Despite budget shortfall, Indiana should still be able to take care of bills

(photo supplied / Indiana Statehouse)

INDIANAPOLIS (Network Indiana) — Indiana will close the books Tuesday on a fiscal year that’s turned out to be financially rockier than expected even four months ago.

The pandemic has put Indiana a billion dollars behind what legislators budgeted for last year. Some of that money will come back next month, as income tax files arrive at the later-than-usual July 15 deadline. But budget director Cris Johnston expects the shortfalls to continue after that, with a gap of three-or-four-billion dollars by the time the two-year spending plan ends next June. That’s a number that dwarfs even Indiana’s once-robust surplus of two-point-three-billion dollars.

Johnston says he’s confident a mix of spending cuts and federal aid can keep Indiana in the black. Governor Holcomb has already canceled nearly 600-million dollars in spending, and asked state agencies to cut budgets by 15-percent. There’s also federal help from the CARES Act, but unless Congress revisits the bill, that money can’t be used simply to plug holes in the budget — it’s limited to specific, pandemic-related expenses. Even within those restrictions, Johnston says there’s uncertainty. He says the Treasury Department still needs to clarify how closely tied to the coronavirus that spending needs to be. The state health department still has other duties apart from the virus, and Johnston says it’s unclear whether those costs can be paid with the federal money.

Johnston says he’s not worried about having enough money to pay the state’s bills. But he says the pandemic will siphon most of the cash out of the state’s rainy day funds, and predicts the budget legislators write next spring will need to be tight, to rebuild those reserves. He says he’s “fairly confident” a tax hike would be “the very last thing” to be considered.

Johnston says fiscal analysts will do a formal revision of their forecast in September, three months ahead of their usual December update.