Indiana

State Fiscal Briefs

April 2021

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Indiana’s budget basics

According to the National Association of State Budget Officers (NASBO), Indiana’s total expenditures in fiscal year (FY) 2020 were $38.7 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2020 were $2.3 trillion, ranging from $4.7 billion in Wyoming to $337.7 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 $54.6 billion in FY 2018 (the most recent year census data were available), or $8,161 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 $9,801.

Indiana’s largest spending areas per capita were public welfare ($2,084) and elementary and secondary education ($1,554). 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 $58.3 billion in FY 2018, or $8,709 per capita. National per capita general revenues were $10,071. Indiana uses all major state and local taxes. After federal transfers, Indiana’s largest sources of per capita revenue were charges ($1,779), such as state university tuition and highway tolls, and general sales taxes ($1,164).

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 recent fiscal debates

Indiana’s current budget

Indiana enacted its FY 2020-2021 biennial budget in April 2019. Over the two-year period, the budget approved $34.3 billion in general-fund spending and $71.2 billion in total spending. Governor Holcomb did not propose a supplemental budget in calendar year 2020, and the legislature did not pass any legislative changes to the budget. However, in May 2020, Governor Holcomb required state agencies to cut their FY 2021 budgets by 15 percent. These cuts reduced general fund spending by $665 million.

Governor Holcomb released his FY 2022-2023 biennial budget and gave his State of the State address in January 2021. In his speech, the governor called for restoring some previous budget cuts and increasing K-12 education funding. Over the two-year period, Governor Holcomb’s budget proposes $35.9 billion in general-fund spending. Although that proposed total is higher than enacted spending during the previous biennium, some state agencies would not see their spending levels return to where they were before the governor’s cuts in calendar year 2020.

For more on Indiana’s budget, see