The Pence administration will continue to make funding cuts to state agencies and universities to pad Indiana’s reserves so the state can function through another potential economic slump, a key official told lawmakers Thursday.
State Budget Director Brian Bailey said the public universities could eventually receive all the money allocated by lawmakers – but only if tax revenue meets projections for most of the year.
Bailey spoke to members of the bipartisan State Budget Committee during a meeting in the International Ballroom on the campus of Indiana-Purdue University, Fort Wayne. Lawmakers raised questions about Gov. Mike Pence’s cost-cutting procedures and the need for public universities to continue to place 2 percent of their state funding for FY 2015 in reserves.
“It helps preserve dollars to spend on state agencies and universities through a critical downturn in the economy,” Bailey said of the reserve increase.
In November 2013 – almost 6 months into FY 2014 – Pence directed state agencies not to spend 3 percent to 4.5 percent of the money they’d been allotted by lawmakers. The move came after general fund revenue fell well below predictions.
In part thanks to those cuts, the state ended the 2014 fiscal year on June 30 with $2 billion in the bank. It spent $107 million less than it received from taxes during that year.
Now, despite the $2 billion surplus, Pence is directing state agencies and universities to withhold additional dollars. On Thursday, the funding for those schools became the focal point of the discussion between Bailey and the other committee members.
Sen. Karen Tallian, D-Portage, asked Bailey if continuing the 2 percent funding holdout is necessary and how his office came up with that percentage – instead of a lesser amount.
Bailey responded by saying public universities will get their money back if tax receipts meet or exceed expectations in the first 11 months in FY 2015. Universities will not, however, get back the 2 percent of state funds they lost in FY 2014.
The discussion comes as lawmakers have tried to boost funding for higher education, in part to entice universities to keep tuition from rising too fast. Budget Committee Chairman Luke Kenley, R-Noblesville, has said he’s concerned that big cuts to university funding will encourage the schools to seek more money from students.
Rep. Tim Brown, the Republican who chairs the budget-writing House Ways and Means Committee, said Thursday he’s been getting mixed signals from the State Budget Agency and the governor about the actual need for saving such a large amount of the state’s money.
Brown said he has seen both positive and negative statistics about Indiana’s financial situation and asked Bailey about the factors that went into determining how much the state needs to have in reserves.
Bailey said his agency places a “significant importance” on the amount of money the state has left to spend when it allots the funding for the next fiscal year.
The committee members each spoke highly of the budget discussion that took place during the meeting and agreed it provided more transparency between the legislative and executive branches in terms of the state’s expenditures.
Jacob Rund is a reporter for TheStatehousefile.com, a news service powered by Franklin College journalism students and faculty.
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