On April 12, the State Budget Committee received an update on projected state revenues for the next two years. On December 15, 2016, the Revenue Forecast Technical Committee (RFTC) presented findings to the Budget Committee with their initial revenue forecast for the biennium. This information is the foundation for which the state’s budget will be built. The April 2017 meeting’s goal is to update the initial presentation from December with three more months of actual revenue collections.
What does this mean for Indiana and its next two-year budget?
It takes a lot of planning to craft a budget: technical models, historical information, and expert-evaluation to adequately prepare a $31.5 Billion, two-year state budget. Indiana’s budget process requires that the state does not suffer a structural deficit. Essentially, policymakers must spend less money than they expect to collect through taxes and fees. Before the appropriation of funds to various agencies, projects, and state priorities, the bipartisan RFTC has been hard at work. The committee constructs a consensus forecast of state revenues for the next two years that the budget-drafters in the General Assembly use to appropriate money. The forecast becomes the foundation for which the budget is constructed. This committee consists of fiscal staff from all four legislative caucuses, designees from the State Budget Agency, experts from the non-partisan Legislative Services Agency, and experts in public finance.
In December 2016, the RFTC projected that the state would have $15.48 billion in revenues for Fiscal Year (FY) 2018 and $16.09 billion for FY 2019. The revised forecast, presented on April 12, forecasts a slightly higher revenue forecast for the biennium. $15.59 billion in FY 2018 and $16.18 billion in FY 2019. This accounts for a modest increase in projected revenues over the biennium of $200 million. This additional projected revenue gives budget-drafters the option to put funds into the state’s surplus for possible future downturns in revenue, or expend part or all of the money on state priorities.
What happens after the budget is signed into law?
Once the budget is signed into law by the governor, it is up to the governor and the executive branch to adequately manage the expenditures. The forecast acts as a baseline to monitor actual revenues to ensure that they are meeting revenue expectations. If actual state revenues begin to fall short of the projected collections, reductions in expenditures are carried out. On the reverse, if actual revenues are higher than expected, those excess funds are typically put into state reserves.