The $3B question: How will Indiana spend the next round of federal aid?

Indiana Statehouse (IBJ file photo)

The state of Indiana is expected to receive about $3 billion from the latest federal relief package. The plan for how the money will be spent is still in the works, state leaders said Wednesday.

The $1.9 trillion American Rescue Plan, signed by President Joe Biden last week, includes $350 billion for state and local governments. Preliminary estimates show that Indiana will get about $5.6 billion under the plan, with $2.6 billion of that earmarked for cities and counties throughout the state. The state is also expecting to receive $200 million for a capital projects fund.

The funding can be used to mitigate the impacts of the pandemic, leaving Gov. Eric Holcomb’s administration with plenty of options. When asked how he would spend it, Holcomb said “wisely, in one word.”

Unlike the $2.4 billion the state received from the Coronavirus Aid, Relief, and Economic Security Act last year, the new funding can be used for revenue replacement, but unlike some other states, Indiana has maintained a strong fiscal position throughout the pandemic.

The state ended fiscal year 2020 with a $900 million deficit, but that was largely caused by the delay in income tax payments from April to July, and the state’s reserves were able to cover the shortfall. Indiana’s fiscal year runs from July 1 through June 30.

The reserve balance dropped to about $1.4 billion after the end of fiscal year 2020, but state budget leaders expect that to bounce back up to $2.3 billion by the end of fiscal year 2021.

The governor’s proposed two-year budget would also keep the reserve balance above $2 billion each year—and that’s without any new federal aid.

Office of Management Director Cris Johnston said Wednesday that the funding can also be used in areas such as water, sewer and broadband, he did not say whether that’s something the Holcomb administration would pursue.

“Our goal has been to use the money as judiciously as possible to create the greatest impact, positive impact, for Hoosiers,” Johnston said. “Also, think about how can we use the money to make an enduring impact beyond the life of or the use of this money, but also at the same time, not create any sort of obligation that the state cannot live up to after the use of this money.”

Johnston said the state also is waiting for more guidance from the U.S. Department of Treasury before moving forward on how to spend the money.

“We don’t want to allocate dollars for a program that’s ineligible down the road,” Holcomb said.

Holcomb’s administration oversaw and directed the spending of the $2.4 billion CARES Act money, but this time around, it seems more likely for state lawmakers to be involved.

Holcomb said he met with legislative leaders earlier on Wednesday to discuss the federal aid.

“We have the ability to emerge and accelerate away from this pandemic because of the strong position we were in and this assistance that’s coming our way,” Holcomb said. “But it will be a team effort.”

State lawmakers are currently drafting the next two-year budget, which should be finalized before the Legislature adjourns at the end of April.

Senate President Pro Tem Rodric Bray has said it’s possible at least some of the funding will be folded into the budget and its uses appropriated that way.

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2 thoughts on “The $3B question: How will Indiana spend the next round of federal aid?

  1. Since no Republicans voted for this bill and we are about as Republican of a state as you can be, I say we should walk the talk and send it back.

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