Indiana announces $2B in reserves, taxpayer refunds
Gov. Mitch Daniels said Tuesday that Indiana ended its fiscal year with $2 billion in reserves and a $500 million surplus, meaning refunds to taxpayers.
The 2012 fiscal year ended with reserves of more than $2 billion. Taxpayers will see a refund between $100-$200. The key is if the state's reserves exceed ten percent of the upcoming budget, half of the excess is to go back to taxpayers. The current reserve represents 14 percent of the state budget.
"Thanks to that amount and the overage beyond the 10 percent of our next year's budget there will be a major infusion of cash for pensions funds which are already the strongest in the country and the first automatic taxpayers refund in history," Daniels said. "That amount will be - now it's clear - more than $100 per person, more than $200 on a joint return which is the most of the returns and just to size that for you in the previous year, the median income tax payout by a Hoosier was $819. So what we can say today is we have a double digit discount for the typical Indiana taxpayer."
Roughly $300 million would go to 2013's tax credits and another $300 million would go toward the state's unfunded teacher pension liability.
The final report from the Office of Management and Budget and the auditor's office will be complete by the middle of the month. The surplus will certainly be attractive to the next administration and the next legislature in January.
But on the street, Hoosiers seemed a little hesitant about the news.
"I think it is a political stunt, somewhat," said Jim Zetzl. "You have already collected it. The people are not waiting for the money, you are just trying to score political points, is what I am thinking. I would rather see that money put to other uses."
"I think it's well-deserved. Budgeting process got a little out of whack the last couple of years. We were told we don't have the money we do have. We get into these circumstances, why not get some money back? Why shouldn't it go into our pockets?" said Duane Merchant.
"Money is great, but I am hoping it doesn't cause problems. Sometimes you need to reserve for it, too, so giving it away is great now, hopefully it will help the economy," said Donna Megregion.
"It is certainly not going to reverse our fiscal fortunes," said IU Professor Justin Ross.
In a down economy, giving money back may make political hay, but does it make good policy?
"That is the open question. I don't think we should be thinking about this at the moment as, really, an economically stimulative program?" Ross asked.
Ross believes the future is still too fuzzy for a rebate.
"There are some big lumpy costs coming around. Revenues remain somewhat uncertain," he said.
He says the state will need at least $2 billion to meet the new health care mandate. Daniels said the surplus came from some of the areas Ross believes will need the money down the road.
House Minority Leader Pat Bauer congratulated the governor for hitting the surplus, but then added, "What were the human costs paid in order to achieve this goal?"
There is also the case of the unemployment trust fund. The state still owes almost $2 billion and that has to be paid, but the governor says that comes out of a separate fund, instead of the general fund and then there are the cuts agencies and education has had to make.
"I would remind them that K-12 education is 56 percent of the entire state budget. The biggest, number one in America. Not number five or four or two, number one," Daniels said. "And it's only there because we have made it top priority and were so careful with everything else."
The governor released preliminary results on the end of the state's fiscal year during which his administration disclosed it lost track of more than $500 million in tax revenues. The fiscal year ended June 30th.
Meantime, the State Budget Committee is preparing to hire an external auditor to look at how the tax money was mishandled.
The review follows the December disclosure that $320 million in corporate tax money collected over several years hadn't been properly deposited in the state's general fund.
State officials then announced in April that $206 million in local income tax revenue wasn't properly distributed to counties.