State tax collections were once again significantly below projections in November, prompting Gov. Mitch Daniels to announce more budget reductions, including $150 million in cuts to Indiana's public colleges and universities.
Daniels also said a $15 biweekly matching contribution to state employees for deferred compensation retirement accounts will be suspended in 2010, and the Department of Administration has been ordered to further reduce the number of state-owned vehicles.
"We find these moves very unwelcome but we will do what is necessary to protect the taxpayers of Indiana against the severe service disruptions or the tax increases that are happening in almost every other state," Daniels said.
Tax collections for November were $144 million below a May forecast, and for the first five months of the fiscal year are $475 million, or 9 percent, below target. Daniels said if previously announced budget cuts and the new steps were not made, what was a $1.3 billion surplus in July would be wiped out by next summer.
Last month, Daniels ordered state agencies to cut their budgets by 10 percent and said employees could take up to a month off of unpaid leave. Thirty-three state employees have been laid off, and those still on the job will get no pay raise this coming year.
Daniels said those actions are expected to save $300 million to $400 million, and the newly announced cuts are estimated to save the state at least $159 million more over the next 18 months.
"We are taking steps to offset shortfalls as they occur," he said. "The chance that revenues will suddenly begin to resemble the forecast seems highly unlikely."
A new revenue forecast is due out Dec. 15, and Daniels said he hoped it was more accurate.
Daniels said he briefed legislative leaders on the new round of cuts, and his impression was that they understood the steps were necessary. House Speaker Patrick Bauer, D-South Bend, already has said his chamber would not consider any bill that spends money during the legislative session that will begin in earnest on Jan. 5.
Daniels also said the presidents of the state's seven colleges and universities were briefed on the cuts, and "school after school said they wanted to be part of the solution."
The $150 million in cuts to higher education over the current two-year budget cycle is about 6 percent of state funding for their operating costs. Daniels has charged the Commission for Higher Education to work with each institution to determine its share of cuts.
Daniels also will present a package of cost-saving initiatives to the General Assembly for the upcoming session. It will include a proposal to combine the administration of the Public Employees Retirement Fund and Teachers Retirement Fund. That is projected to reduce investment management fees and administrative duplication by at least $50 million per year.
He will also ask lawmakers to merge or eliminate several boards and commissions.
Public schools got very slight spending increases in the two-year budget that began on July 1, and Daniels said he hoped to preserve that. But he said he could not guarantee it.
Indiana University President Michael McRobbie said he appreciated that other cuts were made before turning to higher education, and accepted "the reality that we cannot expect to be immune from the consequences of this economic downturn and its impact on state revenues."
But he said he will stress that the cuts to higher education be fairly allocated among colleges and universities.
Purdue University officials said they already were taking steps to cut costs, and supported Daniels' move toward more belt-tightening.
Speaker Bauer said he understood the difficult fiscal solution the state was in and there are no easy solutions.
"These cuts to higher education unfortunately come at a time when we need to support schools that provide the training that enables Hoosiers to gain additional skills to find good-paying jobs that can help restore our economy," Bauer said.
But, he said, "Indiana House Democrats will seriously review and consider the legislation that contains the cost savings proposed by the governor."