Indiana governor seeks spending cuts with tax revenue drop

INDIANAPOLIS (AP) — Indiana’s state government agencies have been told to cut spending by 15% for the coming year in reaction to plummeting tax revenues during the coronavirus outbreak, the governor’s office said Friday.

State tax collections were about $960 million, or 44%, less than expected for April, and Gov. Eric Holcomb said the state could see a drop of more than $3 billion in tax revenue over the next 14 months.

“This is the first of what is likely to be a number of steps we’ll take to rein in state spending while we continue to provide critical government services to Hoosiers without interruption,” Holcomb said in a statement.

No cuts to school or university funding have been announced, although those areas saw significant cuts during the last recession in 2009-10.

A memo sent Thursday by Holcomb’s budget director to state agencies directs them to develop plans for 15% spending cuts during the new state budget year that begins in July. The (Fort Wayne) Journal Gazette first reported on the memo’s distribution.

Budget officials last month imposed a widespread hiring freeze for agencies that Holcomb oversees, such as the Bureau of Motor Vehicles, Department of Transportation, Department of Natural Resources and the state prison system.

“Unfortunately, we expect to continue to miss our revenue forecast for the remaining 14 months of this biennium,” Budget Director Zac Jackson said in the memo. “This projected loss of revenue puts a significant strain on the State’s financial resources.”

Holcomb said the planned cuts would help “maintain maximum flexibility to navigate a still very uncertain economic picture.”

“All options are on the table, and as we approach tax filing deadlines and better understand all of the federal funds available to Indiana, we will make more precise adjustments ahead of crafting a budget for next biennium,” he said.