Budget Shortfall Solution

Budget Shortfall Solution (with Taxpayer Friendly Improvements to the version of House Bill 1001 (SS) amended by the Indiana Senate Finance Committee on June 13, 2002):

Budget Shortfall Solution (with Taxpayer Friendly Improvements to the version of House Bill 1001 (SS) passed by the Indiana House of Representatives on June 6, 2002):

Recent revenue and spending increases have been excessive. Per capita state revenues increased 22.1 percent from 1997 to 2001, while per capita state spending increased 29.6 percent. These revenue and spending increases were both more that twice the inflation increase of 11.0 percent. Put another way, state spending increased $3.6 billion more than was justified by population and inflation increases the last four years. There is so much excess spending built into the state budget that this biennium�s budget shortfall can be easily offset without tax increases.

Using the most generous estimates that are reliably available, the state�s budget shortfall this biennium will be less than $2.2 billion. All but $896.3 million of the shortfall has already been offset with fund transfers and spending cuts. Various General Assembly sources have publicly identified an additional $409.8 million in fund transfers and an additional $486.5 million in spending cuts that can be used to finish balancing the budget. Absolutely no tax increases are needed to offset this biennium�s budget shortfall.

Governor O�Bannon is making Indiana�s tax and spend crisis worse with his insistence that taxes be unnecessarily raised to balance the budget. He has played media games with budget cuts that were selected primarily to generate special interest support for tax increases. Governor O�Bannon�s actions the next couple of months will show whether he wants to be part of the solution or will continue to be part of the problem.

The additional fund transfers and spending cuts that have been identified to finish balancing the budget do not have to include the $289 million monthly school corporations payment Governor O�Bannon is authorized to delay until the 2005 fiscal year. School superintendents do not have the delayed monthly payments included in their budgets, and could use this windfall to replace Governor O�Bannon�s recent cuts to special education, summer schools, full-day kindergarten, and other specialty programs. If Governor O�Bannon follows through with the unneeded monthly school corporation payments delay, he will have chosen political maneuvering over problem solving.

Indiana Senate Republicans are also guilty of conspiring to unnecessarily raise taxes to balance the budget. On April 25, Senate Republican leaders proposed a tax restructuring plan that will increase taxes $522.5 million this biennium. The inadequate problem-solving ability in the Senate is demonstrated by the following quote from Senator Garton in The Indianapolis Star on April 26: "Governors win special sessions. If we don�t pass something, the Governor will call us back. I really don�t want to spend all summer in Indianapolis. It�s very clear the Governor wants a tax increase, period. The Governor is going to have his tax increase."

Informed Hoosiers know there is a tax and spend crisis. They need to help solve this problem by identifying and supporting candidates in the May 7 primary who have the political will and wisdom to not increase taxes during this time of recession.

Sincerely,

Aaron Smith, Founder
www.watchdogindiana.org

Budget Shortfall Solution For The July 1, 2001 To June 30, 2003 Biennium
Changes To The State General Fund And The Property Tax Replacement Fund
(compiled June 16, 2002)
(amounts expressed in millions of dollars)
NOTE: The blue budget actions have actually been completed (the other budget actions are proposed for the 2003 fiscal year).

Description Of Budget Shortfall	Increase	Decrease
Revenue Shortfall (see Note 1)		1,530.4
Medicaid Spending Increase From Day Court Case (see Note 2)		323.0
Medicaid Spending In Excess Of Appropriation (see Note 3)		251.0
2001-02 Legislation Cost (from 04/25/02 Senate Repub. handout, see Note 4)		68.8
Grand Total Budget Shortfall		2,173.2

Description Of Fund Transfers Already Made	Increase	Decrease
Build Indiana Fund Transfer (for state projects) DONE 04/08/02	183.7
Build Indiana Fund Transfer (for local projects) DONE 04/08/02	60.2
Build Indiana Fund Transfer (for pre-2001 projects) DONE 04/08/02	3.7
Tobacco Master Settlement Fund Transfer DONE 04/08/02	60.0
Other Dedicated Funds Transfers DONE 04/08/02	125.1
Additional Dedicated Funds Transfers (see Note 11) DONE 04/15/02	9.0
Subtotal Fund Transfers Already Made	441.7
Description Of Spending Cuts Already Made Or Identified	Increase	Decrease
Family & Social Services Administration Cuts (Notes 13a-b) DONE 05/28/02	33.1
Department Of Commerce Cuts (see Note 14) DONE 05/28/02	7.5
Voluntary Furlough Program (one day off a month without pay) DONE 05/28/02	4.0
Department Of Corrections Cut (see Note 15) DONE 05/28/02	3.2
Dept. Of Health Cut (Office of Women's Health reduction) DONE 05/28/02	2.6
Indiana School For The Deaf Cuts (see Notes 16a-c) DONE 05/28/02	1.0
Additional Budget Changes (see Notes 17a-b) DONE 05/28/02	151.6
Higher Education Operating Funds Payments Delay DONE 03/28/02	91.0
Higher Education Operating Funds Cuts DONE 03/28/02	5.6
Higher Education Building Repair And Renovation Cuts DONE 03/28/02	65.3
Higher Education Technology Cuts DONE 03/28/02	58.0
Higher Education Additional Cuts DONE 03/28/02	9.7
K-12 Public Schools Tuition Support Transfers (see Note 5) DONE 03/14/02	115.2
K-12 Public Schools Categorical Grant Cuts (see Note 6) DONE	35.4
State Agency Cuts (7% except education and prop. tax relief, FY 2002) DONE	113.0
Family And Social Services Administration Cuts DONE 02/18/02	44.0
Department Of Corrections Cuts DONE 02/18/02	16.5
Department Of Natural Resources Cuts DONE 02/18/02	8.2
Department Of Health Cuts DONE 02/18/02	5.2
Indiana Schools For The Blind And Deaf DONE 02/18/02	1.9
Other State Agency Cuts (for FY 2003) DONE 02/18/02	33.2
State Employee Pay Raises Suspension (FY 2002) DONE	15.0
Teachers Retirement Fund Cost Of Living Appropriation Cut DONE	15.0
Subtotal Spending Cuts Already Made Or Identified	835.2
Total Budget Changes Already Made Or Identified	1,276.9

Description Of Fund Transfers Not Yet Made	Increase	Decrease
Rainy Day Fund Transfers (see Note 7)	255.0
Medicaid Reserve Fund Transfer (see Note 8)	100.0
State Police Funding Shift (to MVHA & Motor Carrier Reg. Fund, see Note 9)	54.8
Subtotal Fund Transfers Not Yet Made	409.8
Description Of Spending Cuts Not Yet Made	Increase	Decrease
State Capital Projects Cuts (see Note 9)	64.0
Horse Racing Industry Subsidy Cut (see Note 7)	10.0
Local Taxing Units PTRC Delay (to FY 2005, see Note 10)	154.0
Medicaid Spending Cuts (see Notes 7 and 12a-h)	206.1
Subtotal Spending Cuts Not Yet Made	434.1
Total Budget Changes Not Yet Made	843.9

Revenue From Improved HB 1001 (SS)	52.4

Grand Total Budget Changes	2,173.2

Budget Changes Not Needed
DELETE School Corporation Payments Delay (to FY 2005, see Note 7)	289.0
REDUCE Medicaid Spending Cuts (see Note 7)	43.9

Notes:
1. Revenue Shortfall from 11/14/01 forecast updated with May 2002 SBA monthly revenue report.
2. Actuarial projection on 03/07/02 for retroactive Medicaid payments to 18,000 claimants.
3. Medicaid Spending In Excess Of Appropriation based on OMPP December forecast.
4. Legislation Cost includes cost of federal IRS update in HEA 1195 and costs from other legislation.
5. HB 1196 passed by IN Gen. Assembly allows K-12 debt serv./transportation/capital proj. transfers.
6. Categor. Grant Cuts include special ed., summer sch., full-day kindergarten, other specialty prog.
7. Included in the 11/15/01 O'Bannon-Kernan Balanced Budget Plan.
8. Included in the 04/25/02 Indiana Senate Republicans tax restructuring compromise.
9. Included in the HB 1004 Indiana Conference Committee report proposed on 03/13/02.
10. PTRC distributions delay in HB 1004 version passed by IN House of Representatives on 02/04/02.
11. Environ. Emergency, Recycled Goods Market Promotion, License Branch Computer Eq. funds.
12a. $9.0M annual Medicaid savings from dr. approval for brand-name instead of generic drugs. DONE
12b. $30.0 million annual Medicaid savings from a preferred drug list.
12c. $3.4M annual Medicaid savings from limits on patients using multiple doctors and pharmacists.
12d. $7.0M annual Medicaid savings from prior authorization for early drug refills and other actions.
12e. $2.0M annual Medicaid savings from requiring pharmacists to bill ins. companies first for drugs.
12f. $1.0M annual Medicaid savings from expanding prior authorization program for prescription drugs.
12g. $0.6 million annual Medicaid savings from limiting the days supply of prescription drugs.
12h. $153.1 million of annual Medicaid savings have not yet been identified.
13a. FSSA will reduce program growth to counter domestic violence and cut Youth Services Bureau.
13b. FSSA will reduce administrative expenses in the Division of Family and Children.
14. DOC cuts will reduce grants for development and promotion of tourism.
15. Department of Corrections will eliminate the sex-offender treatment program at New Castle prison.
16a. IN Deaf School will eliminate nearly all temporary employees and 4 days at start of school year.
16b. IN Deaf School will furlough administrative/supervisory employees 2 weeks each school year.
16c. IN Deaf School will put employees on a four-day work week during the summer.
17a. Cuts will be divided among more than 40 state agencies and programs.
17b. Existing contracts will be renegotiated, bonds refinanced, and unused funds tapped.

Budget Shortfall Solution For The July 1, 2001 To June 30, 2003 Biennium
Changes To The State General Fund And The Property Tax Replacement Fund
(compiled June 11, 2002)
(amounts expressed in millions of dollars)
NOTE: The blue budget actions have actually been completed (the other budget actions are proposed for the 2003 fiscal year).

Description Of Budget Shortfall	Increase	Decrease
Revenue Shortfall (see Note 1)		1,530.4
Medicaid Spending Increase From Day Court Case (see Note 2)		323.0
Medicaid Spending In Excess Of Appropriation (see Note 3)		251.0
2001-02 Legislation Cost (from 04/25/02 Senate Repub. handout, see Note 4)		68.8
Grand Total Budget Shortfall		2,173.2

Description Of Fund Transfers Already Made	Increase	Decrease
Build Indiana Fund Transfer (for state projects) DONE 04/08/02	183.7
Build Indiana Fund Transfer (for local projects) DONE 04/08/02	60.2
Build Indiana Fund Transfer (for pre-2001 projects) DONE 04/08/02	3.7
Tobacco Master Settlement Fund Transfer DONE 04/08/02	60.0
Other Dedicated Funds Transfers DONE 04/08/02	125.1
Additional Dedicated Funds Transfers (see Note 11) DONE 04/15/02	9.0
Subtotal Fund Transfers Already Made	441.7
Description Of Spending Cuts Already Made Or Identified	Increase	Decrease
Family & Social Services Administration Cuts (Notes 13a-b) DONE 05/28/02	33.1
Department Of Commerce Cuts (see Note 14) DONE 05/28/02	7.5
Voluntary Furlough Program (one day off a month without pay) DONE 05/28/02	4.0
Department Of Corrections Cut (see Note 15) DONE 05/28/02	3.2
Dept. Of Health Cut (Office of Women's Health reduction) DONE 05/28/02	2.6
Indiana School For The Deaf Cuts (see Notes 16a-c) DONE 05/28/02	1.0
Additional Budget Changes (see Notes 17a-b) DONE 05/28/02	151.6
Higher Education Operating Funds Payments Delay DONE 03/28/02	91.0
Higher Education Operating Funds Cuts DONE 03/28/02	5.6
Higher Education Building Repair And Renovation Cuts DONE 03/28/02	65.3
Higher Education Technology Cuts DONE 03/28/02	58.0
Higher Education Additional Cuts DONE 03/28/02	9.7
K-12 Public Schools Tuition Support Transfers (see Note 5) DONE 03/14/02	115.2
K-12 Public Schools Categorical Grant Cuts (see Note 6) DONE	35.4
State Agency Cuts (7% except education and prop. tax relief, FY 2002) DONE	113.0
Family And Social Services Administration Cuts DONE 02/18/02	44.0
Department Of Corrections Cuts DONE 02/18/02	16.5
Department Of Natural Resources Cuts DONE 02/18/02	8.2
Department Of Health Cuts DONE 02/18/02	5.2
Indiana Schools For The Blind And Deaf DONE 02/18/02	1.9
Other State Agency Cuts (for FY 2003) DONE 02/18/02	33.2
State Employee Pay Raises Suspension (FY 2002) DONE	15.0
Teachers Retirement Fund Cost Of Living Appropriation Cut DONE	15.0
Subtotal Spending Cuts Already Made Or Identified	835.2
Total Budget Changes Already Made Or Identified	1,276.9

Description Of Fund Transfers Not Yet Made	Increase	Decrease
Rainy Day Fund Transfers (see Note 7)	255.0
Medicaid Reserve Fund Transfer (see Note 8)	100.0
Subtotal Fund Transfers Not Yet Made	355.0
Description Of Spending Cuts Not Yet Made	Increase	Decrease
State Capital Projects Cuts (see Note 9)	64.0
Local Taxing Units PTRC Delay (to FY 2005, see Note 10)	109.6
Medicaid Spending Cuts (see Notes 7 and 12a-g)	53.0
Subtotal Spending Cuts Not Yet Made	226.6
Total Budget Changes Not Yet Made	581.6

Revenue From Improved HB 1001 (SS)	314.7

Grand Total Budget Changes	2,173.2

Budget Changes Not Needed
DELETE School Corporation Payments Delay (to FY 2005, see Note 7)	289.0
REDUCE Medicaid Spending Cuts (see Note 7)	186.9
REDUCE Local Taxing Units PTRC Delay (to FY 2005, see Note 10)	44.4

Notes:
1. Revenue Shortfall from 11/14/01 forecast updated with May 2002 SBA monthly revenue report.
2. Actuarial projection on 03/07/02 for retroactive Medicaid payments to 18,000 claimants.
3. Medicaid Spending In Excess Of Appropriation based on OMPP December forecast.
4. Legislation Cost includes cost of federal IRS update in HEA 1195 and costs from other legislation.
5. HB 1196 passed by IN Gen. Assembly allows K-12 debt serv./transportation/capital proj. transfers.
6. Categor. Grant Cuts include special ed., summer sch., full-day kindergarten, other specialty prog.
7. Included in the 11/15/01 O'Bannon-Kernan Balanced Budget Plan.
8. Included in the 04/25/02 Indiana Senate Republicans tax restructuring compromise.
9. Included in the HB 1004 Indiana Conference Committee report proposed on 03/13/02.
10. PTRC distributions delay in HB 1004 version passed by IN House of Representatives on 02/04/02.
11. Environ. Emergency, Recycled Goods Market Promotion, License Branch Computer Eq. funds.
12a. $9.0M annual Medicaid savings from dr. approval for brand-name instead of generic drugs. DONE
12b. $30.0 million annual Medicaid savings from a preferred drug list.
12c. $3.4M annual Medicaid savings from limits on patients using multiple doctors and pharmacists.
12d. $7.0M annual Medicaid savings from prior authorization for early drug refills and other actions.
12e. $2.0M annual Medicaid savings from requiring pharmacists to bill ins. companies first for drugs.
12f. $1.0M annual Medicaid savings from expanding prior authorization program for prescription drugs.
12g. $0.6 million annual Medicaid savings from limiting the days supply of prescription drugs.
13a. FSSA will reduce program growth to counter domestic violence and cut Youth Services Bureau.
13b. FSSA will reduce administrative expenses in the Division of Family and Children.
14. DOC cuts will reduce grants for development and promotion of tourism.
15. Department of Corrections will eliminate the sex-offender treatment program at New Castle prison.
16a. IN Deaf School will eliminate nearly all temporary employees and 4 days at start of school year.
16b. IN Deaf School will furlough administrative/supervisory employees 2 weeks each school year.
16c. IN Deaf School will put employees on a four-day work week during the summer.
17a. Cuts will be divided among more than 40 state agencies and programs.
17b. Existing contracts will be renegotiated, bonds refinanced, and unused funds tapped.

Budget Shortfall Solution For The July 1, 2001 To June 30, 2003 Biennium
Changes To The State General Fund And The Property Tax Replacement Fund
(compiled June 16, 2002)
(amounts expressed in millions of dollars)
NOTE: The blue budget actions have actually been completed (the other budget actions are proposed for the 2003 fiscal year).

Description Of Budget Shortfall	Increase	Decrease
Revenue Shortfall (see Note 1)		1,530.4
Medicaid Spending Increase From Day Court Case (see Note 2)		323.0
Medicaid Spending In Excess Of Appropriation (see Note 3)		251.0
2001-02 Legislation Cost (from 04/25/02 Senate Repub. handout, see Note 4)		68.8
Grand Total Budget Shortfall		2,173.2

Description Of Fund Transfers Already Made Or Identified	Increase	Decrease
Build Indiana Fund Transfer (for state projects) DONE 04/08/02	183.7
Build Indiana Fund Transfer (for local projects) DONE 04/08/02	60.2
Build Indiana Fund Transfer (for pre-2001 projects) DONE 04/08/02	3.7
Tobacco Master Settlement Fund Transfer DONE 04/08/02	60.0
Other Dedicated Funds Transfers DONE 04/08/02	125.1
Additional Dedicated Funds Transfers (see Note 11) DONE 04/15/02	9.0
Subtotal Fund Transfers Already Made	441.7
Description Of Spending Cuts Already Made	Increase	Decrease
Family & Social Services Administration Cuts (Notes 13a-b) DONE 05/28/02	33.1
Department Of Commerce Cuts (see Note 14) DONE 05/28/02	7.5
Voluntary Furlough Program (one day off a month without pay) DONE 05/28/02	4.0
Department Of Corrections Cut (see Note 15) DONE 05/28/02	3.2
Dept. Of Health Cut (Office of Women's Health reduction) DONE 05/28/02	2.6
Indiana School For The Deaf Cuts (see Notes 16a-c) DONE 05/28/02	1.0
Additional Budget Changes (see Notes 17a-b) DONE 05/28/02	151.6
Higher Education Operating Funds Payments Delay DONE 03/28/02	91.0
Higher Education Operating Funds Cuts DONE 03/28/02	5.6
Higher Education Building Repair And Renovation Cuts DONE 03/28/02	65.3
Higher Education Technology Cuts DONE 03/28/02	58.0
Higher Education Additional Cuts DONE 03/28/02	9.7
K-12 Public Schools Tuition Support Transfers (see Note 5) DONE 03/14/02	115.2
K-12 Public Schools Categorical Grant Cuts (see Note 6) DONE	35.4
State Agency Cuts (7% except education and prop. tax relief, FY 2002) DONE	113.0
Family And Social Services Administration Cuts DONE 02/18/02	44.0
Department Of Corrections Cuts DONE 02/18/02	16.5
Department Of Natural Resources Cuts DONE 02/18/02	8.2
Department Of Health Cuts DONE 02/18/02	5.2
Indiana Schools For The Blind And Deaf DONE 02/18/02	1.9
Other State Agency Cuts (for FY 2003) DONE 02/18/02	33.2
State Employee Pay Raises Suspension (FY 2002) DONE	15.0
Teachers Retirement Fund Cost Of Living Appropriation Cut DONE	15.0
Subtotal Spending Cuts Already Made Or Identified	835.2
Total Budget Changes Already Made Or Identified	1,276.9

Description Of Fund Transfers Not Yet Made	Increase	Decrease
Rainy Day Fund Transfers (see Note 7)	255.0
Medicaid Reserve Fund Transfer (see Note 8)	100.0
State Police Funding Shift (to MVHA & Motor Carrier Reg. Fund, see Note 9)	54.8
Subtotal Fund Transfers Not Yet Made	409.8
Description Of Spending Cuts Not Yet Made	Increase	Decrease
State Capital Projects Cuts (see Note 9)	64.0
Horse Racing Industry Subsidy Cut (see Note 7)	10.0
Local Taxing Units PTRC Delay (to FY 2005, see Note 10)	154.0
Medicaid Spending Cuts (see Notes 7 and 12a-h)	258.5
Subtotal Spending Cuts Not Yet Made	486.5
Total Budget Changes Not Yet Made	896.3

Grand Total Budget Changes	2,173.2

Budget Changes Not Needed
DELETE School Corporation Payments Delay (to FY 2005, see Note 7)	289.0

Notes:
1. Revenue Shortfall from 11/14/01 forecast updated with May 2002 SBA monthly revenue report.
2. Actuarial projection on 03/07/02 for retroactive Medicaid payments to 18,000 claimants.
3. Medicaid Spending In Excess Of Appropriation based on OMPP December forecast.
4. Legislation Cost includes cost of federal IRS update in HEA 1195 and costs from other legislation.
5. HB 1196 passed by IN Gen. Assembly allows K-12 debt serv./transportation/capital proj. transfers.
6. Categor. Grant Cuts include special ed., summer sch., full-day kindergarten, other specialty prog.
7. Included in the 11/15/01 O'Bannon-Kernan Balanced Budget Plan.
8. Included in the 04/25/02 Indiana Senate Republicans tax restructuring compromise.
9. Included in the HB 1004 Indiana Conference Committee report proposed on 03/13/02.
10. PTRC distributions delay in HB 1004 version passed by IN House of Representatives on 02/04/02.
11. Environ. Emergency, Recycled Goods Market Promotion, License Branch Computer Eq. funds.
12a. $9.0M annual Medicaid savings from dr. approval for brand-name instead of generic drugs. DONE
12b. $30.0 million annual Medicaid savings from a preferred drug list.
12c. $3.4M annual Medicaid savings from limits on patients using multiple doctors and pharmacists.
12d. $7.0M annual Medicaid savings from prior authorization for early drug refills and other actions.
12e. $2.0M annual Medicaid savings from requiring pharmacists to bill ins. companies first for drugs.
12f. $1.0M annual Medicaid savings from expanding prior authorization program for prescription drugs.
12g. $0.6 million annual Medicaid savings from limiting the days supply of prescription drugs.
12h. $205.5 million of annual Medicaid savings have not yet been identified.
13a. FSSA will reduce program growth to counter domestic violence and cut Youth Services Bureau.
13b. FSSA will reduce administrative expenses in the Division of Family and Children.
14. DOC cuts will reduce grants for development and promotion of tourism.
15. Department of Corrections will eliminate the sex-offender treatment program at New Castle prison.
16a. IN Deaf School will eliminate nearly all temporary employees and 4 days at start of school year.
16b. IN Deaf School will furlough administrative/supervisory employees 2 weeks each school year.
16c. IN Deaf School will put employees on a four-day work week during the summer.
17a. Cuts will be divided among more than 40 state agencies and programs.
17b. Existing contracts will be renegotiated, bonds refinanced, and unused funds tapped.