Pandemic-created drop in tax collections leads to state spending cuts • Northwest Indiana Business Magazine

Pandemic-created drop in tax collections leads to state spending cuts

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Gov. Eric Holcomb
Gov. Eric Holcomb

The pandemic which led to stay-at-home orders and reduced business activity led to reduced tax collections in April and now calls for cuts in state spending.

Gov. Eric Holcomb on May 22 asked the State Budget Agency to reduce appropriations to state agencies by 15% for its 2020 fiscal year because of the sharp drop in April’s reported state revenues and to prepare for a continued decline in state revenues because of the economic impact of COVID-19. The state announced May 8 April tax collections fell $964.2 million or 43.9% when compared to tax collections in April 2019.

“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. “It will be imperative that we effectively manage our resources.”

Holcomb said during the last economic downturn, the state’s general fund revenues were nearly $3 billion less than forecasted.

“(The State Budget Agency) estimates we could face an even greater loss of general fund revenue in the final 14 months of this biennium,” he said.

The state is reducing spending for the remainder of its current fiscal year, which ends June 30. The state reviewed several areas to cut costs including operations, leased office space, travel, and hiring.

Holcomb said the state either will not move forward or will delay several previously announced projects.

The state said it will use $291 million in reserves to pay for several capital projects approved in the 2020 legislative session. Bonding authority may be used to move forward with those projects later, the state said.

Another $110 million for maintenance, which included about $70 million for state parks was postponed as was $65 million for the Next Level Trail grants program.

“By taking immediate action to tighten our belts across state government, we will maintain maximum flexibility to navigate a still very uncertain economic picture,” Holcomb said. “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.”


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