It would be easy to forget given the deluge of ads in the U.S. Senate race that there are other contests on the ballot: judges, statewide office-holders, legislators.
But one of the most far-reaching questions on the ballot could be a proposed change to the Indiana Constitution that would make it harder for the state to spend down its reserves, borrow money or dip into pension funds during tough economic times.
The proposed balanced-budget amendment says the state can’t spend more in a given year than it receives in revenue—and that lawmakers can’t skip putting cash into public pension funds to save money.
That seems like a no-brainer. Of course, the state should live within its means. Of course, it shouldn’t take out loans to pay its everyday expenses. We all know it’s bad news to skip payments into pension funds, pushing liabilities into the future.
But government budgeting isn’t always so easy. Lawmakers set aside money in various funds—a rainy day fund, an education reserve fund, a savings account for Medicaid—to prepare for economic downturns. Those accounts are meant to ensure that the state can pay its debts, keep funding schools and just keep the lights on when tax revenue dries up. In addition, past administrations have used various accounting tricks to try to make budgets balance when they’d otherwise need to impose severe cuts.
All of that would be more difficult under the proposed change.
That’s what makes the decision about a balanced budget amendment so crucial—and it’s why the details of such a proposal matter. We think Indiana is doing it right.
Already, the Indiana Constitution restricts state government from issuing some types of debt, although officials have found ways around the provision. But Indiana is one of the few states without an amendment that specifically addresses annual revenue and spending.
That’s generally been OK. Indiana has had a series of fiscally responsible administrations that have maintained strong reserves and spent them down only when faced with especially tough times. But there’s no guarantee such conscientious leadership is in the state’s future.
Also, the Legislature has for decades given governors the authority to restrict spending—even spending that’s been approved in a budget. That’s also helped administrations manage their way through downturns. But such authority is not assured.
So a balanced budget amendment could force elected leaders to make tough decisions in the face of adversity, even if they weren’t inclined to do so otherwise. And the amendment includes an important safety valve, which is a key reason IBJ can get behind it.
The amendment allows the state to spend more than its revenue with a two-thirds vote in both the Indiana House and Senate. That means reserve accounts would still be available fallbacks—if a supermajority of lawmakers agree to the spending.
That’s a much higher bar than is necessary today. And while Republicans currently hold supermajorities in both chambers, that won't always be the case. In many years, achieving a two-thirds majority would mean finding bipartisan support.
With a safety valve in place—and requirements that pensions be funded, even during tough times—we think adding a balanced budget amendment to the Indiana Constitution is smart. We urge Hoosiers to vote yes.•
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