Not much extra money available as Hoosier lawmakers start planning next budget

Less tax revenue than expected and the uncertainty of a Trump presidency on the economy are complicating matters for those asked to fulfill the biennial funding wish list.

Senate Appropriations Chairman Luke Kenley, R-Noblesville, alluded to the miserly sentiment last week when asked about a potential $1 million request to expand DNA testing of people charged with felonies.

"They'll have to go to the end of the line, behind the four-dozen other people in front of them," he said, only half-jokingly, of the request.

Official state revenue estimates for the next fiscal year won't be released until Thursday, but Kenley and others say they have a general idea of what those will say based on monthly updates and last year's overly optimistic forecast, which was off the mark by more than $100 million.

"I don't think people realize we won't have the money to give out to everyone who wants it," Kenley said.

As of October, for example, tax and revenue collections for the state's general fund were about $76 million short of what was expected.

Smaller collections from corporate income taxes and less sales taxes due to cheap gasoline were reasons for the drop, said Purdue University economist Larry DeBoer, who specializes in local and state finances.

That may be less than 2 percent of a $31 billion-plus budget, which comes with $2 billion in reserves, but those lost millions add up.

"There is not exactly a lot of extra money sloshing around," DeBoer said.

Adding to Kenley's concerns are trends in gaming tax revenues collected form the state's 11 casinos, which have been steadily dropping from a $900 million peak a decade ago. It's now down less than $600 million a year.

More competition is on the way for those gaming halls, with Pokagan Band of Potawatomi Indians about to break ground on a South Bend casino that won't be subject to state taxes.

Anticipation of a conservative forecast later this week has already dimmed hopes of expanding pre-kindergarten funding beyond the program that now exists for a limited number of low-income families in a five-county test area.

While estimates remains fuzzy, a Democratic-backed initiative earlier this year said it would cost $150 million in the first year to offer pre-K to every 4-year-old in the state.

Kenley says he'd rather see any extra money in the budget go to K-12 teacher salaries.

Incoming Republican Gov. Eric Holcomb has yet to unveil his priorities, but he's already indicated support for a slow growth in pre-K funding, given limited dollars.

And, to date, he hasn't asked for any tax cuts that would affect state revenues, unlike his predecessor, Gov. Mike Pence.

Those waiting for road and bridge improvement have reason for hope, since the Republican majority has agreed to look to new sources of money, such tolls or gas taxes, to help cover an estimated $1 billion in annual infrastructure needs.

Unknown still is the impact on the economy - and therefore state revenues - of incoming President Donald Trump's administration.

DeBoer says Trump's pledge to cut taxes could produce an economic boom that in the short-term produces more sales tax revenues from people wanting to spend money.

Trump's economic policies could also lead to inflation and higher interest rates - both with negative consequences for state revenues.

"It's just too soon to know," DeBoer said.