Indiana's Medicaid Payments, DCS To Eat Into State Revenue Growth

Indiana's tax revenue will grow in the next couple years, but many of the dollars are already spoken for.

(Indianapolis, Ind.) - Indiana will see more money over the next two years, but the state will also have to spend more. 

Here’s the good news for the state’s pocketbook. The revenue estimation shared by fiscal analysts with the State Budget Committee on Monday shows the state will see almost $830 million in new revenues over the next two years.

The bad news, however, is that Indiana will also have to payout nearly $245 million more just for Medicaid over the next two years covered by the budget lawmakers will pass in early 2019.  If the troubled Indiana Department of Child Services is budgeted the additional $286 million for the next two years, only about $35 million will remain to be shared among other state agencies and programs in the 2019 fiscal year.

The 2020 fiscal year could bring a deficit of at least $23 million, according to the analysts. That could force lawmakers to make cuts in other areas of the upcoming budget.

Governor Eric Holcomb and legislative leaders have vowed to raise teacher pay, provide more funding for education, and school safety, but the latest numbers may make those tasks difficult.

State Senator Ryan Mishler (R-Bremen) is the chairman of the Senate Appropriations Committee. He said the overall revenue forecast is positive, but the budget session will be difficult in light of the funding needs of DCS.

“The funding DCS is requesting could take up a large part of the new revenue the state is projected to receive, which will make it very difficult as we work on the budget as a whole. My colleagues and I will be taking a very careful approach this year, as we do every year, to be sure to fund our priorities – including protecting our state’s most vulnerable youth and supporting education – while living within our means,” said Mishler in a statement.

State lawmakers will begin crafting and debating the state’s next two-year budget when the 2019 legislative session begins January 3. The total general fund revenue in fiscal 2019 is expected to be about $16.1 billion, then increase to $16.9 billion in fiscal 2020.

“We appreciate the work of the forecasting committee,” said Micah Vincent, director of the Indiana Office of Management and Budget. “With this information, we will work to introduce a budget that continues Indiana’s strong fiscal position and maintains the reserves needed to withstand a downturn in the economy. There is a lot to consider as we prepare the governor’s budget submission in January.”

Indiana Democratic Party Chairman John Zody blamed the revenue forecast on Statehouse Republicans’ 2011 move to cut the state’s corporate income tax by 50 percent.

“Statehouse Republicans crossed their fingers for years, foolishly dreaming the tax cuts they showered on corporations would magically generate offsetting revenue,” said Zody. “The bill for their recklessness is coming due and it’s going to be paid by hardworking educators and students in the form of funding cuts. An ‘I owe U’ from Republicans for teacher pay raises and expanded preschool isn’t worth the paper it's written on. This is about priorities and Republicans made theirs perfectly clear: corporate tax cuts ahead of working Hoosiers.”

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