INDIANAPOLIS — Steady economic growth will help generate an estimated $828.8 million in new tax revenue for Indiana during the two-year state budget period that begins July 1, 2019.

But that extra money likely won't provide much spending freedom to Hoosier lawmakers crafting the budget beginning next month, since higher Department of Child Services and Medicaid expenses are projected to gobble up nearly the entire increase.

"The forecast is strong, but with the DCS spending that's going to be a problem," said Senate Appropriations Chairman Ryan Mishler, R-Bremen. 

"That could take up 64 percent of our increase in the first year and 74 percent in the second year, and then you add the Medicaid number in there, you're looking at roughly $35 million the first year for the entire rest of the budget and negative $24 million the following year."

DCS spending has exploded over the past two years due in part to significant increases in child abuse and neglect cases related to the state's opioid epidemic, as well as high DCS employee turnover, insufficient drug treatment programs and legal costs.

The Republican-controlled Legislature and Republican Gov. Eric Holcomb so far have covered those extra expenses using one-time funds.

However, DCS is requesting a base spending total of $956 million in each of the next two budget years, up from $679 million this year, an amount the agency is likely to receive though Mishler still is hoping to identify DCS efficiencies to shrink the agency's request.

State Medicaid spending also is projected to grow by $245 million during the two-year budget period as a result of scheduled reductions in the federal share of Healthy Indiana Plan and the Children's Health Insurance Program expenses.

As a result, the governor most likely will not be able to follow through on his promise last week to increase elementary and high school education funding in the short-term, as a down payment on Holcomb's long-term goal to meaningfully boost teacher salaries by 2021.

Indiana would need to grow the $7.2 billion it is spending this year on kindergarten-through-12th grade tuition support by $144 million a year, or $288 million for the two-year budget, just to keep pace with the 2 percent national inflation rate.

State Rep. Tim Brown, R-Crawfordsville, chairman of the budget-writing House Ways and Means Committee, asserted that K-12 funding will go up in the next budget no matter what.

He declined to say whether the total will exceed inflation, and actually provide more money to Indiana schools, or whether schools will be forced to cope with higher expenses for transportation, utilities and other fixed costs using more dollars that purchase less. 

"There will be some amount of increase of K-12," Brown said. "But then we'll have to look at other areas, as far as what they asked for versus what's available."

Mishler, too, suggested spending cuts at other state agencies will be on the table as lawmakers work toward adopting a constitutionally-mandated balanced budget by the April 29 adjournment deadline for the 2019 General Assembly.

"My colleagues and I will be taking a very careful approach this year, as we do every year, to be sure to fund our priorities — including protecting our state's most vulnerable youth and supporting education — while living within our means," he said.

State Sen. Karen Tallian, D-Ogden Dunes, the top Democrat on the Senate Appropriations Committee, insisted there is money to spend, if the Republican legislative supermajorities wanted to spend it.

She said in addition to the nearly $1 billion in new tax revenue anticipated over the next two years, the state could spend a portion of its approximately $550 million Medicaid reserve fund and halt the planned reduction in the corporate income tax rate to save another $70 million.

In addition, Tallian said the General Assembly could reallocate the $1 billion paid to the state in exchange for permitting the Indiana Toll Road operator to hike truck tolls by 35 percent in October that Holcomb decided will be spent on central Indiana road projects, bike trails across the state and rural internet access.

"It's not the governor's authority to appropriate money, is it?" Tallian asked. "The last time I looked that (authority) belonged to the Legislature."

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