The new Indiana governor who wins the Nov. 5 general election may have to implement some hasty spending reductions or other budget adjustments before Hoosier lawmakers even have a chance to consider the governor's spending priorities or proposed tax cuts.
Data released Friday by the State Budget Agency show Indiana's general fund revenue came in $159.4 million, or 3.1%, less than anticipated by the revenue forecast during the first three months of the state's 2025 budget year.
Altogether, Indiana collected nearly $5 billion in general fund revenue between July 1 and Sept. 30.
But that total was $135.5 million, or 2.7%, lower than the first quarter of the prior budget year — despite generally higher wages and prices that should have produced greater sales and income tax receipts.
Data show most of the revenue miss was due to a lackluster September when general fund revenue was $183.7 million, or 8.4%, less than expected, which quickly gobbled up the slight revenue surplus Indiana had built up in July and August.
The State Budget Agency isn't panicking, however. It said tax payment timing, tax rate changes, federal policy decisions and a host of other factors can cause wide month-to-month fluctuations in state revenue results.
"These dynamics are expected to normalize over the coming months," the agency said. "Month-to-month changes are to be interpreted within the full fiscal year forecast. More than 60 percent of revenues are projected to come in between December and June."
The state's revenue picture would be considerably more grim if not for the hefty interest payments on Indiana's estimated $2 billion in budget reserve funds generating some $50 million a month in extra general fund receipts.
But with interest rates poised to decline in coming months it's not clear how much longer Indiana will be able use interest earnings to make up for sagging sales and income tax collections.
State Rep. Greg Porter, D-Indianapolis, the top Democrat on the budget-writing House Ways and Means Committee, said this month's "dismal revenue report" is concerning, and there's no guarantee the state's revenue shortfall will be made up over the holidays.
"Even if we do recoup our losses, there's no denying that we won't have much wiggle room in 2025. Short-sighted budgetary decisions in the past, like unrestrained voucher spending, diverted funding from public resources. In this next budget cycle, we must prioritize essential long-neglected human infrastructures over unneeded investments," Porter said.
Hoosiers voters currently are deciding who makes those decisions since all 100 members of the Indiana House, and 25 of the 50 state senators, are up for election this year, and early voting already is underway.
The new General Assembly will convene in January and is expected to work with the new governor over the following four months to craft a two-year, $46 billion state spending plan.
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