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ndiana’s latest biennial budget—the first under new Gov. Mike Braun—effectively lowers state spending by 7% after inflation and an across-the-board holdback policy, the Indiana Fiscal Policy Institute found in a Monday budget analysis.
The $54.6 billion House Enrolled Act 1001, approved in May, spends 3% more than its $53 billion predecessor from 2023. But the state’s spending power has sunk 5% since then.
And, the Office of Management and Budget was authorized to make the State Budget Agency withhold an additional 5% from what most agencies were allotted.
Those two factors will “result in a dramatic decrease in actual spending” compared to the last budget, according to the independent, Indianapolis-based institute.
Some agencies will feel the strain more than others.
A grim revenue forecast left lawmakers with just a week to chop $2 billion in spending off the budget. Most agencies—but not all—saw their allocations shrink 5%.
But it’s not all about the forecast, the institute asserted.
“These decreases in spending … must also be viewed in the context of the reality that Indiana continues to lower taxes, even this year,” the analysis argued.
Not only will that “likely make it harder to provide state and local services at previous levels,” but “the priorities shown in how the cuts were implemented are telling.”
K-12 education funding, long touted as the biggest chunk of the budget, saw a modest bump of 4% to $20.6 billion. The 5% holdback policy outweighs any gains, however.
The budget’s largest single line item is the $19 billion for K-12 tuition support. When accounting for inflation it has remained flat for “the last several” budget cycles, according to the analysis.
K-12 spending beyond tuition support was dealt a “structural reduction.”
For instance, $320 million to cover the cost of free textbooks was eliminated. The $25 million in charter school capital grants was also scrapped—but those entities will instead siphon property tax revenue off traditional public schools under a separate local funding plan.
Such funding decisions “will have a significant impact on schools and Hoosier students,” the institute predicted.
The deepest cuts, proportionally, were reserved for a collection of commerce agencies.
The controversial Indiana Economic Development Corporation saw a non-adjusted 30% decrease. Several line items were zeroed out, including career connections funding, direct flight subsidies, industrial development grants, manufacturing readiness grants and a skills enhancement fund.
The Department of Workforce Development was dealt a non-adjusted 27% reduction—and will absorb the work of the eliminated Governor’s Workforce Cabinet. The Indiana Destination Development Corporation was also slashed.
That prompted the institute to ask: “What is the State of Indiana’s economic strategy in light of this divestment?” alongside questions about business leader attitudes, higher-wage job opportunities and innovation.
Other government verticals experiencing double-digit percentage cuts include business affairs, the lieutenant governor and the secretary of state. Construction was allotted more than 60% less money, too.
Some agencies bucked the trend.
The Family and Social Services Administration, Department of Child Services and Indiana Department of Health each got more, collectively realizing a non-adjusted 17% increase.
Most prominent is the $1.8 billion boost to Medicaid assistance, which FSSA oversees.
FSSA, DCS and the Indiana Department of Correction can also tap into a $300 million “Financial Responsibility and Opportunity Growth Fund,” under the Management and Budget vertical, with State Budget Committee approval.
Indiana State Police are set for a 28% budget increase to pay for significant salary increases. They’re aimed at improving recruitment and retention amid staffing shortages.
Many of the budget’s provisions went into effect July 1, with the beginning of the 2026 state fiscal year.
The Indiana Capital Chronicle is an independent, nonprofit news organization that covers state government, policy and elections.
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