Hendricks County Flyer, Avon, IN

April 17, 2013

Latest state budget forecast may mean tax cuts

Maureen Hayden
CNHI

INDIANAPOLIS — Indiana Gov. Mike Pence is touting the latest state budget forecast as good news for his tax relief plan, but Republican legislators who control the purse strings aren’t ready to sign off on it yet.

House and Senate fiscal leaders said Tuesday that the April budget forecast they’ve been waiting on to finalize their two-year spending plan clears the way for about $500 million in tax cuts.

But they also said it’s unlikely that all of that will come through the permanent 10 percent cut in the income tax rate that Pence wants.

The April forecast estimates the state will bring in about $290 million more in revenue than what was forecasted in December — used to start the budget process. In a statement, Pence called the forecast “great news for Hoosiers” and a boost for his tax cut plan that legislators have been reluctant to embrace.

What Pence called evidence of “greater economic growth” but GOP fiscal leaders in the General Assembly are looking at it a little more cautiously.

They pointed out the forecast predicts a significant drop in revenues from both sales taxes and gaming taxes — two significant sources of money for the state budget. And they cited an economic forecast, delivered with the budget forecast, that predicted Indiana wouldn’t see its jobless rate drop below 8 percent until next year at the earliest.

“It shows there is a little sunshine in the valley and that’s a good sign,” Senate Appropriations Chairman Luke Kenley said. “I hope it’s true. It’s certainly not a robust forecast.”

Senate Tax and Policy Committee Chairman Brandt Hershman called the report “good news, served with a side of caution.”

“It’s always better to have a debate over money you have rather than over money you don’t have,” Hershman said. “But we need to make sure it’s going to be money that we’re going to have.”

Both Kenley and House Ways and Means Chairman Tim Brown said the forecast means the budget bill that’s still being negotiated will likely contain a mix of tax cuts already proposed by the House and Senate.

That includes cuts to the inheritance, corporate, and financial institutions taxes and a smaller income tax cut than what Pence wants.

They believe the new forecast means they can build in about $500 million in tax cuts and still increase spending for road repair and schools.

The House approved budget calls for $500 million in new road spending, and restores about $331 million in education cuts. The Senate version of the budget calls for $400 million in more road money, plus additional education money the House approved.

The governor’s budget director, Chris Atkins, told the Associated Press that new revenue projections mean there’s enough money for both the increased road and school funding and for Pence’s 10 percent tax cut.

The Pence tax cut idea has never found a warm reception in the General Assembly. Republican leaders have been openly skeptical and some Democrats have been scornful.

On Tuesday, Senate Minority Leader Tim Lanane of Anderson repeated his doubts about the wisdom of a tax cut that will take about $500 million a year from state revenues but put only about $120 a year back into the pockets of an average Hoosier.

He said the money would be better spent on roads, schools, and workforce development.

“Today’s revenue forecast is encouraging, but it’s also a reminder that people expect lawmakers to focus on what’s in the long-term interest of all Hoosiers, and to be extremely cautious in protecting Indiana’s hard-earned fiscal integrity,” Lanane said in a statement. “We can do better. We can send a clear message that improving the livelihoods of all Hoosiers is job one.”