Holcomb’s budget proposal calls for increases in funding for K-12, higher ed

Indiana Gov. Eric Holcomb’s budget proposal for the next two years calls for increases to funding for K-12, higher education and broadband internet.

The $35.2 billion budget, which Office of Management Director Cris Johnston and Budget Director Zac Jackson presented to the State Budget Committee on Wednesday morning, also restores the state’s reserve balance to $2.3 billion each year.

That’s something budget officials were uncertain would be possible to do so quickly after the state saw a deficit of nearly $900 million in fiscal year 2020 and had to dip into its reserves, dropping the fund level to $1.4 billion.

According to the budget proposal shared Wednesday, the state is expecting to have a surplus of nearly $30 million in fiscal 2022 and $243 million in fiscal year 2023.

Holcomb plans to target some of the new money toward K-12 education and is suggesting a 2% increase for fiscal year 2022 and an additional 1% increase in fiscal year 2023. That would mean about $377 million in new dollars going toward K-12 over the biennium.

For higher education institutions, which Holcomb asked to take a 7% cut in fiscal year 2021 to adjust for revenue shortfalls caused by the COVID-19 pandemic, funding would be restored in the new budget, plus an additional 1% each year.

The budget also includes an additional $100 million for Holcomb’s Next Level Broadband Grant Program, which the administration established in 2018 with $100 million in one-time dollars from an increase in the toll road fees for heavy vehicles. The program is designed to expand access to high-speed internet to rural areas of the state. To date, more than $79 million has been awarded for broadband infrastructure that will connect 21,900 homes and commercial locations in 41 counties.

And the budget includes $50 million for the new swine barn at the Indiana State Fairgrounds — a project that has been discussed since July 2019, when Holcomb initially suggested using surplus dollars to pay for it. But state lawmakers removed the swine barn from the list of projects to be funded with those surplus dollars during the legislative session last year.

The project involves demolishing most of the existing open-air structure and replacing it with a new 170,000-square-foot, climate-controlled facility that would be called the Fall Creek Pavilion.

The governor is also proposing to create a $280 million capital projects reserves fund with dollars available in fiscal year 2023. This fund could be used for future projects, such as a new location for the Indiana School for the Deaf and Indiana School for the Blind and Visually Impaired.

In the current fiscal year, which runs through June 30, Holcomb plans to use one-time dollars to pay off certain obligations and outstanding debt.

The extra revenue is coming from nearly $900 million in income tax payments that were deferred from 2020 to 2021 and $440 million in CARES Act money that the state has been able to use to reimburse itself for public health and safety payroll.

State budget officials have said that savings from state agencies were also better than expected. In May, the governor asked state agencies to take a 15% budget cut for 2021.

Holcomb has proposed using $302 million to retire debt from several capital projects, including the remaining bonds for the Interstate 69 project.

And he is suggesting using $400 million to pay down a teacher pension obligation. Holcomb initially suggested in his State of the State address last January that the state use $250 million to pay down this obligation in the 2022-2023 budget.

The new recommendation announced Wednesday increases the amount of the teacher pension obligation being paid off and bumps up the timeline to fiscal year 2021. The move is expected to save $69 million annually.

Even with the additional one-time spending in 2021, Holcomb’s administration expects to end the year with a surplus of $107.3 million and build reserves back up to $2.27 billion.

In fiscal year 2022, the state’s reserves would be $2.29 billion, and in fiscal year 2023, reserves would be $2.27 billion, under Holcomb’s proposal.

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