Statehouse Report 17

June 5, 2009

LEGISLATIVE DEVELOPMENTS

Introduction

This is the first Statehouse Report regarding the special legislative session that will convene on June 11 and must adjourn by June 30 with passage of a new biennial budget before the state's fiscal year begins on July 1.

Since the regular legislative session ended on April 29 without passage of a biennial budget, a plan for proceeding was jointly announced by the House Speaker and the Senate President Pro-Tem:

• Produce and present a revised revenue forecast
• Governor prepares and presents a detailed budget recommendation
• Special legislative committee convenes and attempts to reach consensus on a biennial budget
• Governor calls special session to enact a biennial budget.

This report brings you up to speed with regards to the first three items in this process.

Revenue Forecast Update

The revised revenue forecast was presented on May 27. The following is a summary the revised forecast (numbers in millions):

• Total Forecast Revenue -- (FY2009) $12,932; (FY2010) $13,144; (FY2011) $13,660
• Total Year over Year Change -- (FY2009) -150; (FY2010) 212; (FY2011) 517
• Year over Year Percent Change -- (FY2009) -1.1 percent; (FY2010) 1.6 percent; (FY2011) 3.9 percent

Due to the continued deterioration of the economy, the May update further reduced revenue projections from the levels forecast in April by nearly $1.1 billion over three years as follows:

• Additional Revenue Reduction -- (FY 2009) $444; (FY 2010) $332; (FY 2011) $316

Obviously, this additional reduction in revenues only severely compounds the state's fiscal woes and increases the challenge that the General Assembly faces in putting together a biennial budget.

Summary of Higher Education Provisions in Governor's Budget Proposal

The Governor's budget proposalpresented on June 2 is similar in methodology to his initial 4 percent cut proposal in January at the start of the regular legislative session. It uses the same new operating funding formulas recommended by the Indiana Commission for Higher Education last fall:

• The Governor' proposed budget cuts each institution by 5 percent across the board (1 percent cut from FY 2009 appropriation levels plus another 4 percent) and reallocates "freed up" funds via the new ICHE formulae.
• Total IU system operating funds would be cut by $20 million in FY 2010 and another $1 million in FY 2011
• Appropriations for each IU campus are the same as those in the Governor's recommendations issued in January. Total operating cuts for the biennium exceed 6 percent on some campuses.

The Governor's budget would replace each dollar of general fund operating cuts with a dollar of federal stimulus funds that can only be used for facility repair and rehabilitation (R&R) purposes. For IU, the distribution would total $85 million in funds.

Capital projects would be funded using Federal Part B stimulus funds to provide cash for the following IU projects:

• $10 million for life science laboratory renovations in Bloomington
• $10 million for life science laboratory renovations in Indianapolis
• IU's top priority projects such as Tamarack Hall, Cyber Infrastructure Phase II, and Neurosciences Phase II were not funded and neither were any of the other projects in our request

The Indiana Innovation Alliance was not funded except for $3 million per year appropriated for expansion of the Centers for Medical Education.

Funding for the State Student Assistance Commission of Indiana for primary student financial assistance programs would be increased by 3 percent per year. The Administration intends to supplement these appropriations with federal workforce development funds to provide a total increase of 5 percent with the goal being to retain student aid award caps at current year levels.

Testimony on the Governor's Proposed Budget

The special legislative committee held committee hearings on the Governor's budget proposal on Thursday. IU and its sister institutions were afforded the opportunity to testify. We centered our comments on the following points:

• Requested that the General Assembly provide additional budget flexibility by using federal stimulus funds to "backfill" state operating appropriation cuts
• Requested consideration of funding for the Core Research element of the Indiana Innovation Alliance initiative
• Requested inclusion of IU's highest priority capital projects.

Next Steps

When he presented his budget, the Governor indicated that he would call the General Assembly back into session on June 11. The Governor has not formally done so as of this writing, but we expect that he will do so shortly.

The Special Legislative Committee is continuing deliberations. It is not yet clear whether the committee will reach consensus on a bill that can be quickly acted on by the General Assembly when it convenes.