State faces $923 million shortfall

State Sen. Lawrence Borst, R-Greenwood, said he crafted a lean budget that reflects a slowing economy and dwindling revenues. But his handiwork will have to be scrapped.\nThe state will bring in $923 million less than lawmakers expected, the state forecast committee announced Thursday. With the shortfall, lawmakers will have to shave up to $600 million from the proposed two-year budget.\n"The personal income tax is running low," said Gary Baxter, the committee's lead economist. "We overestimated the economy, and while the sales tax has held steady, the personal income tax has slipped."\nTo make ends meet, lawmakers have agreed that they'll have to cut the two-year budget by $200 to $300 million a year. The budget-writing session ends April 15, and the daunting task is sure to require a special session. \n"There's not widespread panic over the situation," Senate Republican caucus spokesman Randy Campbell said. "We'll manage to make it work out."\nAppearing at the General Assembly, Gov. Frank O'Bannon said he'd present ideas Monday to help the state through the budgetary crunch. O'Bannon spokesman Thad Nation said the governor hopes to pay for his legislative priorities -- including adequate public school funding, two new prisons and in-home care for the elderly. Nation hinted that raising taxes might be necessary.\n "We'll have to step back and take a look," he said. "We're just going to have to see what works. We're already running a pretty lean budget."\nBut Nation said raising income or property taxes would only be considered as a last resort. Although he stressed that nothing has been finalized, Nation said a hike in cigarette taxes is more likely.\n"You might be able to go up to 50 cents," Nation said. "A 50 cent per pack increase would raise around $350 million in revenue a year."\nThe governor also rules out tapping either riverboat gambling money or the state's emergency rainy day fund, Nation said.\n"That would only be in the event of a recession," he said. "That would only be if we've had two quarters of negative growth. That's not going to be triggered under this scenario." \nThe General Assembly doesn't meet today, and lawmakers will hold tight in the meanwhile.\n"We're going to wait and see what the governor will suggest," Campbell said. "We're not going to lose any sleep, but we're not going to lose any time either."\nThree months remain in the budget year, and revenue has already fallen $214 million short of the December projection. The fiscal forecast predicts Indiana will see no revenue growth this year compared to last.\nThe projected surplus has dried up. After a $231 million shortfall this year, the forecast estimates the state will take in $302 million less than earlier predicted next fiscal year and nearly $390 million less in 2003.\nBut Baxter said that economic slowdown reached rock bottom -- and that there's nowhere to go but up.\n"We predict a general economic turnaround," he said. "It's clearly hit its low point."\nThe economy should be slightly stronger in Indiana than elsewhere across the country, Baxter said. \n"The technology sector has largely brought this slowdown about," he said. "We don't rely so much on it here. And automobile production is picking up, which will help with all the plants we have in Indiana"