INDIANAPOLIS – State Auditor Tera Klutz announced that Indiana will end its fiscal year with a staggering $6 billion surplus after collecting $1.24 billion more than forecasted in the last year.
“Indiana’s historic $6.1 billion reserve balance gives legislators the opportunity to review the state’s funding model as well as provide residents with the assurance that Indiana can continue to provide essential services as our country confronts an uncertain economic future,” Klutz said in a release.
Income tax and corporate income tax accounted for the largest increases, 14.6% each, increasing the 2022 General Fund by 9.2% compared to 2021. Fiscal years run from July 1 to June 30.
Delayed tax collections in 2020 during the pandemic inflated revenues for 2021, meaning that the 2022 General Fund would be up even higher when compared to a typical year.
Tera Klutz (Provided by the State Auditor’s Office)
The estimated balances for the Fiscal Year 2023 reserves are $5.1 billion, and would drop under Gov. Eric Holcomb’s proposal to send $1 billion back to taxpayers.
Holcomb, noting the forecasted surge in funds, called for the General Assembly to convene in early July and enact his proposal. The refund would mimic the automatic taxpayer refund from earlier this year, which distributed $125 each to Hoosiers.
The $1 billion payout would distribute an additional $225 each to Hoosiers.
The calculation for reserves in 2023 includes $2.5 billion paid out to stabilize the pre-1996 teacher pension fund as well as an additional $338 million less in revenue from tax cuts enacted in the 2022 session.
In 2022, lawmakers decided to repeal the state’s utility tax and cut the income tax from 3.23% to 2.9% over the course of seven years, so long as revenue growth remained strong, starting in 2023.
In 2021, while crafting the two-year budget, legislators created a one-time mechanism for excess funds to revert to the teacher pension fund, capping the amount at $2.5 billion. That transfer, though in code, must be approved by the State Budget Committee in their August meeting.
The announcement means legislators have a choice in the future – spend the reserves or prepare for another automatic taxpayer refund next year.
Lawmakers may also consider whether to increase Holcomb’s $1 billion proposal during their special session this month, scheduled to begin July 25. Republicans have also said they will increase maternal and child supports in that session alongside any abortion restrictions.