Holcomb has no plans to expand inflation relief proposal despite $6 billion in budget reserves
The Holcomb administration doesn’t have any plans to expand the governor’s inflation relief proposal despite the state having $6.1 billion in reserve following the closeout of its fiscal year.
Indiana collected about $3 billion more over the last 12 months than lawmakers expected when they wrote the current state budget. The state is already spending billions to pay down pension debt and deliver an automatic taxpayer refund. And it will still have billions more than it needs in the bank.
Let's put that $6.1 billion reserve level into some context. For years, lawmakers have wanted Indiana's budget reserve to be about 12 to 13 percent of state expenditures per year. $6.1 billion equals 35 percent of state expenditures.
That’s part of why the governor proposed his inflation relief plan, which would send $225 to everyone who filed taxes in Indiana last year – $450 if you filed jointly.
But despite historic revenue levels, Office of Management and Budget Director Cris Johnston said the administration has no plans to expand that proposal any further to ensure low-income Hoosiers aren’t left out.
“The system we’ve got is probably the most effective and efficient way to go about doing it and to move as quickly as possible,” Johnston said.
Johnston acknowledged that lawmakers might have their own proposals when they meet in a special session beginning July 25.
In a statement about the record revenue, Gov. Eric Holcomb said he plans to present a new state budget next year that will ask for major investments in public health, state employee salaries, K-12 education and economic development.
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Republican legislative leaders patted celebrated what they call their "continued fiscal discipline." House Speaker Todd Huston (R-Fishers) said the record revenue "reaffirms" why his caucus pushed for a $1 billion tax cut package this year.
Huston also said House Republicans plan to deliver Holcomb's inflation relief plan during the special session. Senate GOP Leader Rodric Bray (R-Martinsville) indicated his caucus might be looking at something more than what the governor has proposed.
"Senate Republicans are considering a package that can provide relief to Hoosiers in multiple ways while continuing to pay down our outstanding debt," Bray said.
House Democratic fiscal leader Rep. Greg Porter (D-Indianapolis) expressed "great fears" that Republicans will focus more on paying down debt than making "historic investments" in public health, education and student debt.
"A good credit rating is worthless if our people are sick, receiving a subpar education or unable to support their families," Porter said.
Senate Democratic fiscal leader Sen. Eddie Melton (D-Gary) echoed that sentiment, calling it "fiscally irresponsible" to celebrate the $6.1 billion reserve level while, in his words, "Hoosiers are struggling to make ends meet right now."
The rosy close to Indiana's 2022 fiscal year did carry with it a note of warning. Despite lofty revenues, state sales taxes actually came in just below expectations, based on a December revenue forecast. A slowdown in sales taxes can be a sign of a worsening economy.
Still, Johnston said that sales taxes are hard to predict. And he noted that Indiana's sales tax revenues grew by 10 percent compared to the previous fiscal year, which is very positive growth.