Indiana

State Fiscal Briefs

March 2020

Indiana’s budget basics

According to the National Association of State Budget Officers (NASBO), Indiana’s total expenditures in fiscal year (FY) 2019 were $34.3 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2019 were $2.1 trillion, ranging from $4.5 billion in South Dakota to $311.3 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 $53.2 billion in FY 2017 (the most recent year census data were available), or $7,995 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 $9,449.

Indiana’s largest spending areas per capita were public welfare ($2,093) and elementary and secondary education ($1,534). 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 $55.3 billion in FY 2017, or $8,305 per capita. National per capita general revenues were $9,573. Indiana uses all major state and local taxes. After federal transfers, Indiana’s largest sources of per capita revenue were charges ($1,630), such as state university tuition and highway tolls, and general sales taxes ($1,135).

Indiana’s politics

Governor Eric Holcomb, a Republican, was elected in 2016 with 51 percent of the vote. The next gubernatorial election is in 2020.

Republicans control both the House of Representatives (67 Republicans to 33 Democrats) and Senate (40 Republicans to 10 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 2020 because representatives serve two-year terms. Senators serve four-year terms; roughly half the senatorial seats are on the ballot in 2020, and the other half will be up for election in 2022.

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 recent fiscal debates

Indiana’s current budget

Governor Eric Holcomb’s FY 2020–21 budget proposed spending increases in K–12 education, capital improvements (e.g., roads, state buildings, and fish hatcheries), and a range of tax credits aimed at encouraging economic development. The governor also emphasized, both in his budget and his 2019 state of the state address, maintaining at least 11 percent of state funds in reserve and instituting a plan for continued public savings. However, he also proposed using a $140 million surplus to pay off local pension liabilities.

The legislature passed its budget in April 2019. It included some of the governor’s proposed education spending increases, including funds to pay off local pension obligations, but it did not include increases in teacher pay (which is why teacher advocates disapproved of the budget). The final budget also included many of the governor’s infrastructure priorities and held 11 percent of funds in reserve.

Governor Holcomb gave his 2020 state of the state address in January 2020.

For more on Indiana’s budget, see