Governor takes more action to offset revenue short

[Daniels]

“We are taking steps to offset shortfalls as they occur. The chance that revenues will suddenly begin to resemble the forecast seems highly unlikely,” said Daniels. “So it’s highly likely these are not the last steps we’ll have to take. Unwelcome as these actions are, we will do what’s necessary to protect Indiana taxpayers from the tax hikes being imposed in almost every other state.”



Budget actions taken today:

General fund support of the state’s public colleges and universities will be reduced by $150 million over the remainder of the biennium. This amount represents 6 percent of state general fund support of operating expenses and was reached in consultation with the Commission on Higher Education. The governor has charged the Commission to work with each institution to determine its share. The cut as a percentage of the institutions’ total revenue is about 2 percent.
· A $15 bi-weekly matching contribution to state employees for deferred compensation retirement accounts will be suspended for calendar year 2010, a frequent cost-savings suggestion from state employees. Savings are estimated at $9 million.

· The governor directed the Department of Administration to further reduce the number of state-owned vehicles. Since 2005, the number of state-owned vehicles has been reduced by over 2,500.



Additionally, the governor will submit a package of cost savings initiatives to the Indiana General Assembly. It will include a proposal to combine the administration of the Public Employees Retirement Fund and the Teachers’ Retirement Fund, which is projected to reduce investment management fees and administrative duplication by at least $50 million per year. The proposal also will include merging or eliminating several boards and commissions.



The state ended Fiscal Year 2009 with $1.3 billion in reserves. If the current revenue trend continues and the governor had not taken the above actions, state budget agency officials estimate the state’s reserves would have been depleted by July 2010.



A link to the November revenue report may be found here: www.in.gov/sba/2540.htm



Audio from today’s media availability can be found here: www.in.gov/gov/files/Audio/120409_Media_Availability.mp3



Video will be available later today at this link: www.youtube.com/INGovernor

[WTHR]

Indianapolis - Governor Mitch Daniels announced steps Friday to deal with the state's budget shortfall.

Indiana's tax revenue for November was $144 million below projections. That marks the 14th consecutive month where tax revenues for the state were well below projections.

The steps proposed by the governor will save the state at least $159 million over the next 18 months. He says he is trying to address the shortfalls as they occur.

Since the fiscal year began July 1, the general fund revenues are $475 million below the May forecast. The state will get a new revenue forecast next week.

"If the erosion continues, then more action will be necessary and, little as we like it, we will take them. We are not going to be California, we are not going to be Michigan. We are not going to be one of those 40 or some states raising taxes on people who are finding it difficult to make it right now," the governor said.

Daniels is proposing a $150 million cut of general fund support for higher education. Purdue University, for one, announced that it supports the governor's move. Indiana University is asking that these cuts be fairly allocated among all public institutions in the state.

So far, K-12 education, which is a top priority, has not been cut. In fact, it is still in line for a 1.3% increase.

"Education, both K-12 and higher is our highest priority along with the safety of Hoosiers. So it will be the very, very last resort. But it is half the budget," Daniels said Friday. "We've essentially been squeezing one-fourth of the budget for the savings to date. Higher ed is about 13 percent, so we've found it necessary to move that portion. Nobody hopes more than I do that we can still, somehow, deliver an increase. Indiana may be the only state in America, surely there are very few, thinking of any increase for K-12 spending. Whether we can preserve that increase, I don't know."

The governor said all of the state's higher education presidents and boards of trustees were briefed Thursday and could not have been more gracious.

Daniels is also proposing to make up the shortfall by suspending a $15, bi-weekly matching contribution suspension for state employee retirement accounts for all of the 2010 calendar year, which is expected to save $9 million. He is also directing the Department of Administration to reduce the number of state-owned vehicles.

"Want to reduce to the number absolutely necessary to do the business of the state. We've still got some room to go there," Daniels said.

In addition, Governor Daniels will be asking the legislature to approve some cost-saving initiatives, including a proposal to combine the administration of the Public Employees Retirement Fund and the Teachers Retirement Fund, which he says would save the state up to $50 million in management fees and administrative duplication.

Colleges, business owners react

Dan Wild, owner of D & Z Gifts just reopened a store at a new location after being closed for several months.

"I'm going to be able to pay taxes again and that's going to help the state out," he said.

With unemployment and business failures, Indiana needs more of those types of success stories.

"There's no way to promise today that these are going to be the last charges we will have to make," Daniels said Friday.

"Indiana has been hit harder by the recession than any other state," said retired IU professor and economist Dr. Morton Marcus.

He says even with the economy back on the upswing, it could be another year before revenues rebound, so the governor has to look at cuts like the ones he proposed to higher education.

But will it be felt in the classroom?

"Well, that is where I believe the universities will try to avoid cutting. That is their central function. They will probably cut maintenance," Dr. Marcus said.

But the cuts come just as some colleges are starting their recruiting.

"That means we won't be able to attract as many high-quality young people to teaching and it will be difficult to keep some of our young stars," he said.

Dr. Marcus doesn't see big tuition hikes in the short term, but recent students worry.

"Things can be detrimental. It's already really expensive to go to college," one student said.

"I want to go back to school, but I can't afford it right now," said another.

Only when more cash registers ring will the state's picture improve.

"Then we'll have more income and I'll be able to pay the state more. I do think 2010 is going to be a better year," Wild said.

From the Associated Press:

State tax collections were once again significantly below projections in November, prompting Gov. Mitch Daniels to announce more budget reductions, including $150 million in cuts to public colleges and universities.

Daniels also said a $15 biweekly matching contribution to state employees for deferred compensation retirement accounts will be suspended in 2010, and the Department of Administration has been ordered to further reduce the number of state-owned vehicles.

"We find these moves very unwelcome but we will do what is necessary to protect the taxpayers of Indiana against the severe service disruptions or the tax increases that are happening in almost every other state," Daniels said.

Tax collections for November were $144 million below a May forecast, and for the first five months of the fiscal year are $475 million, or 9 percent, below target. Daniels said if previously announced budget cuts and the new steps were not made, what was a $1.3 billion surplus in July would be wiped out by next summer.

Last month, Daniels ordered state agencies to cut their budgets by 10 percent and said employees could take up to a month off of unpaid leave. Thirty-three state employees have been laid off, and those still on the job will get no pay raise this coming year.

Daniels said those actions are expected to save $300 million to $400 million, and the newly announced cuts are estimated to save the state at least $159 million more over the next 18 months.

"We are taking steps to offset shortfalls as they occur," he said. "The chance that revenues will suddenly begin to resemble the forecast seems highly unlikely."

A new revenue forecast is due out Dec. 15, and Daniels said he hoped it was more accurate.

Daniels said he briefed legislative leaders on the new round of cuts, and his impression was that they understood the steps were necessary. House Speaker Patrick Bauer, D-South Bend, already has said his chamber would not consider any bill that spends money during the legislative session that will begin in earnest on Jan. 5.

Daniels also said the presidents of the state's seven colleges and universities were briefed on the cuts, and "school after school said they wanted to be part of the solution."

The $150 million in cuts to higher education over the current two-year budget cycle is about 6 percent of state funding for their operating costs. Daniels has charged the Commission for Higher Education to work with each institution to determine its share of cuts.

Daniels also will present a package of cost-saving initiatives to the General Assembly for the upcoming session. It will include a proposal to combine the administration of the Public Employees Retirement Fund and Teachers Retirement Fund. That is projected to reduce investment management fees and administrative duplication by at least $50 million per year.

He will also ask lawmakers to merge or eliminate several boards and commissions.

Public schools got very slight spending increases in the two-year budget that began on July 1, and Daniels said he hoped to preserve that. But he said he could not guarantee it.

Indiana University President Michael McRobbie said he appreciated that other cuts were made before turning to higher education, and accepted "the reality that we cannot expect to be immune from the consequences of this economic downturn and its impact on state revenues."

But he said he will stress that the cuts to higher education be fairly allocated among colleges and universities.

Purdue University officials said they already were taking steps to cut costs, and supported Daniels' move toward more belt-tightening.