$462.9M, $862.3M, $1,104M. These are the numbers that can be added to what is projected in tax collections for fiscal years 2021, 2022 and 2023. This is how much more money the Indiana revenue forecasters are now projecting over what was outlined in their December 2020 forecast. The amount totals $2.4B in “new” money that the budget-makers could include in their final budget expected to be worked out next week. The Budget Committee received updates this week on the estimation of Indiana’s economy and how that will likely translate into tax revenues for the balance of this fiscal year and through the next biennium. The forecast is quite sunny and bright, especially considering what many thought the situation would look like just a year ago.
6.4%, 4.5% and 4.2%. These are the projected growth rates in tax collections for fiscal years 2021, 2022 and 2023. These are all healthy numbers. What will it mean for the coming days of budget negotiations? For one thing, it will be a little harder for the negotiators to say “no”. People who have seen their budgets cut, requests denied and programs reduced or eliminated will all be renewing their wishes and seeking reconsideration in light of this new money. In some respects, this will make the budget negotiations both more difficult and easier at the same time. Perhaps a hard “no” or dollar limit that was initially in place on one side of the table can be exchanged for a concession from the other side of the table given that there is more money to go around. More options can be entertained but, with that, the bargaining expands too. No doubt it will change the picture and the final product.
As indicated above, the revenue forecast is about numbers, and there are plenty of them to check out if you are so inclined. The full revenue forecast presentation, with all the numbers.
But if you are more of an economist at heart, you may want to study the economic forecast. It is on the strength of all the economic indicators that the revenue forecasters reached the greatly enhanced tax collection numbers. The economic forecast presentation.
But there is even more money, federal money. The billions of dollars of federal relief and recovery money, provided through three major pieces of federal legislation since the pandemic began, has not been, and should not be, incorporated into the state budget in a way that would create ongoing fiscal obligations that can’t be met without ongoing federal money. But the existence of these substantial amounts is another positive factor at play in this year’s budget-making process. This money can and is being used to pay for several extremely important relief programs and initiatives, paying down debt and other existing obligations, funding capital projects and covering pandemic-related expenses.
Understanding how the monies may, or may not, be used, and how they might possibly supplement budgeted state expenditures, is a critical part of the big picture budget considerations. Acknowledging this, the Budget Committee also heard from Cris Johnston, the director of the Office of Management and Budget, who presented an outline of the federal money in the March 2020 CARES Act, the December 2020 Appropriations Act and the American Rescue Plan Act passed just last month. See how these relief packages have been used and may be used over the next few years.
So these forecasts, the new money and the federal monies will all play key roles in the considerations of those sitting around the table next week, trying to hash out the details of Indiana’s next two-year budget.
Resource: Bill Waltz at (317) 264-6887 or email: bwaltz@indianachamber.com
