Hot Topic: The Indiana
State Budget
Long Session, Short Revenues
The Indiana General Assembly will write a budget during its 2003 session. The legislators will pass a budget for the two-year biennium that starts on July 1, 2003 and ends on June 30, 2005. There's a lot of information available about Indiana's budgets and revenues, but it can be hard to pull together and tough to understand.
But it's really a lot like a household budget. You start the year with balances in your checking and savings account. The state has a checking account, called the general fund, and a savings account, called the rainy day fund.
During the year you earn income from wages and salaries and dividends and other sources. The state gets tax revenue. During the year you spend on food and clothing and the mortgage payment. The state spends on education, aid for the poor and property tax relief.
At the end of the year both you and the state have balances left. If you spend more than you earn, your checking and savings balances get smaller. Same with the state. Your bank objects if your bounce a check. The state constitution keeps Indiana from running balances that are less than zero
Lately, Indiana's revenues have not kept up with spending, and balances have fallen. Over the past four years revenues have fallen short of expectations by almost three billion dollars. What has the state done about this? Indiana:
Raised taxes;
Cut spending growth;
Delayed payments to local governments;
Found money in other accounts; and
Ran balances down to record low levels.
Revenues are expected to grow faster after 2003. That’s good news, but they won’t grow fast enough to get budget-makers off the hook. The past few years have put us in a pretty deep hole, and digging out will be hard. We’re looking at a very tight budget for the 2003-05 biennium, and a very tough budget session.