INDIANAPOLIS — An improving economic outlook for Indiana is placing a new kind of pressure on state lawmakers as they enter the crunch period of this year's budget-writing session.
A new revenue forecast the document that instructs lawmakers on how much they can spend indicates the state is on pace to collect $644 million more than earlier anticipated during the next two-year budget period.
Before Friday, Republicans who are drafting a spending plan worth about $28 billion were worried about where to make cuts. Now, the question is whether they can afford to loosen their belts a little.
"The pressure is not necessarily less. It's different," said John Ketzenberger, the president of the non-partisan Indiana Fiscal Policy Institute.
"You go from a purely defensive mode of, you've got to hold the line or even cut, to, 'OK, we've got some extra money.' The pressure is to spend it."
Gov. Mitch Daniels announced that the first beneficiary would be K-12 education the area he has called his top priority. He called for $150 million in new funding over two years, with part of that money going to full-day kindergarten and to fund teacher merit pay.
That leaves nearly $500 million more, according to the latest revenue forecast. Daniels said that money, if it materializes, ought to be set aside and applied to Indiana's bottom line. But others wondered if they might benefit, too.
In light of the latest forecast, the budget might include up to $50 million in extra annual spending beyond the additional education funding, said Rep. Jeff Espich, the Uniondale Republican who chairs the House Ways and Means Committee.
Mass transit, he said, is one line item that will avoid cuts that likely would have forced reductions in bus services in Evansville, Indianapolis and elsewhere.
As for other areas that are feeling the pinch universities' repair and rehabilitation funds, a horse racing industry that relies on tens of millions in annual subsidies, a program for seniors' home care, and more they'll be watching closely. But Espich said no one should expect much.
Adam Horst, who is Daniels' state budget director, noted that the latest revenue forecast is based on the middle-of-the-road scenario out of three that Global Insight, the group Indiana hires to provide worldwide economic projections, has identified.
There's a better scenario, in which Indiana could take in even more tax dollars over the next two years than the latest forecast suggests. But there's also a worse scenario, which obliterates the projected gains.
"I don't know if this is any more volatile than it's been in the past. It feels like it," Horst said. "If you use the pessimistic scenario, there's no new revenue, period."
That, said Rep. Kreg Battles, D-Vincennes, is a good reason to put off any more new spending until next year's 10-week "short" legislative session.
"These are projections, at best. These are not real dollars that are sitting in the bank account," he said. "It's not harmful to start a prioritized list, but put that on hold just a little bit so we can see actual numbers in a bank account, rather than projected numbers that we're hoping will come in."
The budget started in Espich's committee and has passed the full House. The Senate Appropriations Committee, chaired by Luke Kenley, R-Noblesville, is expected to make a series of changes and then send the spending plan on to the full Senate on Monday.
Kenley said he is not yet convinced that Indiana can spend much more in the budget.
"We don't have the money in hand yet," he said.
The Senate will vote on the budget by April 21, and then the two sides will work out their differences in conference committee negotiations ahead of a vote by the April 29 date to adjourn this year's session.
"I think you're going to see a posture of caution from the Legislature. From the budget that the governor introduced to the one that the House passed, it's very sober, and I don't think you'll see any outlandish spending in the Senate," Ketzenberger said.
"I think what you're more likely to see is finding places to stuff some of that additional money into reserve funds. If they can later take it out and spend it, they will, but for now, they'll stick it back on the balance sheet and forget about it for a while."