Destination 270

SMU Students Analyze the 2012 Presidential Election

Indiana’s Budget Surplus

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At a time when the federal government runs a $1 trillion deficit every year, exponentially growing the national debt, some starts are able to run budget surpluses. Even during a recession that has affected most parts of the country, Indiana has managed to accumulate a massive budget surplus.

At the end of the Fiscal Calendar Year for the state, at the end of July, the state announced that it had $2.15 billion in cash reserves. This is much more than was initially estimated by Governor Mitch Daniels and several state budget leaders. In addition to that, the total state debt dropped by a significant amount over the past year.

With a major surplus, state budget leaders must now decide what to do with the extra money. They must decide if they will give tax breaks, or if they will send some of the money back into programs that were cut under the previous year’s budget. Overall, Indiana is in a good fiscal position, but how did it get to this position?

A Balanced Budget

Some states have balanced budgets because it is required under that state’s Constitution. Either the Governor or the state legislatures will be forced to make budget cuts, raise taxes, or do a mix of the two to balance the budget. However, Indiana does not have this requirement, meaning state leaders did it under their own fiscal discipline.

Governor Daniels worked with the state legislature to ensure that the budget would be balanced. They had to make some tough agreements and compromises, cutting expenditures in several areas of the budget. Daniels remained committed to not raising taxes on citizens since the economy is still in a recession. Despite this constraint, the state was able to strategically cut budgets to balance the overall budget.

A Strategic Advantage

Even though the budget cuts were criticized by many at the time, they did not drastically alter the lives of many citizens. Now, Indiana is in a great position during the recession. The state actually has one of the lowest debts per capita in the entire nation, ranking 3rd for the lowest per capita debt. Less than half the national average, this is a significant accomplishment with a rough economy.

With a massive surplus and a low debt rate, Indiana is in a great position to experience high levels of economic growth. Furthermore, the state has the ability to improve programs that are currently lacking, like education. These choices will be important for the next few budgets of the state.

Even now, some of these choices are already being made. Governor Daniels recently announced that the state’s pension fund will receive $360 million from the surplus. This means the state’s pension funds will be fully funded, something that most states are struggling to accomplish.

Now, the state will be deciding what to do with the budget surplus. With a new Governor being elected in November, nobody knows what will happen. However, Indiana provides a good example of how a state can balance a budget, even when not required to do so. At this rate, Indiana is set to tackle many of the state problems for the next decade.


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