Published: June 17, 2009 11:27 pm      

Daniels discusses budget fight

House proposal could increase taxes for Hoosiers.

ELWOOD — Gov. Mitch Daniels is speaking out about the long-term consequences of a state budget advanced Wednesday by the Indiana House.

Daniels was in Elwood Wednesday at an event sponsored by the Elwood Chamber of Commerce. He used the visit to promote his budget proposal for the state during the next two years.

The Indiana General Assembly is currently meeting in special session to pass either a one or two-year budget. The House bill, if passed, would increase spending, wipe out the state’s reserve and create a deficit heading into the next budget cycle. That bill could go to a vote today, sending it to the Republican-led Senate.

However, Daniels is warning the House-proposed budget could have some negative consequences.

At a recent conference, Daniels said governors from 22 other states wanted to know how Indiana avoided cutting spending on education and currently has a $1.3 billion surplus. It was accomplished by reducing state spending and maintaining reserve funds, he said.

Daniels said the state’s loss of revenue has been severe and is down $1.5 billion from a forecast released last December.

“We’ve seen the biggest drop ever in sales tax collections, which is 40 percent of state revenues,” he said. “I don’t think people will go back to spending like they used to.”

Daniels said projections are that the state will receive less revenue in 2011 than it did in 2007. He said state budgets were cut by 7 percent and a hiring freeze was put in place.

“We didn’t cut education, public safety or child protection,” he said. “We have been cutting state spending for the past four years. Four years ago the state was broke, even in good economic times. We’re heading back to where we were.

“Our objective is to do everything necessary not to raise taxes.”

Daniels said people are disappointed with a 2 percent increase in education funding when other states are cutting spending on education by 10 to 15 percent.

He said the proposed budget in April spent all of the state’s reserves and would have resulted in a $1 billion deficit entering the next budget cycle in 2011.

“The General Assembly acted like nothing was different — everything is different,” Daniels said. “Revenues dropped by 8 percent and spending was increased by 3 percent.”

His proposed budget would maintain a $1 billion reserve, cut executive branch budgets by 10 percent, maintain funding for public safety and child protection and provide a small increase for education.

Daniels’ proposal has no tax increase, suggests offsetting spending increases by reducing budgets elsewhere and uses federal stimulus funding for one-time projects, Daniels said of his proposal.

Daniels said the “Bauer Budget,” a reference to House Speaker Pat Bauer, D-South Bend, spends an additional $935 million on 100 programs, raids the state teacher’s retirement fund, wipes out the reserves and creates a budget deficit of $1 billion by 2012.

“It will result in a massive tax increase,” he said of the budget proposed by House Democrats. “It would be so easy to end up like other states, say yes to increased spending.”

Daniels said he was confident lawmakers would reach a common sense conclusion to the state’s budget woes.

“You cannot overspend your income,” he warned.

• Ken de la Bastide is the Kokomo Tribune enterprise editor. He can be reached at (765) 454-8580 or via e-mail at ken.delabastide@kokomotribune.com