INDIANAPOLIS — Hoosier officials are downplaying the new state revenue forecast that projects Indiana will collect $394.7 million less in tax revenue than lawmakers expected in April when they approved a $32.3 billion, two-year state spending plan.
The State Budget Committee learned Monday that 70 percent of the anticipated revenue reduction is attributable to corporate income tax collections that have sharply declined since the budget year began in July.
David Reynolds, senior fiscal analyst for Senate Republicans, said it now is clear those revenues are not going to perk back up as businesses increasingly are claiming all the state tax credits they are entitled to and taking them immediately as refunds, rather than applying them to future tax liabilities.
"There's a dynamic that's changing here," Reynolds said.
The revised forecast deletes $174.4 million in corporate income tax revenue from current budget year projections, and an additional $104.1 million from 2019.
If the forecast is accurate, state revenue from corporate income taxes at the end of the 2019 budget year only will total 89 percent of what the state took in during the 2017 budget year.
The only major revenue category to see a sharper projected decline is casino wagering taxes, which now are expected to drop 6.6 percent in 2018 and 9 percent in 2019 due to the opening of an untaxed tribal casino in South Bend.
Despite those headwinds, state Rep. Tim Brown, R-Crawfordsville, chairman of the budget-writing House Ways and Means Committee, said he is comforted that the forecast shows overall state revenue still increasing by 0.9 percent in 2018 and 3.6 percent in 2019.
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"The forecast means that we're growing, and year-over-year we're growing," Brown said. "Our stable reserves and structural surplus put us in a good position to be proactive instead of reactive to the recent revenue forecast."
Brown believes Republican Gov. Eric Holcomb has all the tools he needs, including a $1.8 billion budget reserve, to adjust spending to match revenues in line with the state's priorities as outlined in the budget legislation.
He said he's "not interested" in considering measures to increase revenue during the 10-week legislative session that begins Jan. 3, such as slot machines in bars similar as to in Illinois.
State Sen. Karen Tallian, D-Ogden Dunes, the top Democrat on the Senate Appropriations Committee, said the forecast shows the benefits from annual corporate income tax rate reductions that continue into 2021 are not "trickling down" to ordinary Hoosiers.
"It just hasn't happened in Indiana and I don't think it's going to happen at the federal level either," Tallian said. "We've had five years of it and it has not helped us."
That said, Tallian doesn't think it's time for Hoosiers to panic, or there's any need for massive spending cuts, since Holcomb previously directed state agencies to hold back 3 percent of their appropriations in case state revenue failed to meet expectations.
"Heck, we may get more money in than we're projecting," Tallian said. "These numbers still are only a projection, so our actuals may come in higher than we hoped."
Micah Vincent, director of Indiana's Office of Management and Budget, pledged that no matter the revenue forecast, the Holcomb administration will "carefully manage spending and keep Indiana in a strong fiscal position with the reserves needed to withstand a downturn in the economy."