Daniels to cut state spending by 10%

[Daniels]

Daniels to cut state spending by 10%

Jim Shella
Edited by Hyacinth Williams
INDIANAPOLIS (WISH) - More state budget cuts are on the way as Governor Mitch Daniels looks for ways to battle yet another budget shortfall.

State government already has fewer employees than at any time since 1983 and up until now the governor has avoided layoffs.

"I can't say that that will remain the case here," said Gov. Daniels. "We're going to try our very best. If anybody is displaced we'll put them at the front of the line for any openings that occur in state government but it may not be avoidable."

The problem is a growing budget shortfall that amounts to more than $300 million in just the last four months. Tax revenues are more than 7% below projection since a new budget took effect in July.

House Speaker Pat Bauer (D-South Bend) previously advocated spending some of the state surplus.

24-Hour News 8 political reporter Jim Shella asked the Bauer if it should be preserved and he said simply, "Yes." The change in position is significant.

The speaker also informed fellow Democrats Friday that there is no money to spend in 2010.

"I am advising the members of my caucus that we don't need any general fund budget increases in the short session," said Bauer.

The governor, meantime, ordered 10% cuts in state agencies and eliminated raises in state government for a second year in a row.

He has instituted a voluntary furlough program and delayed construction projects.

The goal is to preserve a small increase in school funding.

"I hope that we can deliver that increase," said Daniels. "But it's going to be hard to do that. It's half the budget."

What that means is that if the current trend continues school funding is not just the next place to turn, it may be the only place to go.

The 10% agency cuts are on top of 5% cuts ordered in July and 10% cuts last year.

[Broke]

Daniels cutting state spending, no pay raises

Gov. Mitch Daniels this morning announced an additional $300 million to $400 million in state spending cuts, including no pay raises for state employee and a moratorium on most state building projects.
Daniels said the cuts are necessary after state revenue projections missed for the fourth straight month. State tax collections in October were $46 million, or 4 percent, short of projections.

Since the fiscal year began July 1, the state revenue has dipped $309 million below projections, or 7.4 percent below forecast.
The spending cuts Daniels announced today are aimed at making up those losses, and will include:
-- An additional 5 percent in spending cuts by all state agencies. This on top of a 5 percent cut Daniels ordered in July.
-- No pay raises for state employees, which will save $20 million.
-- All building projects for state agencies will be deferred.
-- Some earmarked or dedicated funds, not generally used for day-to-day state expenses, will be transferred into the state's general fund.
Exactly how much the cuts will save is unclear, because many specifics are still be identified, said Budget Director Chris Ruhl.
"At this point, we've seen enough to know that new actions are necessary if we're going to protect Indiana taxpayers against the tax increases that are happening in most of the rest of America," Daniels said.
"With regret, we're going to take a series of actions on top of the hundreds we've already taken to live within our means in Indiana."

[broke]

Letter from Governor Daniels November 6, 2009

Dear fellow state employees:

One of the most difficult decisions I made a year ago when we faced tough revenue challenges was to forgo state employee pay raises.

At the time, I had hopes that a year would bring some recovery to the national economy and to the amount of dollars paid in taxes to state government. Instead, the reverse has happened. For the first four months of this budget cycle, the state’s revenues are 12% lower than last year, and 7% below the level forecast in the budget passed in June.

We will now have to take a series of unwelcome actions to continue living within our means and avoid the complete draining of our state reserves. As one example, I regret that we simply cannot afford pay raises for state employees in 2010. Our employee spot bonuses and public service rewards will continue, as they have this year.

Indiana has maintained performance head and shoulders above other states, and you have been the biggest reason for that achievement. It’s no consolation to you or me, but things are much worse in other states than here. Many states have laid off thousands of employees and slashed pay for the rest.

I won’t ask you to accept this decision cheerfully or even to agree with it. I will ask you to keep in your thoughts the hardships now being experienced by so many of our fellow Hoosiers in the private sector, and by thousands of government workers in states elsewhere.

I regret having to deliver this news and remain deeply grateful for your service to Hoosiers.

Best regards,

[Indystar]

Budget cuts best option for now, Daniels says

Governor sees trims as way to avoid pay cuts or layoffs

By Bill Ruthhart
[e-mail]

By calling Friday for emergency budget cuts that include a pay freeze for the state's 30,487 employees, Gov. Mitch Daniels said he hopes to avoid measures such as pay cuts, unpaid furloughs, layoffs and cuts to school funding.

But he's not making any promises. Especially concerning layoffs.

Month after month, the anemic economy has produced state revenue far below projections. State tax collections are already a half-billion dollars behind the tally last year at this time. And that's in a fiscal year that started July 1. In October alone, tax collections fell $46 million short of projections.

"At this point, we've seen enough to know that new actions are necessary," Daniels said. "With regret, we're going to take a series of actions on top of the hundreds we've already taken to live within our means in Indiana."

To stop the bleeding, Daniels announced Friday that state employees will not receive a raise for the second straight year, and state agencies will have to cut their budgets by an additional 5 percent.

In the state's new two-year budget, those agencies already had their spending cut by 10 percent, and department heads were asked to cut 5 percent in July. With the latest round of cuts, state agency spending will be nearly 20 percent lower than in the last fiscal year.

Since agencies have had to cut so much, Daniels said he could not guarantee that no state employees would be laid off as part of the latest spending reductions.

"Up to this point, we have managed with few, if any, involuntary terminations, except for poor performance. I can't say that will remain the case here," he said. "If anybody is displaced, we will put them at the front of the line for any openings that do occur in state government. It may not be avoidable. We'll sure try to minimize it."

Daniels said he'd forgo a scheduled pay increase to $107,000 from his current salary of $95,000, but he said the state likely would continue to give out a small number of bonuses and pay raises for "top performers."

Chris Ruhl, the state's budget director, said the new round of 5 percent cuts for agencies combined with the 5 percent trimmed in July should save the state $240 million to $250 million. Pay freezes would account for an additional $25 million to $30 million in savings, he said.

Millions more would be saved by transferring money from dedicated or earmarked funds that have surpluses and delaying state building projects, except for those at universities. State budget officials released a limited number of examples but had not determined a complete list of projects to be delayed or how much they would save.

The governor also said some reimbursements to Medicaid providers would be reduced to create more savings. Daniels said the Family and Social Services Administration would announce the details of that decision Monday but added it would be private contractors, not doctors, who would have reimbursements reduced.

In total, Daniels said the decisions he announced Friday should save the state $300 million to $400 million, which he said was "enough to handle the shortfall to date."

If the state continues to miss revenue projections badly, Daniels warned, spending cuts to public education would be on the horizon. Public schools, which account for 48 percent of the state budget, are to receive a 1 percent state funding increase in 2010 and 0.3 percent in 2011.

"I hope we can deliver that increase, but it's going to be hard to do that," Daniels said. "If we're growing half the budget, it's hard to achieve the necessary savings out of what remains."

Indiana is one of just a few states that passed an increase in education funding this year. At least 35 states have cut K-12 funding.

House Speaker B. Patrick Bauer, D-South Bend, who criticized Daniels for not providing a larger increase in education funding, said Friday that the governor's warning about cuts to education was "appropriate."

Bauer also abandoned his calls for Daniels to spend the state's $1 billion in reserves to create jobs.

"We've lost $300 million since then," he said. "So losing $300 million will make you say not to spend it."

Although he did not disagree with any of Daniels' decisions, Bauer said he'd like to see more detail on how the spending cuts would be accomplished, particularly the reduced Medicaid reimbursements.

Bauer also committed the House of Representatives to a 10 percent budget cut, and he said he would explore moving to a paperless system to handle legislation to cut down on the thousands of pages of bills printed for lawmakers, which he said costs 6 cents per page.

Most of all, Bauer said he was concerned about the prospect of layoffs for state employees.

Daniels did not raise that possibility in a letter he sent to state employees Friday, but he did mention that other states have "laid off thousands of employees and slashed pay for the rest."

"I won't ask you to accept this decision cheerfully or even agree with it," Daniels wrote. "I regret having to deliver this news and remain deeply grateful for your service to Hoosiers."

CORRALLING CASH

In addition to freezing pay for state employees, cutting state agencies by 5 percent and reducing Medicaid reimbursements,

the state also will delay non-university building projects and transfer money from some earmarked or dedicated funds.

State budget officials did not release a complete list of projects to be delayed or funds that would be tapped, but did release these examples, without associated costs:

Building projects

Replacing fire detection system in government center buildings.

Upgrading fire alarm systems in government center buildings.

Upgrading Indiana State Police communication towers.

Replacing ventilation system at Evansville Psychiatric and Children's Center.

Drainage improvements at the Evansville State Hospital.

Replacing ventilation system in the natatorium at the Indiana School for the Blind.

Updating the student library and replacing the perimeter fence at the Indiana School for the Deaf.

Placing new historic site exhibits signs.

Construction of a new maintenance building at Chain O'Lakes Correctional Facility

Demolition of a cottage at Plainfield Education Re-Entry Facility.

Dedicated funds

State Budget Agency's Personal Services Contingency Fund, which covers costs for salary increases, bonuses and health care.

Gaming Fund, which includes excess funds paid to the Indiana Gaming Commission.

Post War Construction Fund, which uses alcoholic beverage taxes to pay for upgrades at older facilities such as state hospitals, prisons and the schools for the deaf and blind.

Office of Technology Rotary Fund, which charges agencies for technology usage and pays for technology enhancement.

Lake and River Enhancement, a Department of Natural Resources fund.

Regional Health Care Construction Fund, which includes excess funds for building projects at health facilities that either never were built or completed under budget.

Recycling Promotion and Assistance, a Department of Environmental Management fund used to promote recycling.

Brownfields Fund, a Finance Authority fund used to match federal funds for brownfield redevelopment.

Waste Tire, a discontinued Department of Environmental Management program, funded by fees associated with tire purchases that advocates for tire re-use.

Excess flood relief assistance, extra funds set aside to match federal relief for past floods.

Excess accounting software funds, money left over associated with the state's recent conversion to a centralized, electronic accounting system.

New Castle Lease Fund, money left over from building projects at New Castle Correctional Facility that was paid for out of another state fund.

State Solid Waste Management, excess funds from waste management fees the state uses for its regulatory program.

-- Source: Chris Ruhl, director of State Budget Agency