Governor orders state spending cuts

Indianapolis - Governor Mitch Daniels on Friday ordered state agencies to make spending reductions, following the fourth straight month of lower than expected state revenues for Fiscal Year 2010.

Revenue collections in October were $46 million below the forecast. For the first four months of the fiscal year, general fund revenues are $309 million below projections, a decrease of 7.4%.

The governor ordered reductions that are expected to save the state $300 million to $400 million over the two year budget cycle.

Reductions ordered by the governor include state agencies reducing spending by at least 10% from the as-passed budget. The governor ordered 5% cuts in July. The lieutenant governor, auditor, treasurer, secretary of state, and superintendent of public instruction have all committed to 10% spending reductions in their office budgets.

Reimbursements to some Medicaid providers will be reduced. State employees will not receive a pay increase in 2010, the same action Governor Daniels took in 2009.

Governor Daniels said he will not accept his full pay in 2010, the same action he took for 2009, when his salary was scheduled to increase from $95,000 to $107,882. State agencies will offer voluntary unpaid leave for the remainder of the current fiscal year.

State agency capital projects will be deferred. This includes new buildings or structures, infrastructure and system upgrades and site improvements. Some dedicated funds will be transferred to the general fund.

"We have seen enough to know that new actions are necessary if we are going to protect Indiana taxpayers against the tax increases that are happening in most of the rest of America," Daniels said. "Indiana has distinguished itself among the states, avoided tax increases, maintained all vital services, because we have been willing to act on time, to deal with our difficulties."

The state ended the 2009 fiscal year with $1.3 billion in reserves. If the current revenue trend continues and the governor had not ordered spending cuts, state budget agency officials estimate the reserves would be depleted by August, 2010. "We agreed to dip into reserves $300 million over two years and now it's gone in four months," Daniels said. "If we keep dipping, it will all be gone next August."