State employees won’t see raises, and agency spending cuts could result in layoffs under new actions announced by Gov. Mitch Daniels on Friday to combat declining state revenues.
He also said some Medicaid reimbursement rates would be reduced for providers; state agency capital projects will be deferred; and millions of dollars in dedicated funds will be transferred to the state’s main checking account to keep the state in the black.
The collective actions are expected to save between $300 million and $400 million over the two-year budget period.
“If we do nothing on the current track, … our reserves will be exhausted by next August,” Daniels said.
But even with all of the proposed cuts, the governor couldn’t promise that education spending will remain unscathed.
Daniels said it’s too soon to say what will happen to K-12 and higher-education funding but cautioned that increases that were expected might not come if state revenues don’t rebound soon.
The announced cuts accompanied the October revenue report, which indicated that collections were $46 million below projections. For the first four months of the fiscal year, the state has collected $309 million less than expected.
The governor did note there are some indicators the Indiana economy is emerging from the recession, including modest job growth.
“There are reasons to hope that difficulties we are experiencing will not last forever,” Daniels said.
But in the meantime, hard decisions have to be made. Here is a look at the major actions taken:
•State employees will not receive a pay increase in 2010 – making it the second year in a row without a hike. The last time there were back-to-back years with no pay raises was 2002-03.
•State agencies will reduce spending by at least 10 percent from the budget amount passed in June. In the past, Daniels has said no state employees would be furloughed or laid off. But now he is giving each agency flexibility to reduce spending.
The auditor, treasurer, secretary of state and superintendent of public instruction – all separately elected state officials – have committed to 10 percent spending reductions in their own office budgets as has the lieutenant governor.
House Speaker Pat Bauer, D-South Bend, said his office would look for efficiencies to save money in the House. Unlike many agencies or offices, the House’s fiscal year 2010 appropriation is 9 percent higher than its appropriation in 2009.
Senate President Pro Tem David Long, R-Fort Wayne, said the Senate will continue a strategic hiring freeze and defer technology upgrades.
•Some Medicaid reimbursement rates will be cut. More details are expected Monday, but Daniels said the cuts won’t affect doctors.
•Daniels will not accept his full pay in 2010. Last year he rejected an increase when his salary was set to go from $95,000 to $107,000.
•State agencies will offer voluntary unpaid leave for the remainder of the fiscal year ending in June. Daniels said employees could choose how to structure this leave time and still retain benefits.
•State capital projects – not including higher education – will be deferred. This includes new buildings or structures, infrastructure and system upgrades and site improvements on state property. A few examples include not replacing the perimeter fence and air conditioning units at the Indiana School for the Deaf, or not constructing a maintenance building at Chain O’Lakes State Park.
•Some dedicated funds will be transferred to the general fund. There are numerous smaller funds in state government to which fees and other taxes flow for dedicated purposes outside the general state budget. Daniels said he will transfer varying amounts and will not disrupt the long-term viability of the programs.
Some of the accounts that could be tapped include the DNA Sample Fee, the Waste Tire and Brownfields funds, the Post War Construction Fund and the Drug Free Communities Fund.
In general, Bauer seemed accepting of Daniels’ actions.
“Many of these are unavoidable,” Bauer said, noting he also will block bills in the 2010 session that spend additional money.
