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Republicans not planning state spending increases despite rosy Indiana tax revenue forecast
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2020 Indiana General Assembly

Republicans not planning state spending increases despite rosy Indiana tax revenue forecast

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Indiana Statehouse

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The Hoosier State is likely to collect $260 million more tax revenue through June 2021 than lawmakers anticipated in April when they adopted the two-year state budget.

But leaders of the Republican-controlled General Assembly aren't planning to go on a spending spree — to increase teacher pay or fund any other demands for extra money — when lawmakers convene their 10-week annual session Jan. 6.

State Sen. Ryan Mishler, R-Bremen, chairman of the Senate Appropriations Committee, said the revenue forecast presented to the State Budget Committee Friday simply ensures Indiana 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," Mishler said.

State Rep. Tim Brown, R-Crawfordsville, chairman of the budget-writing House Ways and Means Committee, noted the extra money amounts to just 0.75% of the state's annual budget, and the revenue forecast has a plus-or-minus 2% margin of error, so the money may not materialize at all.

But state Sen. Karen Tallian, D-Ogden Dunes, said it's ridiculous for Republicans to hoard the extra revenue when there are so many needs going unmet across the state.

"Our public health spending is the lowest in the nation, leading to some of the worst infant and maternal mortality rates in the United States. Our smoking rates are increasing while most other states' rates are decreasing. We have the slowest teacher salary growth in the nation, so it's no surprise that we have a teacher shortage crisis on our hands," Tallian said.

"We demand that this extra revenue be invested in worthwhile and needed programs, and that it not just disappear into the black hole we call Indiana's bloated surplus. It's time to show Hoosiers where our priorities really lie."

The updated revenue forecast projects Indiana will end its current budget year on June 30, 2020, with $2.37 billion in reserve.

The state will have $2.55 billion in the bank at the end of the 2021 budget year, according to the forecast.

Those totals do not account for Republican Gov. Eric Holcomb's proposal to use reserve funds to pay for $300 million in previously approved state construction projects using cash, instead of debt, which would reduce the reserve to roughly its usual 12% to 14% share of annual state spending.

Tallian said the governor's spending plan confirms Indiana can afford to invest more now on urgent needs like increasing teacher pay and halting the Lake Michigan beach erosion emergency.

"Given the extremely low interest rates, it makes no sense to cash fund the projects that were set to be bonded," she said.

Much of the extra revenue stems from Indiana now requiring nearly all online retailers to collect sales tax on purchases made by Hoosiers.

Though the forecast also predicts meaningful annual growth in both personal and corporate income tax receipts as Hoosiers and Indiana companies earn and make more money than state budget leaders originally anticipated.

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