(AP) — A new report released Thursday said Indiana lawmakers will likely
have to consider a tax increase next year to shore up state government’s
dwindling finances, a suggestion that drew immediate criticism from
Fiscal Policy Institute, a nonpartisan government research group, determined
that the state could face a $1.3 billion deficit in the next budget year if
the economy does not drastically improve or if deeper spending cuts are not
That budget hole
is likely to reach that mark if revenue grows at its historical nine-year
annual average of 2.9 percent and spending is essentially kept at current
levels in the fiscal year that begins July 1, the report concluded. Gov.
Mitch Daniels and lawmakers will write a new, two-year budget during the
General Assembly session that begins in January.
“We may get that
economic expansion and we may get additional federal dollars, but the
reality is they’re going to have to very seriously consider raising taxes in
order to get through this,” said John Ketzenberger, the institute’s
administration and Republican and Democratic legislative leaders balked at
talk of a tax increase.
already cut state spending by hundreds of millions of dollars, including a
projected $600 million in the current budget year. There has been little or
no talk among lawmakers about raising taxes.
time and again we will make the reforms and decisions required to live
within our means and keep Indiana in the black without raising taxes,” Chris
Ruhl, director of the state’s Office of Management and Budget, said in a
written statement. “The Institute’s suggestion of a general tax increase on
Hoosiers is a terrible and unnecessary idea and one the governor firmly
It is always
politically difficult for lawmakers to raise taxes, and the appetite for
doing so — or even talking about the possibility — is tampered even more by
the upcoming November election.
Daniels has left
open the possibility of running for president in 2012, and points often to
Indiana being in better fiscal shape than most states. And although
Republicans are virtually certain to retain control of the state Senate, the
narrowly divided, Democrat-led House is again up for grabs this election
the 2010 fiscal year on June 30, with $830 million in the bank. The Daniels
administration has cut spending and the state used federal stimulus dollars
and spent money from reserves to preserve a surplus.
But the state is
projected to end the current budget year with only about $188 million in the
bank. That would only pay for about five days of programs and services.
Appropriations Chairman Luke Kenley, R-Noblesville, said lawmakers will
indeed face tough decisions in crafting a new budget next year. He said
deeper program cuts probably will be needed, but said with so many people
out of work, it would not be fair to Indiana residents to raise their taxes.
Patrick Bauer, D-South Bend, said any talk of tax increases would have to
come from Daniels. Bauer said Daniels should do more to create jobs,
including securing more federal money for job programs.