Why Some Hoosiers Would Rather See The State's Surplus Go Back To Schools

July 13, 2012 | 10:46 AM

By Rachel Morello

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Gov. Mitch Daniels says Hoosiers could see an automatic tax refund next year, courtesy of a law the General Assembly passed in 2011 that requires the state return money to taxpayers when the surplus reaches a certain percent of the state’s budget. But Steve Hinnefeld over at School Matters argues that money could be better spent on education:

Create a state-funded pre-kindergarten program at least for poor and at-risk children, something that 39 other states have already done. The cost would probably be around $100 million a year.

Restore more of the $300 million in education funding that Daniels cut in December 2009. The legislature did restore some of the funding in 2011 and added money for full-day kindergarten this year. But education funding is still well short of what it was.

Hinnefeld isn’t the only one calling for restoration of programs Daniels cut after taking office in 2005. The Indiana Coalition for Human Services published a wish list for the state that Dan Carpenter wrote about in the Indianapolis Star.

Among other things, the coalition points out that the $2 billion surplus could be spent on rehiring teachers who lost their jobs, reinstating summer remediation for kids falling behind and restoring funding to a program that helps low-income students go to college.

“We talk about being in a better fiscal state than our neighbors, but most of the burden from this economic climate has been put on the backs of the most vulnerable,” David Sklar, coalition president, told Carpenter. “Our lost wages are as bad as anywhere in the country. Our poverty rate is as high as anybody’s.”

State Struggled Until Daniels ‘Brought Out The Big Knife’

There’s also a third option for the money at which Hinnefeld hints: Save it for a rainy day.

After all, the state also had a budget surplus in 1999, he writes:

Old-timers will remember that Indiana had budget reserves of nearly $2 billion in the late 1990s. Republican lawmakers squawked that that was ridiculous – the state wasn’t “a bank” and it needed to give the money back through massive tax cuts. Rep. Jeff Espich, the House GOP budget leader, insisted Indiana had a “structural surplus” of several hundred million dollars.

Democrats, especially Sen. Vi Simpson, now the Democratic candidate for lieutenant governor, urged caution, suggesting the state budget surplus was an artifact of the go-go economy of the Clinton years. Remember those?

Sure enough, the national economy went into recession, and Indiana’s surplus disappeared. The state struggled to balance the books until Daniels … brought out the big knife.

Of course, the automatic tax refunds are state law, making it unlikely anything will happen with the money other than what Gov. Daniels has already described. The Fort Wayne Journal Gazette penned that editorial as a gentle reminder after gubernatorial candidates Mike Pence and John Gregg announced what they’d like to do with the surplus.

So, Hoosiers, what do you think? Would you rather see an automatic refund the next time you pay taxes, or could the state’s surplus be better spent on restoring funding to education?