Indiana: The right way to cope with declining tax revenue
by Kristina Rasmussen Budget & Tax News (one of my go-to publications for state fiscal policy news) features a great interview with Indiana Budget Director Christopher Ruhl. It’s refreshing and encouraging, and Illinois state leaders could learn a thing or two from it: Gov. Mitch Daniels (R), who took office in 2005, insists on fiscal discipline. One of his...
by Kristina Rasmussen
Budget & Tax News (one of my go-to publications for state fiscal policy news) features a great interview with Indiana Budget Director Christopher Ruhl. It’s refreshing and encouraging, and Illinois state leaders could learn a thing or two from it:
Gov. Mitch Daniels (R), who took office in 2005, insists on fiscal discipline. One of his chief fiscal disciplinarians is Budget Director Christopher Ruhl. Budget & Tax News Managing Editor Steve Stanek recently spoke with Ruhl about the Indiana budget and how the state has been coping with declining tax revenues, a problem plaguing most states.
Stanek: Indiana is in much better fiscal shape than some of its neighbors, including Illinois, Michigan, and Ohio, which are bleeding red ink. Why are you doing so much better?
Ruhl: When we started in 2005, we inherited an $800 million deficit. The only way we saw out of that was to dramatically reduce spending growth, which had been growing faster than revenues. We were able to achieve that in every pre-recession year. We quickly turned from a deficit to a $1.3 billion surplus.
Stanek: What’s happened to the state’s revenues since the recession began?
Ruhl: For us, spending restraint wasn’t new. Last year revenue was down about 7.5 percent. This year it’s on pace for about another 7.5 percent decline, although in the last couple of months we’ve started to get toward break-even.
All our attention has focused on how to align spending with revenues. We started December 2008 with an initial 10 percent cut. That was met mostly through not filling open positions and a pay freeze for state employees. We made the cuts permanent in the budget we adopted last year.
Then last July we did an additional 10 percent cut. For the budget starting this July, another 5 percent cut. A lot of agencies have seen cuts of about 20 to 25 percent.
Stanek: How has this affected state services?
Ruhl: We’ve been reviewing that. We’ve been through about 80 percent of our agencies, and in most instances there’s been no impact on services. This has been an opportunity to focus on priorities and core functions. We have suspended some low-priority items and have redirected savings to other areas, mainly education and public safety.