Indiana Expects Budget Shortfall Of More Than $3 Billion By Next Year

Indiana fiscal officials expect the state to fall between $3 to 4 billion short of its current two-year state budget.

A new revenue forecast will come out later this year. But officials at the State Budget Committee meeting Wednesday say they expect a $1.7 billion shortfall this fiscal year (which ends in two weeks) and another roughly $2 billion loss next fiscal year.

Budget Director Zac Jackson says there are multiple steps the state must take to make its budget work.

“We will need to spend down those reserves," Jackson says. "We will need to cut spending and we will also need to use federal assistance as creatively as we legally can.”

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Indiana state government has received $2.4 billion in federal assistance for COVID-19. But that money can’t be used to directly replace lost revenue. Office of Management and Budget Director Cris Johnston says there’s hope that will change.

“If I don’t get any sort of budgetary relief or assistance from the federal government, but I do get flexibility because of these funds, I want to be able to have that money available,” Johnston says.

Johnston says Indiana – like many states – hasn’t currently planned to spend all of its federal relief money for that very reason.

Existing state budget reserves should be able to cover the full budget shortfall this fiscal year. But remaining reserves would only meet about half the budget shortfall in the following year. So, the state has asked its agencies to cut 15 percent of their budgets for the upcoming fiscal year. And higher education institutions will get a 7 percent cut of their state funding.

Together, those cuts could reach about $1 billion.

Contact reporter Brandon at bsmith@ipbs.org or follow him on Twitter at @brandonjsmith5.