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July 4, 2012

State surplus triggers taxpayer refund

Maureen Hayden CNHI Statehouse Bureau Chief

INDIANAPOLIS — The State of Indiana has ended its fiscal year with a bonus for taxpayers: An automatic refund of at least $100 that they will receive next year.

Indiana Gov. Mitch Daniels announced that at a press conference Tuesday, crediting a surplus of state revenues that kicks a new law into effect: Whenever the state collects a certain amount more money than it needs to meet its yearly budget, a portion of that extra cash goes back into the pockets of Hoosiers.

The state is still closing its books for the fiscal year that ended June 30. But Daniels said the preliminary information he’s received indicates the state will have more than $2 billion in reserves. That’s about 14 percent of the state budget and that’s enough to trigger the state’s first-ever automatic taxpayer refund.

The governor said about 3 million state residents may be eligible for either the direct refund or a credit on taxes owed. Single filers should expect at least $100, while joint filers would get more than $200.

The state is also taking an equal chunk of money from the surplus — about $300 million — to put into the state’s public pension funds.

Daniels said the median amount of state income tax paid by Indiana residents is $819; that amount should go down about 10 percent next year with the refund, he said.

“There will be a double-digit discount for the typical Indiana taxpayer, sharing in the economy dividend that comes from a strong state fiscal picture,” Daniels said.

Daniels is ending his second term in office in December, before taking his new job as president of Purdue University.

He said it had been his mission to put Indiana on a strong financial footing. “We thought this was a fundamental assignment of our administration, to turn over to our successors the strongest possible position,” Daniels said.

Exactly what the state’s fiscal picture looks like won’t be known for about another week, when state Auditor Tim Berry releases the final financial report.

The surplus comes in part from money that reverted from state agencies that were instructed by the governor to return a percentage of their budget back to the state’s coffers. That is a step to help offset declining revenues caused by the recession.

Indiana law gives Daniels the power to make those cuts, and he’s exercised that power for several years. He declined to say how much of the surplus comes from cuts to state agencies. State budget officials said most agencies gave back about 3 percent. In past years, the reversions have been much bigger.

Daniels’ announcement triggered sneering comments from the Democratic House Minority Leader Patrick Bauer of South Bend. “Congratulations to Gov. Daniels for hitting his magical $2 billion in surplus and giving $100 tax credits to Hoosiers,” Bauer said in a press release. “Nevertheless, one has to ask, ‘What were the human costs paid in order to achieve this goal?’”

Bauer zeroed in on cuts made in the past, including those made to K-12 education and the state’s Department of Child Services. And he was critical of mistakes made by state budget officials who last year admitted they’d lost track of about $320 million in corporate income tax revenue and earlier this year revealed they’d failed to distribute $206 million in local income tax revenues to counties.

“Taxpayer refunds are good,” Bauer said. “We [Democrats] proposed them long ago. However, $100 per taxpayer is less than $2 per week. It buys only about a half gallon of gasoline each week. The question has to be asked, ‘How much more are you paying for other necessities?’”

Daniels, though, defended his decisions to push the state into frugal spending, saying it’s put Indiana in a position of being one of the few states that hasn’t engaged in deep deficit spending. He made reference to the neighboring state of Illinois, which currently has a $43 billion budget deficit.

“We made a different choice and I think it was the right one,” Daniels said.



Maureen Hayden is the Indiana Statehouse bureau chief for CNHI, the parent company of the Tribune-Star. She can be reached at maureen.hayden@indianamediagroup.com.

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