State Achieves Balanced Budget, Solvency

State Achieves Balanced Budget, Solvency

INDIANAPOLIS (July 11, 2006) - Indiana has its first balanced budget in eight years and the first true surplus in three years. Governor Mitch Daniels announced today that for the fiscal year just ended, revenue exceeded expenditures by $371 million, the first annual surplus since 1998. Now, the state's total cash balance exceeds debt to K-12 schools, higher education and local governments for the first time since 2003.

In Fiscal Year 2005, spending exceeded revenue by $201 million, and the state began Fiscal Year 2006 (FY06) with a projected budget deficit of $131.6 million. But through a combination of controlled spending and increased revenue, performance this year was $502 million better than plan, moving the state from deficit to surplus.

"We've achieved a balanced budget for the first time in eight years, and for the first time in three years, the state has more cash than it owes. The state is solvent, and we're not going back," said Daniels, during the FY06 closeout with State Auditor Connie Nass.

The state ended the year with a General Fund/Property Tax Replacement Fund (GF/PTRF) combined balance of $1.089 billion; liabilities no longer exceed assets. The combined cash balance exceeds $1 billion for the first time since 2000.

Among factors that contributed to the turnaround:

* The General Assembly passed the tightest state budget in 55 years, with planned spending growth of 2.6 percent in the first year of the budget. But actual spending through savings identified and captured by various state departments was limited to an even lower growth level of 1.9 percent.
* Actual revenue for GF/PTRF, such as sales, individual and corporate income taxes increased 5.5 percent over last year, from $11.43 billion to $12.06 billion. This is nearly 1.5 percent higher than plan.
* The 5.5 percent growth does not include one-time revenue such as tax amnesty or Medicaid bed tax.

The budget achievements were accomplished with no tax increases and do not include any of the proceeds from the $3.8 billion lease of the Indiana Toll Road.

"I wouldn't have thought it possible to come this far in just one year," said Nass. "We're in the black for the first time in three years, and our bottom line is the best it's been in five years."

The state still owes $622.1 million in delayed payments to higher education institutions, K-12 schools and municipalities and $50 million to the Public Deposit Insurance Fund.

"Our work is far from done. We still have debts to pay back and reserves to build. Though agencies responded by holding the line on their budgets this year, we can deliver more efficiencies," said Daniels. "Public education will be the first to benefit from our return to solvency. As long as we continue to control other spending, we'll clearly have the money to pursue full-day kindergarten in Indiana next year. That will be our first legislative priority."

For FY06, individual income tax collections were $109.2 million over Fiscal Year 2005 collections and corporate income tax collections were $100.6 million more than the previous year. Sales tax collections exceeded FY2005 by $266 million.

The 2006 closeout statement is available at www.in.gov/sba/budget/

http://www.in.gov/serv/presscal?PF=gov2&Clist=196&Elist=86850