INDIANAPOLIS — Lawmakers received news Monday that they will have more money to spend in the next two-year budget cycle – a lot more money.
But fiscal leaders still seemed cautious.
“This is a forecast, not a guarantee,” said Sen. Luke Kenley, R-Noblesville. “I’m a little skeptical.”
He said it points to a growing economy but he also doesn’t want to promise too much to Hoosiers and then have to pull back if the economy falters again because of federal inaction.
“It’s a whole lot easier to hope for the best and expect the worst,” Kenley said.
The revenue forecast predicts 2.2 percent growth in tax collections for fiscal year 2014 and 2.9 percent growth for fiscal year 2015.
That translates into an additional $1.28 billion to spend in the new budget, according to the new revenue forecast.
And the state has a projected $362 million structural surplus this year, meaning it didn’t spend all the revenue possible in the current budget.
But there are already competing needs for the dollars – including increased obligations for Medicaid and a push to boost K-12 school support.
Gov.-elect Mike Pence also is seeking a state income tax cut that could cost up to $500 million a year in revenue when fully implemented.
House Ways and Means Chairman Tim Brown, R-Crawfordsville, said no decisions have been made about the proposed tax cut.
“We’ll have to see how the numbers work out,” he said. “I’m still very concerned about how tight things are.”
Pence assumed 2.5 percent growth each year to make his plan work, and the projections were nearly that. A final forecast in April will weigh heavily on budget talks.
“Today’s revenue forecast is welcome news for Hoosiers struggling in this economy as it projects steady growth and lower unemployment over the next two years,” Pence said in a statement.
“This revenue forecast is also consistent with the growth we projected this summer and will allow us to recommend a budget that lives within our means, maintains reserves, funds our priorities and provides tax relief for every Hoosier.”
Pence said he will use the forecast to complete a recommended budget to submit to lawmakers in January.
While Pence’s projected revenue growth was generally on target, he also assumed only 1.5 percent growth in the state budget.
Kenley wouldn’t say whether that’s feasible but acknowledged the pent-up demand for spending in some agencies and in education after years of cuts.
“We can make it be 1.5 percent. We can make it be zero if we want,” he said. “The question will be will that reflect the priorities we have and the investments we want to make and where we want the money to go.”
Based on appropriations for the current budget, a 1.5 percent increase would provide about $425 million in new spending.
Medicaid growth alone could eat up $265 million of that in the new budget, according to new projections. Medicaid is a joint federal-state program providing health care for the poor.
State support for the joint program would need to rise from $1.882 billion to nearly $2.1 billion, the new data showed.
Some increase is expected every year. The forecast anticipates additional growth because of 92,000 Hoosiers enrolling who are already eligible but not on the program.
This is based on an assumption that some might lose the coverage they have or be forced on by the federal individual mandate to have insurance.
The forecast does not expand Medicaid services or eligibility.
Kenley said he isn’t sure he trusts that the federal government will keep paying its share – “particularly when they are dead broke.”
Brown also said education will be the top priority. A 1 percent increase in funding for Indiana schools costs the state about $65 million.