Daniels: Without recovery, schools face tough 2011

Gov. Mitch Daniels warned public schools Monday that they will face an "extraordinarily difficult" state budget
next year unless the national economy shows significant improvement by then.

Daniels, reviewing the legislative session that ended Saturday, said he expects the federal government will help states like
Indiana who've had to borrow money to pay for unemployment benefits. He also told reporters that the state's top priorities
will be to stay fiscally solvent and creditworthy over the next 10 months before lawmakers start writing a new state budget.

K-12 education in Indiana already has faced $300 million in reduced state funding this year as the state has cut spending
in the face of lower tax revenues. Daniels said his administration cut elsewhere before resorting to "nick" education
funding without raising taxes, while other states cut more deeply.

Lawmakers next year will write a new two-year state budget.

"It depends on the national economy," Daniels said during a news conference in his Statehouse office. "If
we don't see a really significant improvement in anything I see right now, it will be extraordinarily difficult next year."

Awaiting Daniels' signature into law is a bill that allows schools to shift 5 percent of an account funded by property
tax funds to help offset a portion of the budget cuts. They could shift an additional 5 percent for operating expenses if
they don't give salary increases to most teachers next school year.

Frank Bush, executive director of the Indiana School Boards Association, said school funding cuts in Indiana of about 4 percent
are less than the 10 percent to 15 percent cuts public schools in other states have faced.

"I certainly hope we don't have to go to those levels because it's extremely difficult to get the programs back
once you've cut at that level," Bush said.

Bush said another bill passed by lawmakers could result in schools losing an important, alternative source of funding in
November. Voters will decide a state constitutional amendment that would limit property tax bills to 1 percent of homes'
assessed value, 2 percent on rental property and 3 percent on business property.

"It's not just public schools that will be suffering the consequences of a constitutional amendment that restricts
property tax revenues," Bush said. "It's going to be cities and towns, too."

Daniels has pushed to include the caps in the constitution, saying it would make property tax cuts harder to undo by future
Legislatures.

Before it adjourned early Saturday, the General Assembly also approved a one-year delay for an increase in the premiums that
businesses pay into the state's unemployment insurance fund. The premium increase, estimated to cost employers about $400
million, is aimed at repaying some of the more than $1.7 billion Indiana has borrowed from the federal government to cover
jobless benefits.

Daniels said the one-year delay "makes good sense" because he believes the federal government will have to do something
about the billions of dollars that more than 40 states have borrowed to keep paying benefits during the economic downturn.

"This is now a problem for almost all 50 states, and I think eventually there will be some sort of a national component
to the solution," Daniels said.