INDIANAPOLIS | Indiana faces a budget crisis unmatched in the state's history. Or does it?
The Indiana Fiscal Policy Institute thinks so. In its Resetting Indiana's Future report issued this month, the nonpartisan institute projects Indiana's already slim-and-trim state government faces a $1.3 billion revenue shortfall in the 2012 and 2013 budget years that the General Assembly must fix starting in January.
"There is no road map for a trip through this recession, so the governor and legislators will have to be careful or they'll take a turn for the worse," said report authors Mark D. Brown and John Ketzenberger.
They suggest possible increases in the state's 3.4 percent income tax and broadening the state's 7 percent sales tax to include more services as ways to fix the estimated deficit, which equals about 9 percent of Indiana's 2010 revenue. They also suggest completely rethinking the services state government provides and eliminating unnecessary programs and departments to save money.
"The governor and the General Assembly face the brutal and formidable task of bringing the budget back into balance without overburdening taxpayers, shorting education or those who rely upon the state for assistance and services," Brown and Ketzenberger said.
While state legislative leaders agree that decisions on Indiana's next two-year budget will be tough, both Republicans and Democrats say things aren't as bad as the institute projects.
"Let's not kid anyone, it's not going to be an easy time," said state Rep. Jeff Espich, R-Uniondale, the House GOP budget chief. "It gets harder when you've ran government pretty efficiently the last three or four years."
But Espich said House Republicans can pass a budget without increasing taxes by not growing spending and relying on recent improvements in state revenue to keep the lights on. He said lawmakers will only have to cut some $200 million to $400 million in spending to balance the budget.
House Speaker Patrick Bauer, D-South Bend, said Democrats can balance the budget without state tax increases of any kind, including higher fees. He said eliminating state spending on things such as sports stadiums and sports team bailouts and taking back tax breaks from companies that fail to deliver on promised new jobs can fix the revenue gap.
"Many of these proposals already should be in place in state government. Many of them were opposed by both the administration and its followers in the Indiana General Assembly," Bauer said.
Power in the General Assembly currently is split, with Republicans in charge of the Senate by a wide margin and Democrats in control of the House. But while a Republican Senate is assured after the Nov. 2 elections, the two-member majority Democrats have in the House could disappear, as all 100 seats are up for election. A Republican majority in the House would give the GOP total control over the state's budget in the General Assembly and with Republican Gov. Mitch Daniels.
Bauer said that would be the worst of all possible outcomes, as Republicans are not willing to rule out budget cuts to schools and public safety.
State Rep. Brian Bosma, R-Indianapolis, the House Republican leader, said Republicans would only approve cuts to those items as a last resort.