Indiana's public universities could see their budgets cut another 2 percent if state tax collections continue lagging behind expectations, Gov. Mike Pence's budget director said Thursday.
Budget Director Brian Bailey told members of the State Budget Committee that tax collections actually fell between 2013 and 2014. He says that unless they meet expectations for 2015, universities will have to cut roughly $27.5 million.
Bailey said the state's universities will still see a net increase in funding because of spending approved in the state's 2014-15 budget.
Cuts to the state budget made by the governor have continued as Indiana's economy slowly improves. Pence sold the state plane last year and cut various agencies after learning that tax collections were failing. The state's tax collections during the 2014 budget year, which ended in June, came in slightly less than what the state collected in 2013.
"We are concerned that fiscal year 2014 did not exceed prior-year collections," Bailey said.
Pence's staff alerted state agencies at the start of this current year to plan on withholding 3 percent of their budget again in 2015. But Bailey noted that the state's K-12 education system has been spared those cuts.
Senate Appropriations Chairman Luke Kenley, R-Noblesville, led about a half-hour of questioning of Pence's budget director Thursday. He said he was concerned that cuts in higher education would contribute to further tuition increases.
Rep. Terry Goodin, D-Crothersville, pointed out that the state's cash reserves — roughly $2 billion, or 13.7 percent of the amount the state spends each year — would be more than enough to trigger the state's automatic tax refund. Democratic lawmakers accused the previous administration of gutting services in order to trigger the politically popular tax refund.
"It sounds like we're setting up another automatic tax refund," he said.
Kenley said Goodin's question and others will be important as lawmakers work up their next two-year budget during the coming session. Lawmakers meet in January for their "long session", which will almost certainly be dominated by budget concerns.
Pence has been laying the groundwork for changes in the state's tax code, though it remains unclear how much he will push for during the 2015 session.
The budget cuts — also called "reversions" — are central to a lawsuit filed by adoptive families alleging the state shorted them payments. The families argue that roughly $240 million was cut from the Department of Child Services and used to replenish the state's cash reserves, while not paying them. However, Pence announced this week that the families would be paid the subsidies for 2015.
Kenley asked budget committee members Thursday not to discuss the issue because the lawsuit is pending.