Gov. Mike Pence said he will need to use caution when coming up with a proposed state budget for the next two years after numbers released Thursday showed revenue was flat in fiscal 2014 and projections for the next fiscal year were lowered by $129 million.
There was some good news, though. The state budget forecast predicts annual revenue growth of 2.4 percent in 2016 and 3.2 percent in 2017.
"This revenue forecast confirms the growth we are seeing across our state and should be an encouragement to every Hoosier," Pence said. "While the December revenue forecast projects economic growth for our state, Hoosiers may be assured that our administration will continue to exercise caution as we finalize our recommended budget for the next two years."
Republican Sen. Luke Kenley, chairman of the State Budget Committee, said the most important thing when reviewing the numbers is to watch for trends.
"We would say this is a moderately positive forecast for the next two years at this point in time. Of course, we'll be preparing budgets based on these percentages. Cautiously optimistic, I guess, would be the watch word," he said.
This will be the first budget proposed by Pence and his administration. Former Gov. Mitch Daniels and his advisers came up with most of the current budget. Pence already has told department heads to reduce their 2015 appropriations by 3 percent and to find other potential cuts to offset requests for new or expanded programs.
Democrats, though, said the total revenue isn't important if the money isn't spent in a way that helps taxpayers.
Rep. Greg W. Porter of Indianapolis, the ranking Democrat on the Indiana House Ways and Means Committee, said the number the Pence administration is most interested in is a $2 billion surplus.
"That is their cherished figure because it represents a surplus amount that is supposed to show the world that Indiana is being run the right way," he said.
The forecast calls for sales tax revenues to increase by $13.8 million for the current year, or 4.8 percent, then grow 4.1 percent and 4.7 percent the next two years.
The forecast also projects revenue from casinos and racinos to drop below 2003 levels in 2015, said David Reynolds, a fiscal analyst who presented the revenue projections to the committee.
"Competition continues to be the driving force on casino and racino taxes," he said. "We continue to see the pressures from Illinois, Ohio and the south Michigan tribal casinos."
The forecast also shows that revenue from the sale of cigarettes is down $13.8 million. That creates a problem for Pence, who plans to use cigarette tax revenue to help pay for the state's Healthy Indiana Plan, his plan to expand Medicaid using a state-run alternative.
Doug Handler, chief U.S. economist at IHS Global Insight, told the committee Indiana's recovery from the recession has been "very solid" and steady.
"It hasn't been a bust, a boom and leveling off," he said. "It's a bust and a very dynamic return to normalcy. That sort of characterization describes our forecast through 2015."