State revenues for January fall short

INDIANAPOLIS -- Even though expectations were lowered, state tax collections in January still came in $21.5 million below target.\n"The bottom line is, it continues to reflect the sick economy in the state of Indiana," state Rep. Jeff Espich of Uniondale, the fiscal leader for House Republicans, said Wednesday.\nJust last month, a group of economists and budget analysts lowered the amount of tax revenue it expected Indiana to take in during the current, two-year budget cycle ending July 2005.\nThat new forecast projected the state would take in $321 million less in tax revenue than lawmakers had initially counted on when they enacted the budget. It took effect July 1.\nEven if revenues ultimately meet the updated projections, Indiana would end the budget cycle with only $65 million left in readily available cash to pay its bills. Espich said that figure would now be about $14 million because of January's lower-than-expected revenue and other factors.\nState budget officials said at least $300 million is needed to meet monthly cash-flow obligations.\nIndiana faces a deficit of around $1 billion, meaning spending in the two-year budget exceeds expected revenue by $1 billion. Lawmakers tapped more than $500 million from teacher pension savings and other dedicated accounts last year to help pay for the spending they approved.\nThe state also owes about $720 million in back-payments to schools, universities and local governments.\nDespite such financial problems, Democratic Gov. Joe Kernan said in his State of the State speech last month he would not ask lawmakers to open up the current budget this session and cut spending. He said he would take any needed steps to manage the budget himself without raising taxes.\nMany Republicans scoffed at his plan to expand state-funded, full-day kindergarten, saying a state in such financial straits should not be starting a program that could eventually cost about $150 million a year.\nKernan's would be funded initially through a mix of loans, diversions in revenue and money from a fund providing low-interest loans to schools. He has said his proposal is fiscally sound and a needed investment in Indiana's children and future.\nState Budget Director Marilyn Schultz called the January revenue figures disappointing, but said the revised fiscal forecast projects the economy will begin to strengthen in the latter part of this fiscal year.\n"We are hopeful that will be the case, but in the meantime, we will continue to manage a very tight budget," she said.