From the Indianapolis Business Journal:
With $2.2 billion in the bank, improving tax collections and extra tax refunds on their way to Hoosiers, it would be easy to assume Indiana's leaders could coast for a while.
But lawmakers and the next governor will have to make some tough decisions about which way the state heads as they write the budget that will set much of the Indiana's direction for the next two years.
A few decisions have already been made for them. That $2.2 billion cushion will be whittled back to $1.4 billion as a result of Gov. Mitch Daniels' automatic tax refund, which will return more than $100 to each taxpayer next year, and payments to Indiana's teacher pension fund. Lawmakers will also have to make up for cuts already approved to the state's corporate income tax and the phasing out of the inheritance tax (some of which will be offset with the state's sales tax agreement with online retail giant Amazon).
Indiana's next governor will have to decide whether to expand Medicaid under the federal health care law. Lawmakers and the new governor also will have to find roughly $500 million each year to pay for transportation projects as the money from the leasing of the Indiana Toll Road runs out.
"Highway funding is going to be a big issue," said House Ways and Means Chairman Jeff Espich, R-Uniondale, who is not seeking re-election after more than four decades in the General Assembly.
Espich also notes that the economic picture could turn again at any time, causing the state to begin losing money as it did during the Great Recession. He said even a small adjustment of a percentage point in tax collections could throw off the state's books by hundreds of millions of dollars, cutting into the $500 million structural surplus the state has built.
John Ketzenberger, president of the Indiana Fiscal Policy Institute, said the best thing lawmakers and the new governor can do is to take a deep breath before making major decisions about how that money should be spent—either on more services like education, or on tax cuts.
...
Espich said his replacement as the House's budget-writer should get used to saying "no." He estimated that of the roughly 80 bills he weighed in his committee earlier this year, 50 were new tax credits of some sort for local economic development, farm aid and many other projects.
Ironically, it's the state's solid footing that makes it that much harder for lawmakers to say "no" after years of pent-up demand caused by budget cuts, Ketzenberger said.
"It's harder for the Legislature to say no when there is revenue available, certainly more than it is when you're in the negative," he said.
Some drains on the state reserve will likely be out of Indiana's hands. Even if the state decides not to expand Medicaid, the expected growth in in the program already underway and increasing reimbursement costs could eat away at the reserves just as easily as any conscious decision from lawmakers, Espich said.
In the end, $2.2 billion might look like a lot, but it could easily disappear depending on myriad factors, some within state leaders' control and some not.
http://www.ibj.com/budget-questions-could-easily-eat-at--2-2b-reserve/PARAMS/article/35801
