Indianapolis - Another financial setback for the state: Indiana's new revenue forecast is out and it could lead to more budget cuts.
It has come down to simple math. The new revenue forecast says Indiana will take in $1.8 billion less than budget projections. It has already taken in $475 million in less revenue during the first five months of this fiscal year.
Now Gov. Mitch Daniels is asking K-12 to make a sacrifice. K-12 education was scheduled to get a 1.3-percent increase but that now appears to be wiped out. The governor says the debate over using the reserves is now over. He will use the reserves but he estimates he will still need at least $300 million from K-12 to keep the state in the black.
"We already cut state agencies by 20 percent and higher education by 6 percent. We are now forced to our last resort. K-12 spending is half the entire state budget and it will have to contribute something to keep us in the black. I have asked the state Board of Education to meet quickly and recommend how much reduction can be absorbed without reducing the number of classroom teachers. I also asked for recommendations superintendents, school boards and teachers themselves can take to prevent layoffs," said Gov. Daniels.
One option would be for teachers to follow the lead of all state employees and much of the private sector, according to the governor, and not take pay increases.
Daniels suggested among other things that schools could absorb some of their cuts by joining the state's program for buying materials in bulk. They could also join the state's health insurance program and pay less in premiums, he said. The Board of Education is scheduled to meet Thursday.
The state's current budget is about $27.6 billion.
Dennis Costerison, executive director of the Indiana Association of School Business Officials, said he was not surprised about the cuts.
"We're next in line," he said.
A bipartisan panel of fiscal analysts told the State Budget Committee that an updated look at economic conditions caused it revise its May revenue estimates downward. It said the state would take in about $1 billion less, or nearly 8 percent, than previously expected during the fisscal year that ends in June.
Tax collections for the next fiscal year are projected to be nearly $800 million less, or 5.8 percent, than previously predicted.
"The revenue loss in this recession is much, much more profound than in past recessions," said Dan Novreske, a member of the forecast committee.
The full Legislature is set to convene on Jan. 5. Besides the cuts the administration is making on its own, Daniels will present a cost-savings package for lawmakers to consider.
It will include a proposal to combine the administration of the Public Employees Retirement Fund and Teachers Retirement Fund. That is projected to reduce investment management fees and administrative duplication by at least $50 million per year.
He will also ask lawmakers to merge or eliminate several boards and commissions but said he will not seek any tax increases.
Daniels said debate over trying to preserve $1 billion in reserves was now over.
"The only question is whether we will use every penny of them or find a way to have something left," he said.
House Speaker Patrick Bauer, D-South Bend, and Senate President Pro Tem David Long, R-Fort Wayne, have said they will not consider any bills that spend money during the upcoming session.
Rep. Peggy Welch, D-Bloomington, said she could not fault Daniels, a Republican, for turning to K-12 education for savings.
"Everything has to be on the table," Welch said. "When you're in this fiscal situation you have to look at it all. But I know that we as House Democrats will be looking very carefully at what these cuts might be."