An updated state revenue forecast released this month predicts modest revenue growth over the next two fiscal years as Indiana continues to emerge from the worst national recession in decades. The report comes amid one of the most challenging fiscal periods in state history. Total state revenues for the last fiscal year were about $1 billion less than budgeted.
State fiscal leaders, who will use the new revenue forecast to help set spending levels during next year’s budget-writing session of the Indiana General Assembly, welcomed the predicted improvement but warned that fiscal conditions still call for spending restraint.
By insisting on protecting reserves in the last budget and tightening our belts as revenues declined, Indiana has weathered the national fiscal storm much better than most states. While I’m pleased to see experts predicting modest growth in the coming years, lawmakers must continue to be realistic about state spending limits and work hard in the upcoming session to pass a balanced budget that doesn’t raise taxes on hard-working Hoosiers.
Analyzing a range of state and national economic indicators, forecasters predict revenues to improve by 3.5 percent in fiscal year 2012 and 4.1 percent in fiscal year 2013.
The new forecast follows three months of generally positive state revenue reports that show most of the state’s major revenue sources tracking with or exceeding previous revenues on a year-over-year basis.
Monthly revenue collections in November were $106 million above those for the same period last year. This included steady improvement in sales taxes and individual income taxes – the state’s two largest revenue sources.
Despite these improvements, lawmakers will be starting the budget-writing process with a $500-$700 million gap to fill. Forecasted revenues for fiscal year 2013, when adjusted for the effects of the 2008 property tax reforms, are below fiscal year 2008 revenues – a five-year step backward in revenue collections.
State Budget Committee members have been holding public meetings throughout November and December to hear budget requests from state agencies and universities. Formal work on the budget will begin Jan. 5 when the General Assembly convenes for the 2011 session. By law, lawmakers must finish legislative business by April 29.
