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Indiana's 2021 budget outlook isn't as bad as lawmakers thought, but money will still be tight

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Posted at 4:30 PM, Dec 16, 2020
and last updated 2020-12-16 16:31:00-05

INDIANAPOLIS — Indiana's state tax revenues have largely stabilized from the plunges seen early in the coronavirus-caused recession, although state budget leaders warned Wednesday that money could remain tight as legislators begin work on a new two-year spending plan.

New revenue projections presented to the State Budget Committee showed Indiana could end the current budget year next June 30 with about $2.3 billion in reserves. That would be nearly the same level the state had in June 2019 - and a significant turnaround considering the state saw a 23% drop in tax revenue during the March-June period this year with widespread business closures and other restrictions prompted by the COVID-19 pandemic.

The revenue projections estimate state government collecting 2.2% and 3% more in the next two years, although much of that could be consumed by expected increases in state expenses toward the Medicaid program providing health coverage for low-income residents.

School districts avoided funding cuts for this year even as Republican Gov. Eric Holcomb's administration ordered spending reductions for most state agencies.

While state budget leaders said Wednesday that protecting school funding would be a priority during the upcoming legislative session, they held out the little prospect for much additional money toward boosting Indiana's lagging teacher pay just days after a Holcomb-appointed commission released recommendations that could cost more than $600 million a year.

Senate Appropriations Committee Chairman Ryan Mishler, a Republican from Bremen, said he believed avoiding school funding cuts with the recession will be a victory.

"The way today is playing out is a flatline is a win, even in K-12 when other states are making drastic cuts," Mishler said. "So, in Indiana, I don't think you're going to see a cut in K-12 like other states."

The Republican-written spending plan approved in 2019 increased base funding for traditional schools by about 2% a year.

Longtime education lobbyist Dennis Costerison said the new state revenue projections were a relief after more dismal expectations a few months ago and that he was hopeful of lawmakers avoiding school funding cuts in the new state budget that's expected to be approved in late April.

"I'm not very optimistic that the General Assembly will look at making any major adjustments to the school formula and adding a lot of new money," said Costerison, executive director of the Indiana Association of School Business Officials. "They are just trying to keep a flat line. I think that will be their challenge."