State revenue is $74.8M off forecast

Tax receipts miss for a 16th month despite adjusted estimates

Groundhog Day may have already passed, but it doesn't feel like it in Gov. Mitch Daniels' second-floor Statehouse office.

Just like the weatherman played by Bill Murray in the movie that bears the observance's name, Daniels on Thursday reported the same news he has reported for 16 straight months: State revenues have fallen short of projections.

This time, Indiana's January tax receipts were $74.8 million less than predicted.

"It missed again," Daniels said.

Despite a new revenue forecast issued in December -- one in which Daniels ordered economists to take an even more conservative approach -- the state's receipts still fell short.

December's cash flow fell $5 million short, but January's larger miss was not encouraging.

In fact, the only encouragement was that the shortfall wasn't as steep as some under the previous forecast -- such as the miss of more than $162 million in September.

"Well, the leakage is less than it has been," Daniels said. "But there's no candy-coating this. It reflects an ongoing weakness in the overall economy of this country."

There was one glimmer of good news: The state's sales tax collections are starting to rebound.

January's revenue reflects tax receipts from the holiday shopping season, and those were almost not as bad as last year. Almost.

The $573 million in sales tax for January was only 1.3 percent below last year, while total revenue lags 7 percent from 2009.

"We're just going to have to keep taking this month by month, and we cannot say for certain that the revenues will begin to match the forecast," Daniels said. "If there's any good news we find in this report, it is that sales taxes -- our single biggest source of revenue -- have begun to catch up to the previous year."

The governor already has ordered several rounds of budget cuts, including a 6 percent cut to public universities and a 3 percent reduction to K-12 education funding. Assuming Indiana's revenues stay on pace with the current forecast -- a big if -- the state is on pace to spend all of its $1 billion in reserves by the end of the budget cycle in June 2011.

Daniels has made clear that tax increases and operating in the red are not options, so if revenue continues to miss projections, more budget cuts will be on the way.For this fiscal year alone, which started July 1, the state has collected at least $550 million less than expected.

Daniels did take the opportunity to push for the General Assembly to pass measures his administration has proposed to save more money.

Topping the list is a proposal to merge administration of the Public Employees Retirement Fund and the Teachers Retirement Fund, a move his administration has said would save $50 million per year. Daniels also has pitched a plan to siphon money from some non-essential, dedicated funds that his budget agency has determined have more cash than they need.

"This underscores, yet again, how essential it is that the legislature help us to control spending," Daniels said, "and that we be as careful as we possibly can be until we again see revenue that allows us to pay for what we'd all like to pay for."