State Budget Practice Report Cards and Budget Resource Guide
Indiana’s strong policies for its Counter-Cyclical Revenue and Economic Stabilization Fund, which acts as a buffer against downturns, helped earn the state a top A average grade in reserve funds for fiscal 2015 through 2019. The stabilization account is driven by a formula that calls for deposits when personal income in the state grows by over 2 percent in a year and that permits withdrawals when such income declines by the same amount. Indiana is also one of twenty states recognizing revenue volatility in rainy day fund policies.
The fund is not the only cushion. Indiana’s State Tuition Reserve protects school funding, and the Medicaid Contingency and Reserve Account assures payment of claims for health care. Balances in the three funds in fiscal 2019 totaled $1.4 billion, equivalent to 8.8 percent of general fund expenditures.
Cautious budgeting practices also have largely protected the state from turning to expenditure deferrals, revenue or cost shifts, or other one-time methods of masking budgetary shortfalls. These practices helped Indiana win an A in budget maneuvers, despite a refunding of highway revenue bonds in fiscal 2017 that postponed near-term principal payments until 2020.
Indiana’s two lowest averages were Cs, in budget forecasting and transparency. The forecasting grade was held down by multiyear forecasts that extend only through the upcoming biennial budget rather than the outlook of three years or longer considered a best practice. The transparency grade suffered from a lack of comprehensive, regular reporting on tax expenditures in 2015–17. Indiana also failed to report on deferred infrastructure maintenance costs. While its public worker pension funding ratio was 69 percent in fiscal 2019, 2 percentage points below the total for all states, its grade in legacy costs—where it averaged a B—benefited from actuarially based pension contributions and minimal other postemployment benefits (OPEB), principally health care.
To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.
The report cards found here contain grades of the state's budgetary practices during the fiscal years of 2015 through 2019. Each state received marks in five critical categories, based on their adherence to best practices in several key budgeting indicators. The five categories covered methods used to achieve budgetary balance as well as how budgets and other financial information are disclosed to the public.
States received grades of A to D-minus (there are no “failed states”) for their procedures in estimating revenues and expenditures; their use of one-time actions to balance budgets; how they oversee and use rainy day funds and other fiscal reserves; the adequacy of their funding of public worker retirement and other postemployment benefits; and the quality of transparency of budget and related financial information. The grades are based on research conducted by public finance and budgeting professors and students at eight US schools of public administration or policy. The universities’ research efforts were augmented by Volcker Alliance staff, data consultants at Municipal Market Analytics, and special project consultants Katherine Barrett and Richard Greene.
State Budget Sources
State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses is a resource published by the Volcker Alliance designed to help public officials, policy advocates, journalists, academics, and concerned citizens fully understand the critical fiscal decisions that governors and legislators must make. The guide includes the links below to budgets for this state as well as legislative analyses of budget bills and treasurers’ or comptrollers’ monthly state cash-flow statements; capital spending plans; reports on public-worker pension funding and returns; and reports by local and national fiscal research organizations, bond rating firms, and associations of state fiscal and finance officials.