News From Terre Haute, Indiana

State News

July 15, 2012

Maureen Hayden: State surplus creates temptation to spend, not cut

INDIANAPOLIS — If you had more money in your checking and savings accounts than you thought you were going to have a year ago, would you look for ways to spend it or stash it away in fear of another economic tsunami?

Your answer may depend on how much deprivation you’ve felt in the last few years. If you feel like the great recession pushed you into operating your personal economy a little more efficiently, then you might be happy to keep those dollars sitting in the bank.

But if you’ve feel like you’ve survived all the sacrifice you can take and feel like you cut essentials as well as luxuries from your life, you’re going to see it a different way: Let’s spend some of it.

That’s a somewhat oversimplified explanation of what the Indiana General Assembly faces when it comes back to the Statehouse in January to a situation the budget-making Legislature hasn’t seen in years.

Late last week, state Auditor Tim Berry officially announced in his annual end-of-the-fiscal year report what Gov. Mitch Daniels had already happily revealed: Unlike some neighboring cash-strapped states, Indiana has a structural surplus (the amount of revenue exceeding ongoing expenses) of about $500 million. What’s more, the state’s overall reserves top $2.15 billion.

John Ketzenberger, executive director of the Indiana Fiscal Policy Institute, a nonpartisan, research organization, said it’s been a long time since the state’s balance sheet looked so robust.

You can expect more crowing about the state’s fiscal health this summer and fall from Republican candidates on the campaign trail (who may forget to credit the $2 billion in federal stimulus funds that Indiana took during fiscal years 2009-11). And some criticism as well, from Democrats who argue the surplus and reserves came with the cost of cuts to essential services to the public (and who may forget to mention the fiscal mess that Daniels inherited when he took office in 2005.)

That’s just talk. The hard part, Ketzenberger said last week, comes in January when the budget-writing session begins. That’s because it’s easier to say to “No” when you don’t have the money to spend than it is to say “No” when you do.

“The new governor and legislators still will certainly have a tough time balancing the budget, but this time it will be in the form of resisting temptation to spend instead of identifying ways to cut expenses,” Ketzenberger told reporters. “There will likely be pent-up demand among many constituents for new or additional spending, and it is harder for policymakers to say no to them when there are surplus funds.”

It’ll be just as hard, Ketzenberger predicted, for legislators to resist the demand for additional tax cuts, above and beyond the “automatic taxpayer refund” that kicked into effect with the surplus and will mean about $100 tax credit for each tax-filing Hoosier next year.

As Ketzenberger warned: A “burp in the economy” could wipe out that surplus and reserves.

Here’s another part of the scenario that may make you feel a little gassy: As Ketzenberger also noted, we’re about to enter a weird period of change in the Statehouse. There will be a new governor in office in January, and at least 40 percent of the General Assembly will be in the first or second terms. Who knows what kind of campaign promises they’ll make or keep.

Maureen Hayden covers the Statehouse for the CNHI newspapers in Indiana. She can be reached at maureen.hayden@indianamediagroup.com.

 

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