State Auditor suggests local governments watch budgets for roads

Mike Grant | Times HeraldIndiana Auditor Tera Klutz discusses how she went from working in the private sector to becoming the first CPA to ever serve as state Auditor during a speech before the Washington Rotary Club on Wednesday.

It is the budget season throughout Indiana. Cities and towns, counties and individual offices and departments are all working on budgets for the coming year. Indiana Auditor Tera Klutz says that one of the things she is noticing is that counties and cities might not be receiving quite as much road and street money in 2020, and she is cautioning officials to tread lightly on their road budgets.

“One of my primary responsibilities is passing out the income tax and gas tax revenue to individual counties,” said Klutz. “I would say for budgets, going into next year that I would be conservative on your motor vehicle highway and road and street estimates.”

Several years ago the state built an inflation tracker into the gas tax to try and stabilize funding for road and street maintenance, but that has not translated into a dollar for dollar appropriation to local government. “The changes the legislature made a couple of years ago, those are still being fleshed out,” said Klutz. “As a state, the revenues we have brought in are about the same as last year, but because of the new allocations locals are receiving less than they previously did. That is predicted to happen again before it eventually goes back up.”

Klutz was in Washington to meet with Daviess County Auditor Patty Ball and also took time to speak with the Washington Rotary Club at the Daviess Community Hospital.

Klutz is overseeing the largest budget surplus in the history of the state. The reserve fund currently stands at $2.3 billion which is 13.2% of the state’s total operating revenues for a year. There is $834 million in unused general fund, $519 million in the rainy day fund, $500 million in the medicaid reserve fund and $500 million in the state tuition reserve fund.

“The reserve is perfectly fine,” said Klutz. “It is in the range of 10 to 15%. If it goes below 10% I get a little anxious about whether we would be able to provide services if there was an economic downturn. If it goes above that range I get anxious that people will think we are just hoarding their money.”

The reason for the jump in the surplus was that during the final quarter of the fiscal year the amount of revenue coming into the state sky-rocketed. At the end of March the budget surplus for the year was $6.7 million. By the end of June it was $410 million.

“That’s much higher than we expected the revenue to be,” said Klutz. “That’s primarily due to the revenue in the last quarter being significantly higher than expected. We exceeded our estimates in the individual income tax by almost $100 million, about $50 million in sales tax and $77 million in corporate taxes.”

The big surplus prompted Governor Eric Holcomb to propose moving $300 million in projects approved for bonding to be paid for with cash. Those include three new buildings on college campuses, the completion of U.S. 31 and construction of a new swine barn at the state fairgrounds.

“I think it is a great plan,” said Klutz. “I think he will get full approval from the legislature when they meet again.”

Klutz points out that by taking the projects out of the bonding schedule and paying for them with cash on hand the state will save a lot money. “We are projecting to save $100 million over the next 25 years,” she said. “By doing that we are saving interest payments and that frees up operating expenses that can be used for other things.”

While some have been critical of Indiana’s multi-billion dollar surplus, Klutz defends it by saying it gives the state a hedge against emergencies and recessions. “A lot of times those hit hardest by a recession are those who need government services,” she said. “By us having that surplus available to continue the services we are already giving and provide the new services we need it gives our decision makers time to find the solutions. If we really do wind up in a whole new environment and need a long term solution they have time to determine if that is a tax structure change, what the impact will be, or if there will have to be a service change. They will have the time to make that decision.”

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