By Megan Banta

On Friday morning, Gov. Mitch Daniels said he would give state employees a one-time pay dividend as a reward for their efforts contributing to Indiana's $1.18 billion in reserves at the end of the 2011 fiscal year.

Daniels said in a press conference that the "strong fiscal shape" of the state economy is "primarily due to an astonishingly great performance by state employees."

"I feel safe in saying there's not a state in the nation where state employees are more committed to efficiency and care with tax dollars Indiana," he said.

Daniels said state employees "took an assignment to save $190 million" at the beginning of the fiscal year, which they "overachieved that assignment by $160 or so million."

Daniels said "the vast majority" of these savings resulted from efficiencies on the part of state employees, rather than from cutting programs or agencies.

House Minority Leader Pat Bauer, D-South Bend, disagreed. In a statement released Thursday after the fiscal year closeout, Bauer said the surplus is the result of "gimmicks."

He said these gimmicks include budget reversions, use of federal stimulus dollars, and cuts in agency budgets and that without them, "our financial picture would not be as rosy as the governor and the auditor would like."

"At that point, it is prudent to wonder at the cost extracted by these gimmicks," Bauer said. "What services are suffering as a result of the obsessive need to maintain a $1 billion surplus?"

Bauer said schools are suffering after losing $300 million in "state support, cut at the governor's demand" and that families are suffering as fees and charges and taxes are increased and legislators fail to give greater priority to job creation.

"Families are more important than a $1 billion bottom line, particularly when that bottom line crunches them the most," he said.

In response to Bauer's comments, Daniels pointed to an editorial that ran in The Indianapolis Star.

"The Indianapolis Star said it best today. He bankrupted the state the last time he was in charge, and he hasn't learned a thing in the intervening years," he said.

Daniels said he thought Bauer "might learn something during the weeks he spent in Illinois, where they do what he proposes for Indiana, and they're broke," but that "some students aren't as educable as others."

"I've been trying to educate the poor fellow for a long time, and I just give up," he said.

Daniels said the recognition of state employees' "extraordinary achievement on behalf of their fellow citizens and taxpayers" will be given based upon performance.

"As is our practice, it'll be given on a performance basis," Daniels said. "More than nine out of 10 will receive something and the best employees will receive the largest award."

In a letter to state employees, Daniels explained that they are to be evaluated on their 2010 job performance, earning $500 for performance that meets expectations, $750 for performance that exceeds expectations, and $1,000 for outstanding performance.

He said this dividend will cost the state $15 to $20 million, or 9 to 12.5 percent of the "unexpected, extra savings [state employees] achieved."

Daniels said this "amounts to maybe a dime or so on the dollar of the extra savings, the unexpected savings, beyond which we were budgeting just two or three months ago."

Indiana citizens will benefit from these unexpected savings, Daniels said.

"They'll see a continued period of tax stability. Taxes are being raised all over the country," Daniels said. "They're going down here, specifically property taxes, and they'll see continued excellence service."

He said Hoosiers should be "proud of what this highly efficient and hard-working group has been doing the last few years," especially given the current state of the national economy.

"Any time the Washington dinosaur twitches its tail, the state, and all states, are in some jeopardy," he said.

Daniels said he and others are concerned about the possible economic threat presented by the "lock-up in Washington" and that the state's reserves may prove necessary in the future.

"We're preparing by doing what these employees are being recognized for doing today by trying to conserve dollars and to have a safety cushion," he said. "We absolutely needed it when the recession started in 2008, and may well need it again, so [that is] just another reason to be grateful for this surprisingly strong performance that they turned in."

Daniels said the extra reserves show that Indiana stands apart from states that are going through financial problems, such as Minnesota and Illinois.

He said Indiana state employees' performance should serve as an example for other states and for local governments in Indiana.

"I would just say that other levels of government, other forms of government, [need to] take a look at what Indiana state employees have achieved," Daniels said. "Just take a look, and if they were able to do half as well, in most cases they wouldn't have a problem at all."