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Indiana fiscal leaders learned Wednesday they’ll need to build the state’s next biennial budget with $2 billion less than they expected when lawmakers convened their 2025 session, further constricting what’s already been a tight budget-crafting process.
An updated revenue forecast presented to the Budget Committee projected the state’s revenue will flatline from 2025 to 2027.
For the current fiscal year, the state is also expected to bring in $400 million less than anticipated, meaning the total decrease over the next three years is $2.4 billion.
The backslide means lawmakers will need to make budget cuts during the two weeks left of the legislative session. The Senate passed a $46.8 billion budget on Tuesday.
“I was here during the recession—the ’08-’09 budget. This one scares me a lot more,” Senate budget writer Ryan Mishler, R-Mishawaka, told reporters Wednesday afternoon. “The number is a lot higher. And back then, if you remember, we had federal money to backfill it. We don’t have any federal money to backfill it. This is all on us.”
The projection, presented by the Revenue Forecast Technical Committee, says the state is expected to collect less in sales, individual income and corporate income taxes than lawmakers thought in December when they first started to put together a budget plan. Those are the taxes that generate the bulk of the state’s general fund revenue.
Lawmakers told reporters the updated revenue estimates were much lower than expected. Mishler said he had guessed over the weekend that revenue would be as much as $1 billion less than the last estimates released in December and was surprised to be so far off. Sen. David Niezgodski of South Bend said Democrats had tried to plan for less revenue as they prepared their budget amendments, but the forecast was even worse than they expected.
In explaining the drastic change since the December 2024 forecast, the committee’s report pointed to an economic outlook by S&P Global Market Intelligence that cited fluctuations in the stock market as well as tariffs and federal funding cuts and layoffs, all of which have been hallmark policies of President Donald Trump’s administration.
The report also warned that jobs and wages will likely grow at a slower rate due to the economy’s overall outlook. It estimated the state’s unemployment rate will rise from 4.3% to nearly 5% by mid-2027.
In a written statement, Gov. Mike Braun blamed the poor revenue forecast on former President Joe Biden’s policies, although many experts considered the economy to be healthy by the end of his presidency. Braun said he is working with lawmakers to pass a balanced budget that maintains the state’s reserves and funds education and other services.
“There will be some tough times ahead, but the America First economic policies we are pursuing here and in Washington will unleash an economic boom,” he said.
After the Senate approved the budget earlier this week, members of the House dissented to changes, sending it into conference committee. Lawmakers typically continue making changes to the budget up until the last day of the legislative session. The Legislature must pass a budget by April 29 or face a special session to finish it.
Mishler and House budget writer Rep. Jeff Thompson, R-Lizton, agreed that “everything is on the table” to balance the budget, which means spending does not exceed revenue. They said spending on K-12 education, which is the largest state expenditure, would be one of the last items they want to touch.
But a Braun budget priority to establish universal school vouchers—a provision the Senate cut from its budget proposal—may be tougher to fit into the budget. Mishler previously estimated it would cost about $170 million to expand the program to families at all income levels.
“We’re gonna have to make tough decisions and then make some cuts,” Mishler said. “If anybody has the audacity to come and ask us for more money, more than likely we’ll just take them out.”
Several revenue-generating proposals didn’t receive much play this session. That includes higher taxes on cigarettes and alcohol, marijuana legalization and an expansion of online gaming. Though leaders previously said they don’t legislate policy for revenue purposes, Mishler told reporters that leaders have talked about those money-makers as possibilities for making up for the revenue downturn.
The Indiana Chamber of Commerce and the Indy Chamber have heavily advocated for raising the cigarette tax from $1 to $2 per pack. In a statement Wednesday after the forecast, Indiana Chamber CEO Vanessa Green Sinders said the state must “consider new sources of revenue to ease financial constraints.”
A marijuana legalization lobbyist group called Safe and Regulated Indiana said the forecast was “an unfortunate reminder” that the state is missing out on revenue from taxes collected on cannabis sales.
As a potential recession looms, Mishler said it’s possible the revenue numbers could get worse, which he said reinforces the need for the state to maintain healthy reserves. The state currently has $2.7 billion in its savings accounts.
When asked if the projected drop in revenue will lead to cuts in state services, Mishler said he state officials will be motivated to dive deeper into their spending to find efficiencies.
One silver lining in the forecast was that the growth in Medicaid spending is projected to slow, Mishler said.
Medicaid costs, which have grown to nearly a quarter of the state’s budgeted spending, are expected to remain close the December projection, which estimated they would increase by more than $1 billion from 2024 to 2027.
Medicaid rolls have not returned to pre-pandemic enrollment after ballooning when eligibility was expanded. In December 2024, lawmakers learned the state’s budget was about $985 million short due to unexpected increases in spending and a financial management oversight.
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Expand the sales tax base to include services. The time is now.
Tax and spend GOP
Yes – punish the working class!
For sure the Super majority Republicans will not cut back on corporate welfare give aways they are so fond of granting .
Only in Indiana do we rush to pass tax cuts before we know how much revenue we need.
It’s almost like they knew.
His head is so far up Trumps diapered butt it’s scary.
And what is Indiana’s “rainy day” surplus for?
For sure, what about the supposed 2 billion “rainy day” monies that existed not so long ago, or did it get blown without taxpayers notification? Scam the money away. And the article mentions income tax will apparently be much less in this next 2 year biennial spending fun. But, since property taxes (PT) will be lowered (Ha, this I got to see…….likely another line of BS from them there “lawmakers”), the door is now wide open for all the school corporations and the many other local units of government to be allowed to increase local income taxes to make up their losses from reduced PT. What a way to run a business……lower one tax and simply raise another.
Not to beat a dead horse, but perhaps the upgrades to the Governor’s private residence and the $90,000 SUV’s should go. The Cabinet Secretaries who are making $275,000 each should also probably be ‘on the table.’
They’re fleecing us and then mortgaging our future
This is known as a self-inflicted wound. It’s going to be fun watching this circus.
“There will be some tough times ahead, but the America First economic policies we are pursuing here and in Washington will unleash an economic boom”
Bwahahahahahahaha
Amazing how that rhymes with “Pay no attention to the man behind the curtain”
“There will be some tough times ahead, but the America First economic policies we are pursuing here and in Washington will unleash an economic boom,” he said.
Lots of tough times that the rich don’t care about.
Why don’t they just increase the cigarette tax to be equal to or above some of those surrounding states? Would have positive impact on Hoosier health and add valuable dollars to the state’s coffers.
They are chicken not to consider this.
Indiana already isn’t spending enough and now they’re not even going to be able to collect enough to fund the meager services left remaining since Trump tanked the economy in record time. A sad state of affairs.
The solution is simple, roll back SOME of the tax cuts they’ve made over the past decade. Because if you or I found ourselves in this situation, we’d be looking for additional income to help get us through. And it’s not like we are a high tax state by any measure.
That, though, would take a courage that Indiana legislators simply don’t have.
Why not do something easy instead, like steal more money intended for the healthcare of the elderly or further defund medical care for those with special needs?
Ugh…. thanks to all the Indiana MAGAs that voted for trump and little trump (Braun)….
Yeah, the cackling imbecile was the better option.
The “cackling imbecile” left the “stable genius” a great economy that he promptly tanked in less than three months.
It’s like he’s not the business genius the TV show made him look like.
Yet again, Republicans mess up the economy, Democrats fix the mess they’re handed.
They’ll cut critical services at the exact moment the country enters a deep recession due to the economic policies in the White House. This is by design.
Do I have this right – decades of bragging about all the businesses coming to Indiana because it’s a low tax state combined with insistence by the same “elites” that lower taxation rates lead to higher revenues down the road is now met with “Doh…. We have a 2 billion dollar revenue shortfall, so need to cut services”? Just a theory – maybe a gerrymandered supermajority isn’t great for the residents?
Here’s the naked truth. Libertarian-oriented Republicans don’t believe in government as a service. They do believe in individual responsibility, pulling oneself up by the bootstraps. Never mind that at least half of the state’s population don’t have the physical and/or mental ability to fend for themselves. And there are not enough charitable entities in the state to help them. But that’s not state government’s problem. This state government, it seems, exists to make life easier and more comfortable for those who are fully capable of making it on their own. This is what we get with one party having all the power (which was gained by gerrymandering and funded by lobbyists looking wanting less government looking over their shoulders and behind their closed doors. All things considered, unless things change, Indiana will always be viewed as an illiterate, backwards thinking state populated by people who lack ambition and the ability to understand the sad state of their affairs here.
In which half are you?
Call a special session for mid June. By then the tariffs will be settled. Also by then China will have sank so low, they will bargin.
Nothing will be steeled for the next four years. This is what Republicans voted for and despite what right wing media is saying, this is the new reality.
Nothing will be settled for the next four years. This is what Republicans voted for and despite what right wing media is saying, this is the new reality.
lol
Sell the LEAP boondoggle and cut that bloated state workforce. Republicans should be ashamed of this fiscal mismanagement.
sell it? it’s worth nothing.
Wow!! Since when have so many Dems become business and tax experts?? shocked you can even read the IBJ. Of course, you must hate Elon Musk bc he’s stopping the Dem funding gravy train of national tax dollars….we can do that here in Indiana! You think there’s no overspending in any state government department??? The proposed budget need not be draconian…but each department can be allocated 3 to 5 % less until the revenue picture brightens! Perhaps Medicaid can be exempted until systemic cost reductions can be made….maybe we delay some road projects 18 months…..Folks, if you’ve never reduced your insurance premiums, cut things like Netflix, downsized a car or a house, etc,,,maybe this seems foreign to you….it’s possible and really shouldn’t be difficult. But thank God the Dems have been out of power in this state for 20 years or we’d be looking at bankruptcy!
John, how about you come back when they pass the cuts and tell us how what they cut is all unneeded.
We’ve already underfunded infrastructure. Go look at the reports of the health of our bridges. Go leave this state on any highway and notice how the roads cease being garbage when you leave Indiana.
We underfund caring for the old. We take the federal money intended for the care of people and spend it in buildings and CEO salaries.
When times were good, we should have invested in the future. Now times are gonna be bad and they will be even worse because our leadership was irresponsible and decided tax cuts were a better idea than future investment.
John – what make you think things will turnaround before the 2028 elections? We’re stuck with the poor trump economic disaster until then….
This feels like a bait and switch scheme. A day after lawmakers pass a tax “relief” bill, then the news beaks that the state is expecting a $2 Billion dollar shortfall.
This is just smarmy and underhanded!!!
Gov Braun’s pet project, the Mid States Corridor, should be on the chopping block if they want to truly save money. It’s a project to put a four lane highway between his hometown of Jasper and I-69 to the north. I’m assuming it would help his distribution company save more than a few dollars on fuel and labor. It’s projected to cost $735 mil to $1billion and isn’t needed, per traffic and population studies by the state. I’ve driven the current route hundreds of times and have never been stuck in traffic. It’s outside of the Indy news area, so it doesn’t get much coverage up here.
+1
Here is any easy fix. Cut off the IEDC!. They have spent over $1 B just on LEAP in the last couple years.
I believe the state should cut the budget to higher education establishments beginning with Indiana University.
In FY23, the state gave IU $623,096,000.
14 IU administrators will receive pay increases for fiscal year 2025. Each administrator will make at least $300,000 for FY 2025.
The President got a $175,000 bonus in October.
Latha Ramchand was appointed the inaugural chancellor of IU Indianapolis in 2024. She will make $609,760 during the 2025 fiscal year.
Many more examples of what I believe to be insane compensation.
I’m also not a college sports fan. I think that college sports should be completely funded through their own sponsorships and not one dollar of taxpayer money should go to support sport programs at universities.
Ohio has out spent Indiana by $10 billion on education over the last decade. It’s a deep red state that seems to be doing pretty well. The last thing Indiana should do is cut education. If anything spending should increase,
The one thing that might bring Indiana’s economy up is increased education levels. The opposite is a shrinking economy and a state that struggles to raise tax revenues because Trump Tariffs have whacked the economy built on nothing but lower paying factory jobs.
How about we stop subsidizing datacenters and warehouses with our tax dollars?
+1