INDIANAPOLIS – Gov. Eric Holcomb would use $700 million in surplus dollars this year to pay off debt and lower pension obligations under his budget proposal released Wednesday.
He would also increase K-12 spending by 2% in the first year and 1% in the second year of the biennial budget.
“The governor's proposed budget is a great starting point as we continue to invest in key priorities on behalf of Hoosiers,” said House Ways and Means Chairman Tim Brown, R-Crawfordsville.
“He was thoughtful in education support, and each and every part of government. We are in a better position than most states, and I look forward to working with my fellow House members to build on the plan offered today while remaining fiscally responsible.”
It is the first volley in the process to craft the state's next two-year budget. The House will use Holcomb's budget as a starting point and offer its own version in February.
While ongoing new revenue is sparse, the state unexpectedly has a larger surplus than expected due to two things.
First, the state used $440 million in federal COVID relief dollars to reimburse state payroll related to the pandemic. And its initial agency cuts saved more than necessary as the economy rebounded quicker than expected.
That is why Holcomb wants to spend $300 million to pay off state bonds early. The retired debt includes highway bonds on the Interstate 69 extension, three hospitals, one prison, the state fairgrounds arena and some park facilities.
The governor also wants to put $400 million into the pre-1996 teacher retirement fund, which will free up future dollars to invest in other priorities such as teacher pay.
After spending $700 million in excess dollars the state would end the fiscal year in June with a $2.3 billion surplus.
But there are other options for the large chunk of cash.
Rep. Greg Porter, D-Indianapolis, said the one-time dollars should go to aid small businesses trying to keep their doors open and Hoosiers struggling to pay rent and keep the utilities on. He also suggested aid to food banks and an increase in teacher pay.
He said Holcomb is “taking care of Wall Street instead of Main Street.”
In 2012, when the state had more money on hand than needed, then-Gov. Mitch Daniels put $360 million to pension relief and $360 million to an automatic taxpayer refund. That refund resulted in about $111 per filer.
Cris Johnston, director of the Indiana Office of Management and Budget, said the administration didn't consider a refund or other assistance programs because the state is already using federal dollars for those things. And he said he doesn't want to create an expectation that a program would later continue with state funding.
Holcomb's budget proposal for the next two years would essentially send all the new expected tax revenue to K-12 schools the next two years and provide some other one-time investments in capital and rural broadband. The rest of budget is relatively flat.
Indiana schools will receive a 2% funding increase in fiscal year 2022 and an additional 1% in fiscal year 2023. That is $377 million in new dollars over the biennium.
Due to the funding formula, some schools will see cuts if they lost enrollment.
Holcomb would also restore a 7% cut to higher education from last year then add a 1% increase in each year of the biennium.
Terry Spradlin, executive director of the Indiana School Boards Association, thanked Holcomb for his support of K-12 public education.
“His proposed budget for schools to support Hoosier students is a promising start to the budget session, as just months ago there was anticipation of budget cuts due to the coronavirus recession,” he said.