Top Indiana lawmakers say nearly everything on table in final state budget negotiations

House Speaker Todd Huston, R-Fishers, and Senate President Rod Bray, R-Martinsville, indicated Thursday some longstanding public policy issues, such as legalizing marijuana or online gambling, probably won't be seriously considered as the General Assembly works to finalize the budget ahead of its April 29 adjournment deadline.

But they said even previously unthinkable cuts to popular programs and services, postponing scheduled state income tax reductions, raising Indiana's cigarette tax and potentially reducing spending on elementary and secondary education all are getting a look.

"We want to try to close that gap without touching K-12 public education. But because it's 47% of the budget it makes it incredibly hard to do. We have to rely on everybody else, the other half of the budget. So we're going to try that first. But it will be a challenge," Bray said.

"We're going to look in every corner of the budget to make sure that we make adjustments there because our job one — more important than any other legislation that we pass — is to make sure we pass a budget that is balanced, and done so with integrity and not gimmicks. That's going to be hard to do now but we're going to get it done."

The latest version of House Bill 1001, approved by the Senate Tuesday, included more than $3 billion in budget reserves, or an amount equal to about 13.5% of annual state spending.

Huston said he's open to dropping the reserve balance closer to 10% to free up additional resources. But he fears going any lower could imperil Indiana's highest-possible "AAA" credit rating that enables the state and local governments to borrow money at reduced interest rates.

"I don't think any of us foresaw this type of revenue forecast. We knew it would be tight. This is a little tighter than any of us expected," Huston said. "But this is why we keep reserves. That's why we make sure we are conservative in the way we budget."

"There are programs that maybe need a closer review to make sure they're justifiable in an economic time like this. But we certainly don't want to impact programs that do have an impact on everyday Hoosiers."

State budget officials reduced Indiana's projected tax collections over the next 27 months compared to the December 2024 revenue forecast because they said the trade war initiated by Republican President Donald Trump stands to hit Indiana particularly hard due to its concentration of manufacturing and agricultural enterprises that import and export goods around the world.

Huston's not certain he buys it. He believes Indiana may outperform the forecast in the months ahead, so he wants the budget to contain as much flexibility as possible to allow Republican Gov. Mike Braun and next year's General Assembly to manage through any "fiscal hiccups."

"I don't think we're in the midst of the Great Recession. There's probably more upside in this forecast than downside. The forecast is the forecast and we're going to budget upon that," Huston said. "We're still growing year-over-year, we're just not growing as much. So I feel good about things. We're just going to have to make some tough decisions over the next week and people need to be prepared for it."

Both Huston and Bray downplayed the suggestion that the governor might need to call the Legislature into special session later this year to make additional budget adjustments. They still hope to adjourn for the year on April 25, a few days ahead of schedule.

Meanwhile, House Democratic Leader Phil GiaQuinta, D-Fort Wayne, said the revenue forecast already doesn't account for Trump's latest retaliatory tariffs on China, or plans by Congressional Republicans to dramatically reduce federal spending and employment — all of which are likely to negatively impact Indiana's finances.

"It's really going to be fairly catastrophic," GiaQuinta said.