ANOTHER VIEWPOINT: Tax refund nice, but needs still abound


KPC News

Indiana has too much money in the bank, which means Hoosiers will get some of it back.

That’s great for every taxpayer who will get some cash back next year, but at the same time, the state has plenty of unmet needs that continue to remain unmet.

An Indiana law enacted by then-Gov. Mitch Daniels in 2012 says that if the state closes out a fiscal year with more than 12.5% of its total expenditures in reserves, it triggers an automatic refund process.

Last week, we got news that’s the case at the end of this fiscal year, as Indiana ends with $3.9 billion in reserves.

Based on the law, half of the excess goes to stabilizing pension funds — lawmakers are saying they’ll use about $545 million to pay down teacher pensions — while the other half gets sent back to taxpayers.

Exact numbers of the individual refund won’t be known until later this year, but it’s estimated to be about $170 per taxpayer.

First, how did we get to an overflowing coffer coming out of a major pandemic?

The answer to that question seems pretty clear — big federal relief spending.

Pandemic relief money flowed into Indiana to help cover the costs for everything from supplies to tourism support to rental assistance. Congressional leaders during both the Trump administration and the Biden administration opened up the tap to flow to states.

That doesn’t just include government support, either. Stimulus dollars that flowed directly to Hoosier wallets in three separate payouts helped, too.

Lawmakers noted that sales tax revenue increased sharply during this fiscal year. Sales tax only increases when people are spending, and people are only spending when they have money to spend.

Yes, Indiana does maintain good fiscal policy year to year, but it’s doubtful the state would be overflowing with cash without a federal faucet pouring more dollars into the bucket.

As for the excess reserve itself, that’s a good sign that Indiana government could be doing more to address its shortcomings.

This fiscal year bumper crop may be an outlier due to the pandemic, but local lawmakers think this is not a blip and that strong annual revenue is here to stay.

If that’s the case, it’s time for our legislators to start addressing more of the state’s needs. The automatic refund triggers as a percentage of state expenditures, which either means expenditures are too low, revenue is unusually high, or both.

Teacher pay is still lackluster in Indiana. Education spending is still trailing despite recent new investments. Road grants and other infrastructure programs could do more good with more funding. Rural communities could use a significant boost in development support.

There’s a long list of needs — not wants, not some wish-list spending spree — where it’s been clearly demonstrated the state lags in comparison to neighbors and peers.

Indiana leaders have done a good job putting the state on a strong financial foundation. But building a foundation is only the first step toward building upward.

So while it feels nice to send back dollars that are stacking up in reserve, lawmakers should now be preparing to head back in 2023 with a plan for the next two-year budget on how to start utilizing their bigger revenue to fix areas of known fiscal deficiency.