Considering the state's surplus: First, do no harm

DISCUSS

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“Just say no.” Some critics thought that was a pretty naïve drug-fighting stance by first lady Nancy Reagan; there’s a lot more to resisting temptation than simple willpower. Some also think it’s pretty naïve economic advice from outgoing General Assembly Ways and Means Committee Chairman Jeff Espich. After all, there are years of pent-up demand because of budget cuts.

“It’s harder for the legislature to say no when there is revenue available, certainly more than it is when you’re in the negative,” says John Katzenberger of the Indiana Fiscal Policy Institute. He also has some good advice. Lawmakers and the new governor should take a deep breath before making any decisions about how to spend the state’s excess money, either on tax cuts or on more services like education. Heed the Hippocratic oath, he said, and “first, do no harm.”

The state has $2.2 billion more than it needs in the bank. That will go down to $1.4 billion because of automatic tax refunds that return more than $100 to each taxpayer next year, and payments to Indiana’s teacher pension fund. And the state has to make up for cuts already approved for the corporate income tax and the phase-out of the inheritance tax.

When all the obligations are added up, though, there’s still a big chunk of uncommitted money for state officials to play with. And every cause with a constituency will be called to legislators’ attention, most with compelling stories to tell of people who will suffer without more state money. Highway funding is getting to be a bigger issue. Potentially expensive Medicaid issues are looming. The education lobby wants cuts restored. Our prisons are overcrowded and underfunded. And on and on.

Espich is exactly right when he warns that the economic picture could get darker at any time, causing the state to begin losing money again as it did during the great recession. Even a small adjustment of a percentage point in tax collections could throw off the state’s books by hundreds of millions of dollars.

So the state should just sit on the money and think about it for a while. Then, when there is a consensus on something good to spend some of it on, they should sit on it some more and think even harder.

In the meantime, perhaps someone will suggest asking Hoosiers – whose money this all is, don’t forget – what they would like done. Do they want to the money saved or spent? Do they want more of it back than they’re getting?

Legislators don’t have to be governed by the prevailing opinion – this is still a representative democracy rather than a pure one – but it wouldn’t hurt them to be guided by it.