The State Revenue Forecast: We Might be OK

Can it be, is it possible, that 2021 won’t be terrible? The state revenue forecast was released on December 16 to provide a starting point for the Indiana General Assembly to craft a new state budget. Might the coming biennium be OK?

It didn’t look OK last June. State revenues suffered an extraordinary drop in the last quarter of fiscal 2020, down $1.4 billion, 27 percent less than expected. We covered the loss by restricting agency spending and drawing down balances. What had been $2.3 billion in the bank was suddenly $1.4 billion. It wouldn’t last long at that rate, and then much bigger budget cuts would be needed.

But it turned out that a large part of that drop, about $880 million, was deferred payments of individual and corporate income tax. Congress had delayed the due date for federal income taxes from April 15 to July 15, and Indiana followed suit. The income tax revenue that would have been collected in fiscal 2020—before July 1—was collected in fiscal 2021. Balances were restored.

Read more.