INDIANAPOLIS — When the revenue forecast for the 2020 fiscal year was given in December, no one could have predicted the worldwide COVID-19 pandemic that emerged this spring would arrive and disrupt Indiana’s budget plans, state officials said Thursday.
Indiana Office of Management and Budget Director Cris Johnston, State Auditor Tera Klutz and State Budget Director Zac Jackson released the state’s 2020 fiscal year close-out report through a virtual press briefing Thursday afternoon. They reported that the state’s revenue collection fell short of more than $1.4 billion than was estimated.
A significant portion of this shortfall — more than $800 million — was due to the tax deadline extension. When Hoosiers first started losing jobs as a result of the pandemic and stay-at-home order, state officials moved the state tax deadline from April 15 to July 15, coinciding with a decision by the federal government to move the deadline for federal taxes.
“This sets up a challenge going forward in the next fiscal year, this tax deferral, as we are currently collecting July revenues,” Johnston said. “A lot of those taxes that were due in April are showing up in July.”
The remaining $600 million of the revenue shortfall represents officials’ efforts to capture the economic impact of the pandemic, which included a $443 million shortfall in the expected collection of sales taxes, withholdings and other revenue sources.
The entirety of the Medicaid Reserve Fund was transferred into the state’s General Fund, Jackson said, and if officials had not made this transfer of over $570 million, the General Fund would have been negative for the year. This would have gone on to affect social programs such as Medicaid, Jackson said.
Jackson said that to take the money out of a different fund, including the rainy day and state tuition reserve funds, would have taken time that the state did not have while facing the unprecedented challenge of the coronavirus pandemic.
June was the fourth month in a row that the state’s monthly revenues missed their forecast, Johnston said. June’s actual revenue was $1.8 billion, missing the estimate by $250 million, or 12.4%.
Indiana saw nearly a $900 million revenue loss overall for the 2020 fiscal year, but 38% of the state’s $2.3 billion reserves was used to make up for deficit and close out the year.
Klutz said this decreased the state’s reserve to around $1.4 billion, or 9.1% of the current year expenditures. The benchmark for expenditures is 10 to 15%, but Klutz said being below the benchmark is responsible fiscal leadership as it leaves Indiana with a 9% fiscal reserve going into a new fiscal year with more uncertainty as the COVID-19 pandemic continues.
The Indiana State Department of Health reported 735 new cases of COVID-19 Thursday, totaling 54,080 across the state. There were an additional 10 deaths from the virus, bringing the total to 2,602 Hoosier deaths. And on Wednesday, Indiana Gov. Eric Holcomb announced he would slow the state’s reopening plan, preventing it from moving into its final stage for at least the next two weeks.
“We know there will be more challenges that we are going to face, especially with the pandemic and the impact it has on our residents and our economy,” Klutz said. “Gov. Holcomb’s team is up to the challenge.”
Johnston also said that the revenue forecast for fiscal year 2021 is probably not realistic right now, so budget leaders in the Indiana General Assembly have asked for a revised revenue forecast statement. This will be delivered to them in September, Johnston said.
Holcomb released a statement not long after Thursday’s press briefing saying Indiana’s responsible budgeting and maintaining healthy reserves were invaluable defenses against the significant economic challenges of the pandemic.
“We will remain dedicated to ensuring Hoosiers receive services without interruption while maintaining Indiana’s trademark fiscal responsibility as we adjust to this new normal,” Holcomb said.
Legislative leaders, including House Speaker Todd Huston, R-Fishers, also released statements highlighting the end of the fiscal year.
“Despite the budget challenges ahead, we will continue to be strong stewards of Hoosier taxpayer dollars by finding efficiencies and funding our critical services like K-12 education,” Huston said.