To the Editor:

Exceeding the state revenue forecast in April was welcomed news, but it is important to keep the numbers in perspective.

Due to the depth and duration of the national recession, state revenues this fiscal year have fallen below the two-year budget plan for nine of the first 10 months. Cumulative shortfalls have already consumed nearly half of the state’s $1.3 billion cash reserves Gov. Mitch Daniels and Republican lawmakers fought hard to maintain.

State collections in April from all sources totaled $1.4 billion – on target, but $14 million lower than the same period last year and the lowest revenue for April since 2004.

Indiana has responded to dwindling revenues the past few years by flatlining state employee wages and freezing hiring for all but essential personnel. Agencies cut expenses by 10 percent, postponed construction projects, sold government vehicles and reduced personnel to 1982 levels.

Modest cuts were made to K-12 and higher education budgets. These were cuts of last resort. State support for K-12 schools was trimmed by 3.5 percent this year, while higher education funding was reduced 6 percent. Because education makes up more than half the state budget, ultimately these adjustments could not be avoided as revenues continued to decline.

However, some help has also been provided: schools now have more flexibility with money already collected and on hand. A new state law allows districts to utilize 5 percent of their capital project funds for operations – and an additional 5 percent if they agree to freeze payrolls except for teacher raises based on experience and new degrees. This could provide up to $82 million statewide to help prevent teacher layoffs and preserve instructional programs without raising new taxes.

Indiana’s latest revenue report is a homegrown reminder that despite federal officials’ claims the U.S. economy is rebounding, progress among the 50 states has been uneven, slow and unpredictable. At least 38 states face fiscal year 2011 budget gaps totaling $89 billion – nearly $34 billion more than estimated just four months ago. The National Conference of State Legislatures says state finances are not expected to recover for at least two years. According to the National Governors Association, states foresee fiscal year 2011 – which starts for most states July 1, 2010 – to be the most difficult since the Great Depression. Few see fiscal year 2012 as being much better.

This news further validates Indiana’s conservative spending since Gov. Daniels took office. By achieving three consecutive, balanced two-year budgets and resisting calls to spend reserves, our Hoosier state continues to be in a better financial position than many. Stateline.org reports other states are considering major, deeper cuts in education and services:

* Pennsylvania Gov. Ed Rendell (D) is pushing to consolidate administrations of 80 percent of his state’s school districts to reduce costs; and

* Michigan Gov. Jennifer Granholm (D) wants to eliminate more than half the state’s agencies. 

In response to Indiana’s continuing shortfalls, Gov. Daniels recently announced agencies will spend 15 percent less next year than budgeted – achieved by continuing the 10 percent reductions already made and finding another 5 percent savings next year.

Even with these cost-cutting measures, some economists estimate a need for $1 billion in new revenue simply to sustain current funding to schools, universities and state services in fiscal years 2012 and 2013. Clearly, like leaders in other states, Gov. Daniels and the Indiana General Assembly face significant challenges as we plan for the next legislative session and build a new biennial budget. 

Sen. David Long (R-Fort Wayne)

President Pro Tem, Indiana State Senate