INDIANAPOLIS —Indiana would spend more money on education and finish fiscal year 2013 with $1 billion in the bank under the budget that cleared a key state Senate committee Monday.
The two-year, $28 billion spending plan received a major rewrite at the hand of Senate Appropriations Committee Chairman Luke Kenley.
But the Noblesville Republican’s job was made easier by a new revenue forecast that shows Indiana’s fiscal crunch won’t be quite as tight as lawmakers expected, thanks to $644 million in additional tax collections projected to come in over the two-year budget period.
The committee unanimously adopted Kenley’s changes, then voted 8-3 on party lines to send the budget on to the full Senate for consideration.
On top of $6.2 billion in annual funding, Kenley’s budget would inject an extra $150 million into K-12 education — including an extra $46.8 million for full-day kindergarten, as well as $15 million for a teacher merit pay program.
It also includes a mechanism that aims to force Indiana’s smallest schools to merge with others, while sparing medium-sized schools from some of the pain of a new education funding formula that would send more dollars to growing, usually suburban schools and less to places where enrollment is declining, usually in urban and rural areas.
That mechanism would send $100 per child to every school district with more than 500 students, up to a total of $100,000 per district. It was a “deliberate” effort to nudge the 15 or so smallest school districts, which won’t qualify for $100 per student, toward consolidation, Kenley said.
Overall, the budget hasn’t changed much since Gov. Mitch Daniels offered his proposal in January and the House Ways and Means Committee added a school funding formula to it in February.
But one major difference — in philosophical terms, if not practical — was on display Monday as Kenley eliminated what Daniels called an “automatic taxpayer refund.”
Once the state’s surplus hits 10 percent of annual spending, Daniels wanted to send tax dollars collected beyond that point back to Hoosiers in the form of a check.
Kenley, on the other hand, said the trigger ought to be 12 percent. And instead of sending small checks to each Hoosier, he said, the money should go to pay down Indiana’s $11 billion in unfunded teacher pension liabilities.
The pension plan responsible for those liabilities was phased out 15 years ago, but teachers who entered the classroom before 1996 are still owed money that the state will have to draw out of its general fund, eating up more and more of the budget over the next three decades.
Using the state’s surplus tax dollars to chip into that burden, Kenley said, is “more prudent.”
“That will have an enormous beneficial savings impact in all the budgets for the next 25 years going out,” he said.
The difference could be entirely academic. If current revenue forecasts hold true, Indiana’s surplus would reach just 7.7 percent of the state’s annual spending by the end of the budget period — not enough to reach the trigger.
Perhaps the biggest winners in Kenley’s budget proposal are county governments.
Because of the way Indiana’s local income tax distribution system works, counties are just now feeling the recession’s impact on government revenues. They face losing $610 million over the next four years.
The House budget would have front-loaded those payments, putting counties on the hook for an extra $88 million in the next two years. The Senate proposal would not do that.
The difference is made up in part by chopping out $62.5 million in Medicaid funding. The state would still dramatically increase its Medicaid spending, to $3.6 billion over two years, in Kenley’s proposal.
Indiana’s bus systems wouldn’t lose any money at all. Kenley’s spending plan reverses the budget cuts included in the House budget and also tacks on a little extra money, funding mass transit at $42.6 million in the first year and $44.5 million in the second year.
His budget also would codify in state law a move Daniels made in 2005 when he ended state employees’ collective bargaining rights.
Daniels revoked former Gov. Evan Bayh’s executive order that granted employees those rights. Kenley is proposing to bar state workers from bargaining collectively unless the Indiana General Assembly gives its approval first.
Democratic senators voted against the budget, but said it is much better than other versions they’ve seen.
“I think it’s a significant improvement over the governor’s budget and over the House budget,” said Sen. Lindel Hume, D-Princeton.