INDIANAPOLIS — The state's revenue hole grew another $29.5 million deeper in October, as Indiana unexpectedly paid out more money in corporate income tax refunds than it took in through corporate income tax collections.
October was the second month in Indiana's 2018 budget year, which began July 1, where net corporate income tax revenue was negative for the state, according to revenue data released Monday.
State Budget Director Jason Dudich said the issue is due in part to businesses timing when they pay Indiana's 6 percent corporate income tax, along with faster refund processing by the Department of Revenue.
Dudich also acknowledged that corporate income tax refunds overall are up $52.3 million, or 81.5 percent, compared to the same four-month period a year ago.
"Corporate income tax collections experience great variability from month to month," Dudich said. "The State Budget Agency continues to work with the Department of Revenue to understand the increase in refunds in this fiscal year compared to prior years."
The corporate income tax shortfall relative to projected revenue caused Indiana to miss its October revenue target by 2.5 percent.
With a third of the budget year now complete, state revenue stands $136.5 million, or 2.8 percent, below the estimates used by Hoosier lawmakers in April to craft the two-year state spending plan.
Dudich said more corporate income tax revenue typically comes in between January and June than during the July through December period, so state revenue should "make up some ground" in the months ahead.
However, he cautioned "this is highly dependent on refund activity and nonresident shareholder and partner transfers that will occur between now and the end of the fiscal year (on June 30)."
Republican Gov. Eric Holcomb has not said anything about potential state spending cuts to cope with Indiana's cumulative shortfall against the revenue forecast.
State revenue also is down $8 million, or 0.2 percent, compared to the same period one year ago.
Holcomb previously directed state agencies to hold back 3 percent of planned spending on the off chance that tax collections failed to live up to expectations.
Indiana also maintains a budget reserve totaling $1.8 billion to weather revenue declines without resorting to tax increases.