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By BRIAN A. HOWEY
INDIANAPOLIS - Gov. Mitch Daniels vowed to steer Indiana through a deepening and unknown financial dilemma that is hitting most other much states harder, while vowing not to spend the state’s Rainy Day Fund.
Speaking to the Indianapolis Downtown Rotary Club at noon today - a day before the Indiana General Assembly convenes in its biennial session - Daniels called for an “honestly balanced budget” with “no gimmicks,” no tax increases, protect the Rainy Day Fund reserves while funding what he called priorities: public safety, K-12 education, Medicaid and child protection.
Daniels vowed to maintain funding levels for the Indiana State Police and Department of Corrections, saying they will need $100 million in new money. He noted that highway fatalities decreased because of an increased number of state troopers. Daniels said that K-12 education will need $80 million more in new monies to maintain current program levels. Child protective services, he said, “have gone from worst to first” and will be maintained with no staffing cuts.
A week before he was to take his second oath of office, Daniels noted that Virgnia recently announced a 7 percent K-12 education cut and other states are letting criminals out of prison early. “A police officer in Philadelphia was killed by one of those prisoners,” the governor said. “All over America things are happening where they were living too close to the edge.”
The governor vowed not to raise taxes and to cut spending. “We did something so brilliant: we began spending less than we took in. It came to us in a blinding epiphany.”
He said that tax increases are not an option when people and businesses “are strapped” and “struggling not to lay people off. We should not make it worse for them by taxing more.” He noted that spending growth had been reduced from 5.88 percent between 1996 and 2004 to 2.83 percent between 2005-08.
The governor projected total revenues in the 2010-11 biennial budget to be $28.354 billion and total appropriations of $28.344 billion. Projected reserves of $1.3 billion will be the same as the close of fiscal year 2009.
Daniels said that for fiscal year 2010-11, agency budgets will be reduced by 8 percent, there will be no pay hikes for state employees and limited capital spending. Programs that will face reduction or elimination include Step Ahead, IHETS, tourism programs, the Fine Arts Commission, public broadcasting subsidies, the Recycling Assistance Program and the Corporation for Educational Technology. Programs to be delayed or postponed include funding to complete full day kindergarten, Hoosier College Promise, the Indiana Economic Development Commission’s High Growth Fund and the Life Sciences Initiative.
House Speaker B. Patrick Bauer was critical of program cuts that could foster new jobs. “Even though Indiana lost more than 80,000 jobs over the past year, I see nothing in the governor’s budget that addresses job creation or retention,” Bauer said. “This is not the time to declare a ‘time out’ on funding initiatives and projects that can help put Hoosiers back to work. We should not be eliminating $20 million for a Life Sciences Initiative that can create jobs.”
Bauer was also critical of a flat-lined education. “It appears that funding for K-12 education is flat-lined over the next two years,” he said at a Statehouse presser. “Whatever increases are being projected will be eaten up rapidly by ongoing costs like utilities and insurance. Once again, that will force our schools into the unpalatable decisions of reducing programs, personnel or both. Our state’s colleges and universities may have even more difficult choices if the governor succeeds in his plan to cut operating budgets by 4 percent and eliminate all new capital projects. These circumstances will cause tuition increases, which will prevent more people from pursuing the degrees and skills that can make them more attractive on the job market.”
Daniels made a plea for the Kernan-Shepard local government reforms that will eliminate townships and consolidate school corporations with under 2,000 students, saying, “They will save money. If ever there was a time.”
The wild card is the federal stimulus package proposed to President Elect Barack Obama which could pass as early as February. “We don’t know when,” Daniels began. “We don’t know how much, don’t don’t know in what form or in what terms.” He said that the Major Moves program passed three years ago was a precursor to the Obama stimulus. When it comes to public works, “Indiana is a leader already,” he said. He cautioned against using the stimulus funds for any on-going program. “We should look at one time projects,” he said.
While House Speaker Bauer has called for tapping the Rainy Day Fund, Daniels expressed caution. “We’ve learned not to read too much into any one month so I don’t,” he said of December revenues that were well below forecast. OMB Director Ryan Kitchell told HPI that income taxes declined by 18 percent.
“But it’s a caution,” the governor said to the overflowing crowd. “There is no surprise that it missed the old revenue forecast but with the new forecast it was shy of that too. It’s another reason that we need to proceed with extreme caution. It’s another reason to protect the reserves which we may need badly sometime down the trail.”
His remarks came as the leading automakers - including General Motors, Chrysler, Ford, Toyota and Honda which manufacture in Indiana - all showed precipitious sales declines last month as credit is still being denied consumers with good credit rating despite $350 billion to Wall Street and banks. A number of supplier companies have closed in recent months as well as many recreational vehicle makers. A collapse of the domestic auto industry could directly impact up to 144,000 Hoosier workers and devastate local and state government revenues and tax bases. Expects say that it it happens, Indiana would face an economic catastrophe.
Robert E. Scott of the Economic Policy Institute, told a Dec. 22 conference hosted by Barnes & Thornburg as well as Kokomo Mayor Greg Goodnight and Marion Mayor Wayne Seybold that Indiana would be devastated by a Detroit 3 liquidation. “Indiana would lose between 41,000 to 147,000 jobs,” Scott said. “That is nothing short of catastrophic. It would move Indiana well beyond recession and into depression conditions if there is an auto industry shutdown.”
Asked about New York Times columnist Paul Krugman who wrote on Monday that the U.S. might be on the brink of a second Great Depression, Daniels responded, “The American economy surprises people over and over again. I have a suspicion that the worst of the doomsayers will prove to be too pessimisstic, but we don’t know. That’s why it is so essential that Indiana continue to proceed in a more careful way than other states have. Until we see the better days coming back, we better not assume they are right around the corner.”
Developing …
Tags: B. Patrick Bauer, Barack Obama, Mitch Daniels, Paul Krugman, Ryan Kitchell
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This entry was written by and posted on January 6, 2009 at 3:54 pm and filed under HPI Weekly. Bookmark the permalink. Follow any comments here with the RSS feed for this post.
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