Bleak economic outlook wipes out $2 billion from Indiana's next budget

Axios

17-04-2025

Indiana lawmakers need to cut a staggering $2 billion from their two-year spending plan.
Why it matters: With essentially no new money to spend, lawmakers are looking for ways to trim the budget, potentially leading to deeper cuts to public services and welfare programs like Medicaid.
Driving the news: The state budget committee received an updated revenue forecast Wednesday that was historically bad.
Projections were revised down between the December and April forecasts more than they were in 2009 during the Great Recession, surprising lawmakers with just how quickly the economic tides had turned.
"I was here during the recession in '08, the '09 budget. … This one scares me a lot more than that," said Sen. Ryan Mishler, R-Mishawaka, the Senate's chief budget writer.
State of play: Statehouse leaders have said they want to wrap the legislative session by the end of next week, giving lawmakers just eight days to write the new budget.
"We have a lot of tough decisions to make and we have to be disciplined," Mishler said.
Speaking with reporters after the forecast, lawmakers said they would examine every piece of the pie, but K-12 education is the last place they would look to cut.
Earlier spending plans from both the House and Senate proposed 2% annual increases for schools.
By the numbers: Lawmakers have just $170 million in new dollars to spend in 2026 and $30 million in 2027.
That's not much, considering the state spends around $22 billion annually and its Medicaid expenses are projected to grow by more than $400 million in the first year and another $375 million in the second.
Between the lines: The dismal forecast is driven by slower than expected growth in jobs and wages, stock market declines and the effects of federal policies around tariffs, immigration and spending cuts.
Mishler said he was expecting the forecast would go down but thought it would be closer to $1 billion.
"I was way off."
What they're saying: "When the U.S. gets a cold, Indiana's got pneumonia," said Rep. Greg Porter, D-Indianapolis.
Democrats said they would like to see the state consider new revenue generators, like an increase in the cigarette tax, in addition to spending cuts.
The other side: Republicans, who have a supermajority in both chambers, have for years resisted calls to increase the cigarette tax but didn't immediately reject the idea when asked about it Wednesday.