Gov. Mike Pence is asking state lawmakers to consider a lean budget that includes slight bumps in education spending and more than a half-billion dollars worth of individual income tax cuts.
Chris Atkins, Pence’s budget director, is unveiling the two-year, $29 billion spending plan that the new administration is proposing at a State Budget Committee meeting on Tuesday – Pence’s second day in office.
The document would set into motion a number of Pence’s goals, including the tax cut, efforts to improve the state’s vocational education programs and new financial incentives for schools to achieve high standardized test scores and graduation rates.
“Our budget is honestly balanced, funds our priorities, holds the line on spending, returns excess revenues to hard-working Hoosiers, and builds our reserves,” Pence said in his budget’s executive summary.
“This budget sends a strong message that Indiana’s public servants will use only those resources necessary to keep Indiana moving in the right direction – and not a penny more.”
His proposal increases public K-12 education spending by a total of $190 million. That starts with a boost of 1 percent, or $63 million each year.
In the second year, the spending plan includes another $64 million to divide among the state’s highest-performing schools. That money would be divvied up among schools that achieve As or Bs on the state’s A-through-F school rating system, graduate more than 90 percent of their students and have 90 percent of their third graders pass the I-READ3 exam.
The budget proposal also increases universities’ funding by 1 percent – far short of the 7 percent boost that the Commission for Higher Education had suggested – and sets aside $19 million for universities to repair and improve buildings.
In both cases, those funding increases would not keep up with the 10-year average of 2.5 percent annual inflation.
Overall, 65 percent of the state’s budget is dominated by K-12 education and higher education. Increased spending there and on Medicaid, as well as the tax cut, will eat through most of the state’s new revenues.
Pence’s budget projects that the state will collect $518 million more in taxes than it spends in the next fiscal year, and $759 million more than it spends the year after that.
Most of that would be used to chop Indiana’s individual income tax from 3.4 percent down to 3.06 percent – a central plank of Pence’s campaign. That would cost Indiana about $742 million in revenues over a two-year period.
After 12.5 percent of the state’s annual spending is set aside in reserves, what’s left would be divided evenly between former Gov. Mitch Daniels’ automatic income tax credits and a new state transportation and infrastructure fund.
Pence’s budget estimates that $347 million would be pumped into that infrastructure fund over the course of the two-year budget.
The most dramatic spending increases come in Medicaid. The health insurance program for the poor is receiving $1.65 billion from the state’s general fund this year, but is projected to need $2.1 billion by 2015 in order to keep up with new enrollees’ costs.
Those increases come even though Atkins said Pence’s administration did not include in its budget any money to expand the Medicaid program to include 500,000 more Hoosiers, as envisioned under President Barack Obama’s health care law.
Largely due to those Medicaid funding increases, the state’s overall spending would grow about 1.4 percent under Pence’s spending plan.
Most state agencies, though, would see their funding frozen at current levels – with a few exceptions.
Pence’s budget proposal also boosts the Department of Child Service’s budget by 7 percent – or $35 million – to implement its plan to add more caseworkers and revamp its much-maligned statewide hotline.
It includes $6 million over two years to launch regional workforce councils that he plans to task with developing vocational and technical education curricula for their areas’ high schools.
And it pumps an extra $18 million over two years into improving the adult workforce, $12 million into a high school dropout prevention program, $6 million into grants for high-performing teachers and $3 million into an effort to more closely link universities with Indiana’s life sciences industry.
Only one area – the horse racing industry – would see its funding cut dramatically under Pence’s budget proposal. It would eliminate a subsidy worth more than $40 million and pump that money into Medicaid.
Pence’s budget would also shift $4 million away from a tobacco prevention council and devote that money to Medicaid.