Indiana Gov. Daniels and Balancing the State Budget

February 24, 2010

While other states have kicked expenses into future years, coasted on stimulus funds, or raised taxes, Indiana under its Governor Mitch Daniels (R) has focused on balancing its structural budget with expected revenues and spending prioritization. Daniels argues that states should adjust to reduced revenues, and the sooner the better:

Because of the economic contraction, the Republican governor foresees “a long-term contraction in the scope of what states are doing,” he said at a Monitor-sponsored breakfast for reporters on Tuesday.

Daniels’s remarks echo an op-ed he wrote last year in the Wall Street Journal:

But the dominant reality is that even assuming the official revenue projections are accurate (and they have been consistently too rosy for the past two years), the state of Indiana will have fewer dollars to work with in 2011 than it did in 2007. Most other states face similar or worse prospects.[…]

After crunching the numbers, my team has estimated that it would take GDP growth of at least twice the historical average to return state tax revenues to their previous long-term trend line by 2012.[…]

Indiana was near bankruptcy five years ago but is relatively solvent today because we have spent the intervening years making hard choices. We have reformed state procurement, contracted out some jobs, cut costs, and relentlessly scrutinized expenditures in pushing for annual improvement in departments large and small. We’ve also reduced the number of state employees by some 5,000 from the 2004 level.

Read the full piece here.


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