Indiana’s budget basics

According to the National Association of State Budget Officers (NASBO), Indiana’s total expenditures in fiscal year (FY) 2021 were $44.7 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2021 were $2.7 trillion, ranging from $4.7 billion in Wyoming to $512.8 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, Indiana’s combined state and local direct general expenditures were $59.5 billion in FY 2019 (the most recent year census data were available), or $8,843 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $10,161.

Indiana’s largest spending areas per capita were public welfare ($2,233) and elementary and secondary education ($1,724). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

Indiana’s combined state and local general revenues were $62.3 billion in FY 2019, or $9,262 per capita. National per capita general revenues were $10,563. Indiana uses all major state and local taxes. After federal transfers, Indiana’s largest sources of per capita revenue were charges ($1,883), such as state university tuition and highway tolls, and general sales taxes ($1,203).

Indiana’s politics

Governor Eric Holcomb, a Republican, was elected in 2020 with 57 percent of the vote. The next gubernatorial election is in 2024.

Republicans control both the House of Representatives (71 Republicans to 29 Democrats) and Senate (39 Republicans to 11 Democrats), with veto-proof majorities in both houses. Control of the governor’s mansion and each house of the legislature gives Republicans a trifecta in Indiana. All Indiana House seats are on the ballot in 2022 because representatives serve two-year terms. Senators serve four-year terms; roughly half the senatorial seats are on the ballot in 2022, and the other half will be up for election in 2024.

Indiana’s budget institutions, rules, and constraints

Indiana uses a biennial budget. The legislature is not required to pass a balanced budget, nor is the governor required to sign one, and deficits may be carried over into the following year. However, the state has budget rules that require lawmakers to balance revenues and expenditures. Indiana further limits spending growth through a statutory formula, but the spending cap may be overridden by a simple legislative majority. The state limits total authorized debt incurred by the state but not debt service.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

Indiana’s current budget

Governor Holcomb has not released a supplemental budget proposal in 2022 (the state uses a biennial budget). He gave his state of the state address in January 2022.

Indiana enacted its FY 2022-2023 biennial budget in April 2021. The enacted budget included total spending of $46.2 billion in FY 2022 and $45.9 billion in FY 2023, plus general fund appropriations of $18.5 billion for FY 2022 and $18.9 billion for FY 2023.

Under the American Rescue Plan, Indiana will receive $3.1 billion in direct state fiscal aid and $2.2 billion in local government aid from the federal government. As of January 2022, Indiana had spent part of its ARP funds on refilling its unemployment insurance trust fund, broadband expansions, economic development, public safety, and public health programs.

According to NASBO, Indiana’s recent expenditure totals (general fund spending/total spending, including federal transfers) were:

• FY 2021: $18.1 billion/$44.7 billion

• FY 2020: $16.7 billion/$37.7 billion

• FY 2019: $16.2 billion/$34.0 billion

For more on Indiana’s budget, see

• the Indiana Office of Management and Budget,
• Indiana’s State Budget Agency, and
• the Indiana Transparency Portal.

Indiana’s economic trends

Indiana’s per capita income (per the Bureau of Economic Analysis) was $56,153 in 2021, ranking 33rd among the states. It was below both the national average of $63,444 and the Great Lakes regional average of $59,346. The state’s median household income (five-year estimate) was $58,235 in 2020, ranking 35th among the states and below the national average of $64,994. Indiana’s poverty rate was 12.9 percent in 2020 (five-year estimate), above the national rate of 12.8 percent.

Although Indiana’s averages tell a story about the entire state, Indiana is composed of diverse localities. For example, the city of Gary’s median household income was $31,315, and its poverty rate was 33.1 percent; the city of Zionsville’s median household income was $137,265, and its poverty rate was 3.8 percent.

Indiana’s unemployment rate historically tracks the national average. (See how COVID-19 is affecting state employment and earnings data.)

Unemployment rates (like other economic indicators) often vary significantly by race and ethnicity. In Indiana, the average unemployment rate in 2021 was 3.3 percent for white residents, 8.6 percent for Black residents, and 3.5 percent for Hispanic or Latino residents. (This is preliminary data. See the 2020 data for a more detailed breakdown of state unemployment rates by race and ethnicity.)