Road Funding Debate Could Change GOP Definition Of State's Minimum Surplus

Jan 19, 2016

Credit Jim Grey / https://www.flickr.com/photos/mobilene/

The road funding plans moving through the House and Senate would mark a first: they'd reduce the amount of money the state considers an adequate reserve.

Three decades ago, House Speaker Brian Bosma (R-Indianapolis) recalls, the state thought a six-and-a-half-percent surplus was enough, only to discover in the 1991 recession that it wasn't.

“That was clear that that was not the case in the recessions of the 90s. We moved ourselves up to about nine-or-10-percent,” Bosma says. “It was clear that that was not sufficient for the recession of 2007 and '08.”

Governors have gradually targeted larger and larger surpluses until Governor Mitch Daniels effectively capped the surplus at 12.5-percent with an automatic tax refund law.

Bosma says even the current limit was set artificially high.

“One of the reasons that, frankly, the 12.5-percent was there was that we wouldn’t trip an automatic refund of $30,” Bosma says. “I had dozens of people tell me, ‘Don’t send me a check for $30 -- invest in schools and roads.’”

Even that wasn't the high-water mark -- legislators have excluded a school funding reserve from the surplus calculation, putting total reserves under Governor Pence around 13.5-percent.

Pence has campaigned for a 15-percent safety net.

But Pence's road funding plan and House Republicans' alternative dial that back to 11.5-percent.

Bills in both the House and Senate would enshrine that number in state law.