The Indiana Fiscal Policy Institute this month released two informational briefs on topics that will be tackled by the Indiana General Assembly in its upcoming legislative session, where the legislature will craft a new two-year budget for the State. On December 15th, the Institute released ”Indiana Revenue Forecast, December 2016.” The brief notes:
The state has two major sources of tax revenue—sales and individual income. The revenue forecast revised down sales tax collections by 3.5 percent in FY2017, for a new total of $7.4 billion. It revised up the revenue from individual income tax collections by one-half point to $5.4 billion. The remaining major sources of revenue—corporate income and gambling taxes—were revised downward.
The forecast anticipates steady growth in all areas except gambling, which is expected to decline from $407.4 million in FY2017 to $391.4 million in FY2019.
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It’s less likely there will spending on new programs such as pre-kindergarten, and more emphasis placed on adjusting the existing school formula. It’s not yet clear whether that will mean more money for teacher salaries or other areas of the formula.
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The sluggish economy failed to meet economic growth projections in Indiana, in turn forcing revenue forecasters to revise down expected tax collections by $300 million. While the economy is expected to grow over the next two years producing about $1 billion more in tax revenue, it will be a challenge to meet spending expectations for transportation and education on top of inflation. Lawmakers likely will remain prudent in appropriating new general tax revenue and probably will look to alternative sources such as higher sales taxes, tolling or bonding to bolster new transportation spending.
On December 19th, the Institute issued “Funding Indiana’s Roads for a Stronger, Safer Tomorrow Task Force Report.” The report summarized:
The Task Force believes Indiana’s road transportation system is underfunded, there is an immediate need to upgrade the interstate, state and local roads/bridges and that it will require increases in taxes and other user-related fees to pay for the improvements. Several members of the Task Force estimated the need for new funding is about $1 billion per year.
It further noted:
Current funding levels are insufficient to meet the “critical transportation and infrastructure needs” of the state. Lawmakers must identify new sources of revenue to meet the needs, at both the state and local levels.
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The 12 revenue sources suggested as options by the Task Force are:
1. Increase the 18-cents per gallon gas tax, which was last increased in 2003.
2. Increase the 16-cents per gallon special fuel tax assessed on suppliers of diesel, bio-diesel and natural gas product, which was last increased in 1988.
3. Increase the 11-cents per gallon motor carrier surcharge assessed on the total amount of fuel used by carriers, which was last increased in 1988.
4. Index the rates of these three taxes on an annual basis.
5. Implement road use fees on alternative fuel, electric and other vehicles.
6. Explore tolling on state-controlled highways and interstates.
7. Implement a per-vehicle fee on all vehicles registered in Indiana.
8. Increase the tire-disposal fee.
9. Shift more revenue from the sales tax on gasoline from the general fund to dedicated transportation funds.
10. Improve overweight truck enforcement through electronic monitoring of weights and permits.
11. Increase fees related to the International Registration Plan.
12. Consider limited debt financing of projects.
The brief concludes:
The Task Force report clearly is the first mile of a long road ahead for a comprehensive plan for road and bridge improvements in Indiana. The Task Force believes it has made the case for the need to act, what needs to be fixed and offered ideas to pay for it. It will be interesting to note the many twists and turns ahead before lawmakers finish in late April.
