Staff Report
TheStatehouseFile.com

INDIANAPOLIS — Indiana can expect to bring in about $250 million more over the next two years than was anticipated, according to a revenue forecast given Friday to lawmakers and state budget officials.

The bipartisan Revenue Forecast Technical Committee told state officials that based on the current outlook for Indiana and the nation, they can expect money coming into the state to beat both last year’s revenue stream and the forecast presented to lawmakers in April. The forecast projects the state will take in about $16.8 billion in the 2020 fiscal year and about $17.2 billion in fiscal 2021. That’s $124 million more than expected for 2020 in last December’s revenue forecast, and $135 million more than expected for 2021.

While millions more seem great, that’s less than 1 percent growth each year. from what had been expected when the current budget was passed.  And House Ways and Means Chairman Tim Brown, R-Crawfordsville, noting the plunge in revenues that took place in the steep recession that started in 2008, seemed to warn any legislators seeking to tap into the state’s $2.5 billion in reserves by noting that the margin of error on forecasts is about 2 percent.

Tom Jackson, a fiscal analyst with the national firm IHS Markit whose data helps form the revenue forecast, told the budget committee that fears of another recession have eased since last spring, with the nation’s gross domestic product averaging about 2 percent and consumer spending and confidence “certainly solid.” Low unemployment has continued with wages gradually improving, he noted.

He said some clouds remain, including ongoing trade negotiations with China that have so far not been resolved and tariffs that have been imposed or proposed. But some economic speed bumps, such as the six weeks long General Motors strike that had an impact in manufacturing-heavy Indiana, have been resolved, he said.

In Indiana, he said, “wage income we see holding fairly steady. As we get into ’21 and ’22 we expect to see the improvement in wage rates to kind of outweigh slower gains in payroll employment headcount. The main story there is just a solid underlying economy.”

The “bottom line for Indiana,” Jackson said, is steady economic growth with “probably not a lot of upside potential from where we are or what we’re seeing.”

While there is employment growth foreseen in health care and tech sectors, “manufacturing employment we see turning modestly — and I do emphasize modestly — negative over the next few years,” he said.

In addition to general economic trends, one contributing factor to Indiana’s revenue growth is gambling. In the 2019 legislative session, lawmakers allowed table games at racinos and legalized mobile sports betting, with gaming revenues, after having slumped in past years, now expected to continue growing as much as 8 percent in 2021 over what was expected in April.

Michael J. Hicks, director of the Center for Business and Economic Research at Ball State University, watched Friday’s meeting and said it reflected the projections made by both Ball State and Indiana University for 2020. Those include growth of less than 2 percent “with modest declines in factory employment and related sectors,” Hicks said.

And while no national recession is foreseen at this point, Hicks said Hoosiers can expect “a year of very tepid economic growth.”

“There were some bright spots,” he said, including personal income in Indiana rising.

“One reason for that is a shift of employment away from lower-wage sectors. This is a new phenomenon in Indiana since most of the post-recession employment growth has been concentrated in low wage sectors,” Hicks said. “Hopefully, this trend will be sustained.”

But, he added, there are long-term clouds for Indiana.

“Educational attainment is too low in Indiana and improving far too slowly. We cannot keep sufficient college graduates in our state and we must look to improve these factors and education as sources of long-term economic growth,” Hicks said.

On Friday, though, lawmakers were more focused on the short term. Despite pressure from teachers and Democrats to re-open the budget in the short legislative session that starts in January, in order to improve teacher pay, recruitment, and retention, Republicans who hold supermajorities in the legislature have shown no willingness to do so. And while Republicans have made verbal commitments to address teacher concerns, they also have resisted dipping into the state’s surplus.

State Sen. Ryan Mishler, the Bremen Republican who is chairman of the Senate Appropriations Committee, said in a statement after Friday’s meeting that the “revenue forecast is promising” as the state is projected to bring in a tad more than expected.

“This means that our state will be on firm financial footing as we look to the 2021 budget session, provided the economy continues to grow as forecast. Conversely, in the event of an economic downturn, it means we will be able to maintain the strong reserves we need to guard our state against cuts to critical government services like K-12 education and public safety.”

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