Budget relies on stimulus

WE SAY Indiana cannot postpone cuts forever.

The Republican-controlled Indiana Senate released its two-year state budget proposal earlier this month. The plan calls for spending $28 billion in state money over the next two years, as well as $2 billion in federal stimulus funds. 

Obviously, the state of Indiana is collecting less tax revenue because of the recession, so in order to maintain a balanced budget, cuts must be made somewhere. Gov. Mitch Daniels earlier proposed cutting most agency spending by 8 percent, higher education operating costs by 4 percent and keeping funding for schools at current levels.

If we don’t make the governor’s cuts, we’ll have to dip into our state’s reserve fund, which isn’t necessarily a bad thing – you save up when times are good and finance a bit when they are bad. And right now it is a rainy day.

But even dipping into our surplus will only take us so far: Our state’s surplus is $1.3 billion, and the highly optimistic December forecast predicted that Indiana will only bring in $1 billion less over the next two years. 

However, with $2 billion in federal stimulus money on its way, Indiana lawmakers are provided some time to delay the hard decision about where to make the necessary cuts. 

Of the $2 billion, $823 million is proposed for education. As students who recognize the need to improve educational opportunities and facilities, we encourage the state government to use the stimulus spending to better our public schools and universities.

Daniels rightfully criticized fellow Republicans in the Senate over the proposed use of the stimulus dollars marked for education, saying that they should instead be used only for one-time expenses. 

It’s never wise for someone – especially someone who spends other people’s money – to get accustomed to a revenue stream that isn’t permanent. That would create the potential for a very large budget gap after the stimulus money runs out, meaning tax increases in the future and possibly very large and sudden cuts. 

Overall, it’s not horrible that the Senate budget expects to run a deficit of approximately $300 million if the economy doesn’t improve enough for state revenues to overcome the deficit, because we’d still have nearly a billion dollars in the surplus during a recession. 

However, we cannot get too comfortable with the stimulus funds and come to expect them in the future when making appropriations decisions. Daniels’ decision to use them for one-time expenses is the best way to spend them.