12 spending by 1.9 percent in 2010 and 2.1 percent in 2011. It also offers slight increases to higher education funding.
The Republican-controlled Senate's budget is offering a traditional two-year budget, rather than the one-year plan favored by Democrats in the House.
Senate Republicans rejected Democrats' calls to tap into the state's $1.3 billion in reserves.
Kenley said protecting that surplus gives the state a cushion in case tax revenues are still down and federal stimulus money isn't available when the time comes to craft the next budget.
"Without knowing where we're going in two years, we think it's important to have that big reserve," he said.
The plan also rejects warnings from Gov. Mitch Daniels to avoid relying on stimulus dollars because the state would have no way to replace that money when it runs out in two years.
Kenley signaled that Daniels, a Republican, is not fully on board with his own party's budget and would like to see more belt-tightening.
"While he applauds our effort, he wants us to do better," Kenley said.
The plan maintains the 8 percent cuts to state agencies Daniels asked for, except for a boost for the Department of Correction to expand two crowded prison facilities - the one spending increase the governor proposed this year.
K-12 spending
But Daniels had suggested holding K-12 education spending steady and cutting higher education spending - a key difference between his proposal and Kenley's plan.
Kenley said he'd already spoken with the Democratic House leaders, and predicted the major battles between the two sides would be over how much to boost education spending, and whether to spend on the prison expansion projects.
Democrats want more education spending and no Department of Correction budget increase.
Rep. Dennis Avery, D-Evansville, who chairs the House Budget Subcommittee, said the two sides are close on education funding, even though Republicans used federal stimulus money while Democrats tapped the state's reserves to do it.
Avery said another key difference is funding for higher education capital projects. Democrats want to fund the building projects at Indiana's public colleges and universities, but Republicans say such projects should be trimmed from the budget.
Kenley said Republicans predicted state revenue would lag more than $300 million below expectations for the next two years.
He cautioned that if the new state revenue forecast due out April 17 is even worse than those levels, lawmakers need to go back to the drawing board, and the state would face across-the-board cuts, including in education spending.