Remember when Indiana was on an economic hot streak, an “island of prosperity,” if you will? Well, those days are gone with election season, apparently. Now we are getting wave after wave of revenue shortfalls for state government.
Gov. Daniels has called for a plan to reduce K-12 education funding by $300 million without laying off teachers or increasing class sizes.
The governor said the decision was forced by continued shortfalls in state tax collections and a new revenue forecast, delivered just before his announcement Tuesday, that projects Indiana will take in $1.8 billion less in revenue during the next year than expected only six months ago.
Without spending cuts to match it, that lost revenue will eliminate the state’s surplus, projected to be $1 billion at the end of the two-year $27.6 billion budget passed in June.
Obviously, I like to pick on Gov. Daniels’ campaign rhetoric, but Indiana is hardly the only state struggling. And, for those of you who are equally happy to pick on President Obama, the economic collapse started rolling on President Bush’s watch and, I think, in response to his policies. One thing you can be sure of, though, the Club for Growth and Heritage Foundation will use these hard times to call for gut financial regulations, repeal the minimum wage, and cut taxes, especially estate taxes — but that’s because these folks are as constant as the north star *any* financial situation is an excuse to call for these things. Remember how Bush’s tax cuts were the cure for our budget surplus *and* our budget deficit? Remember how “Shimmer” was both a floor wax and a dessert topping? But I digress.
Daniels suggested that schools had gotten a free ride for too long. Other state agencies had been cutting and cutting, and now it’s the schools’ turn since they make up such a large part of the budget.
He suggested schools consider joining the state’s health insurance program, procurement contracts for buying supplies — and foregoing teacher pay increases.
“I’d like the (state) Board of Ed to talk about that,” Daniels said. “The data I’ve seen says that in a year in which the average Hoosier income went down 2.5 percent, the average teacher salary will go up more than 4 percent.”
The Indiana State Teachers Association disputed those numbers, saying that in 2010, pay for most teachers goes up an average of 1.65 percent.
Democrats are skeptical of Daniels’ motives in preserving the rainy day fund in the face of the monsoons that have been here for quite some time. They think he just wants to keep some money in the bank to have a big number to tout when he runs for President. They suggest that it’s raining and perhaps we should go to the rainy day fund before cutting education; then, if education needs to be cut, we cut.
I don’t think Abdul is wrong when he suggests that this is a good time to look for waste and creative solutions in school budgets, but I think we ought to be skeptical if/when the proposed cuts are inevitably damaging to the teachers’ unions. Breaking the teachers’ unions seems to be the dessert topping/floor wax in any proposals concerning education.
The Indy Star article continues:
For 14 straight months, Indiana’s collection of sales, income, corporate and other taxes has fallen short of expectations. In this fiscal year alone, the state has collected $475 million less than it expected.
This highlights the danger in shifting from property taxes to other kinds of taxes. Property taxes are predictable which is important for government planning, given that the controls on government spending and budgeting lead necessarily to a loss of flexibility. As we’re seeing, these other kinds of taxes are much more volatile. Indiana lawmakers need to articulate their plan for dealing with this volatility as they rush to enshrine that mess of a property tax cap amendment in the Indiana Constitution out of political expediency.