Indiana is ending the 2026 fiscal year with a budget surplus of about $1.86 billion, a 174% increase from last fiscal year.
The state is also ending the fiscal year with nearly $4 billion in reserves, which is up 60% from last year, according to the latest report.
Gov. Mike Braun attributes this positive budget analysis to cutting government spending by reorganizing certain state agencies and increases in revenue collections.
He says that now lawmakers will have some flexibility during next year’s budget session when deciding where to appropriate funding.
“It gives us the option on difficult places like infrastructure, reining in healthcare costs, early childhood learning, to invest, give some relief to taxpayers,” Braun said Wednesday after the fiscal announcement.
However, Democrats said the dramatic increase in reserve funding means the state is sitting on funds when they should be going toward needed services including childcare, healthcare, and K-12 education.
“Hoosiers don’t pay the state their hard-earned money to watch politicians sit atop a pile of cash and brag about how high it goes,” said Rep. Ed DeLaney (D-Indianapolis). “They contribute their tax dollars with the expectation that the state will use it to invest in making their lives better.”
Rep. Greg Porter (D-Indianapolis) also thinks the state should move on helping Hoosiers with costs now instead of waiting until the next legislative session.
“Because we can do it now, the state board of finance, which is comprised of the budget director, the treasurer, and the comptroller, can do it now,” Porter said.
The state also said it saw a loss of $2 billion in federal funds this fiscal year, that's 10 % less than the prior year.
State budget leaders also noted that the ongoing gas tax suspension does not affect the general fund budget since that funding flows directly to the state and local road funding.
The gas tax suspension, which has been ongoing since April, means the state now has a $500 million shortfall in road funding, but Braun has already promised to ensure local governments are reimbursed for lost funds.
Chair of the Senate Appropriations Committee, Sen. Ryan Mishler (R-Mishawaka) said even with the strong fiscal outcomes this year, he cautions state leaders ahead of the upcoming budget session.
“Indiana's economic circumstances are evolving, and the state is facing several current and future budget pressures, including an over $500 million shortfall in road funding, the Department of Child Services being over budget and the unfunded liability of the Pre-1996 Teachers' Retirement Fund,” Mishler said. “All these things make it important to remember previous years when difficult decisions needed to be made.”
The latest fiscal report also showed that government spending was only up by 1% compared to last year which was at 3.9%.
Secretary of the Indiana Office of Management and Budget Lisa Hershman said that even despite ongoing national and global economic uncertainties, the state's conservative budgeting has enabled them to weather the volatile financial conditions.
“Our cautious forecasting meant we anticipated national shifts from revisions in wages and personal income to major movements in financial markets, and we planned accordingly,” Hershman said.
Contact Government Reporter Caroline Beck at cbeck@wfyi.org
