BY PATRICK GUINANE, Times of Northwest Indiana
pguinane@nwitimes.com
INDIANAPOLIS | State government is in line for some serious belt tightening that will put a crimp in efforts to win funding support for Northwest Indiana projects, such Little Calumet River levees or commuter rail expansion.
Lawmakers received a revenue forecast Thursday that shows they will have about $800 million less to spend in the next two-year budget than what was projected for the current $26.4 billion spending plan.
And the state must shed $763 million in spending during the next six months just to keep the current budget in balance with tax collections that are being dragged down by what one analyst said could be the worst recession in six decades.
In response, Gov. Mitch Daniels ordered several austerity measures Thursday, telling most state agencies to cut their budget by 3 percent and halting annual pay raises for state employees, including himself and legislators.
"We will adjust spending to preserve a balanced budget in Indiana," Daniels said during a Statehouse news conference. "These are only the first and hardly the last of the hard decisions that we will have to make."
Bob Lain, an analyst for the State Budget Agency, told legislators that revenues for the fiscal year that ends in June are expected to come in $488.6 million, or 3.8 percent, below last year. All told, the state is expected to take in $935 million less this year than what was anticipated when the current budget was crafted in early 2007.
"It's a lot of money to try to cut out of the budget," said state Sen. Karen Tallian, a Odgen Dunes Democrat who serves on the legislative panel that heard Thursday's dismal forecast. "I certainly think this is a year that (Northwest Indiana is) not going to be asking for much money from the state. We're going to be in a situation where we're going to have to cut programs or we're going to have to go into reserves."
Indiana has about $1.4 billion in rainy day funds, but Daniels doesn't want lawmakers to touch those reserves, arguing they could be badly needed later if the economic downturn is more severe or lasts longer than expected.
Nigel Gault, chief U.S. economist for IHS Global Insight, an economic forecasting and consulting firm, told lawmakers he expects the current recession, which began a year ago, to last through mid-2009. Indiana's job woes will linger even longer, he said, predicting that the state unemployment rate, currently 6.4 percent, will peak between 8.5 percent and 9 percent in early 2010.
"This recession is likely to prove comparable to the worst we have seen in the post-war era," Gault said, referencing World War II.