INDIANAPOLIS — Consumer spending that boosted state revenues has cooled after two years of above-average financial performance, bringing the state’s reserves back within a typical range.
Indiana ended the 2023 fiscal year with $2.9 billion in reserve accounts, far short of the $6.1 billion it reported in 2022, according to a Thursday release. Lawmakers also plowed $3.1 billion into one-time spending, bringing down the surplus.
Reserves account for 16.3% of the current year’s expenditures, above the 12.5% watermark for triggering an automatic taxpayer refund. However, a change in the most recent budget omits the state’s tuition reserve account from consideration this year, meaning payments wouldn’t be triggered unless the state had closer to $3.5 billion in savings. Lawmakers included the language to avoid another round of refunds.
The excess cash in Indiana’s accounts meant state leaders had to return millions of dollars to taxpayers via refunds in two separate waves in 2021 and 2022, for a maximum of $325 per Hoosier — though not all Hoosiers qualified for both payments.
Revenues hewed closely to earlier forecasts, coming in $25 million over estimates — a 0.1% difference.
Sales taxes, which account for over half of the state’s income, exploded during the pandemic as consumers spent their federal stimulus checks. The mild recession predicted earlier this year did not come and instead, the nation experienced a “soft landing,” as coined by economists.
But as talk of recession picked up, Hoosier spending appears to have slowed, coming $66 million, or 0.6%, short of an estimated $10.5 billion.
Individual tax returns remained steady, coming in 0.2%, or $14 million, higher than expected for a total of $7.6 billion.
Legislators voted to adopt income tax cuts in 2022, choosing to accelerate those cuts earlier this year in conjunction with increased payments for a pre-1996 teacher retirement pension fund — the state’s only unfunded debt obligation.
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