State employees denied raises next year

State employees won't receive raises next year, Gov. Frank O'Bannon announced Thursday.\nO'Bannon said the state can't afford to give raises and called it a troubling day for his administration. Outgoing Indiana Democratic Party Chairman Robin Winston described the salary freeze as "one of the most difficult decisions of (O'Bannon's) term." \n"Our state workers are dedicated public servants who provide important services to Hoosiers and who deserve pay raises," O'Bannon said at a press conference in Indianapolis. "But the current condition of our budget and the continued decline in our revenue makes it impossible this year." \nThe planned four percent raise would have cost the state about $60 million, O'Bannon said. \nFederal grants cover about half of the state's payroll expenses. The $31 million saved from the salary freeze won't begin to cover the state's structural deficit of more than $600 million.\nThe state legislature passed a two-year $20.7 billion budget than spends nearly $500 million in excess of projected revenues, State Budget Director Betty Cockrum said. A recent appellate court ruling on Indiana Medicaid payments has set the state back another $100 million, Cockrum said.\nAnd the state's financial situation has only been worsening.\nCorporate, individual income and sales tax revenues brought in $41 million less than was projected for the month of August alone. Just two months into this fiscal year, the state was $124 million short of projected revenues.\n"The governor is doing everything in his power to address this serious revenue shortfall," said state Sen. Vi Simpson, D-Ellettsville. "There are few places where he has discretion over spending, and he really doesn't have much choice."\nThe average state employee brings in about $30,000 a year, according to State Personnel Department figures. The raise approved by the state legislature this spring was meant to keep pace with projected increases in the cost of living.\nThe state has put off negotiations with unions representing its employees until 2002, O'Bannon said Thursday.\n"We have worked hard in the last four years to pay our workers salaries that compete with the private sector so we could attract the very best people and keep them in state government," he said. "In each of the last four years, we have been fortunate to have the resources to afford raises." \nO'Bannon undertook several steps in July to manage the budget administratively, including imposing a strategic hiring freeze and slicing out-of-state travel of state employees by half. The measures are estimated to save the state around $2 million.\nThe second-term Democratic governor also ordered Cockrum to postpone spending on all capital projects except those already under way or necessary for public safety. The construction freeze should result in around $167 million in saving, Cockrum said.\nAnd O'Bannon asked all state agencies to scale back their spending by 7 percent.\nThe General Assembly comes back into session in November. Simpson said state lawmakers should be more receptive to previously politically unpopular ideas, such as O'Bannon's proposal to increase the cigarette tax by 50 cents a pack.\n"We have serious problems to discuss and tough decisions to make," she said. "We have to keep all options on the table and seriously look at significant cuts to the budget. \n"It would be more preferable to many people than a general tax increase."\nThe widespread layoffs and decline in consumer confidence following the Sept. 11 terrorist attacks should further depress Indiana's economy, Simpson said. She expects a sharp decrease in sales tax revenue.\nThe bleak forecast makes it necessary to rein in spending wherever possible, she said.\n"The state is no different than your family or my family," she said. "If you have less income coming in, you need to either cut back expenses or increase the income stream."\nThe governor said it is impossible to cut the budget enough to offset the deficit unless he slices into spending for education, which he touted as his main priority during his re-election campaign last fall. He said he hoped the legislature would join him in addressing the fiscal crisis so that he would not have to cut education dollars. \nO'Bannon plans to make more announcements about further spending cuts within the next few weeks.