State Budget Practice Report Cards and Budget Resource Guide

Indiana earned an average of B in transparency for 2017 through 2019, up from a C in the previous assessment. The improvement stemmed from its resumption in 2018 of disclosure of its tax expenditures, such as credits, exemptions, and other types of breaks. The state’s comprehensive report describes specific tax expenditures, gives their legislative basis, and estimates their use in fiscal 2018–21. Indiana’s one remaining shortcoming in transparency was an absence of deferred infrastructure maintenance costs. 

Its avoidance of budget maneuvers—one-time actions—to achieve balance earned Indiana an A average in the category, though the state averaged only a C in budget forecasting. It does not develop multiyear revenue forecasts of at least three years in its budget documents but releases estimates covering only the remainder of the current fiscal year and the upcoming biennium. Indiana also fails to provide multiyear expenditure estimates. 

The state’s A average in reserve funds reflects its use of volatility measures in setting rainy day fund targets. Contributions are tied to personal income tax growth under a law that requires money to be set aside when personal income grows more than 2 percent from the previous year. This and other Indiana rainy day fund policies follow best practices cited in the recent Volcker Alliance working paper, Rainy Day Fund Strategies: A Call to Action.

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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 presented here are taken from the 2020 Volcker Alliance report, Truth and Integrity in State Budgeting: The Balancing Act, which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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