Indiana budget chief orders another 5 percent in cuts

State agencies — including those that run prisons, protect children and maintain highways — must cut their spending by another 5 percent during the fiscal year that begins July 1 after already chopping 10 percent a few months ago.

Gov. Mitch Daniels' budget director, Christopher Ruhl, sent a memo to all state agencies Wednesday directing them to hold back 2011 fiscal year spending by 15 percent from the amount approved by lawmakers last year.

It will mark the third time in less than a year that they've had to tighten their belts because state tax collections and other revenues have repeatedly fallen short of projections. Daniels last November ordered most agencies to cut 2010 spending by 10 percent, then said schools and colleges had to pare a combined $450 million.

"For most agencies, this reduction is on top of reductions contained in the budget adopted by the General Assembly for the current biennium last June," Ruhl said in the memo, obtained Thursday by The Associated Press.

The memo's contents were first reported by television station WRTV late Wednesday.

Ruhl's directive applies only to executive branch agencies, but Ruhl has asked other elected officials, the courts and the Legislature to also cut their spending. Early indications were that most would try to comply.

"We will continue to look for efficiencies and ways to save," Lauren Auld, a spokeswoman for Superintendent of Public Instruction Tony Bennett, said in an e-mail message.

"I'm certain we will do what is needed," Scott Minier, a spokesman for state Senate Republicans, said in a statement.

There was no immediate reaction Thursday from Democratic House Speaker Patrick Bauer of South Bend.

Outside state government, one advocate suggested targeted budget cuts that spare essential services could work better than across-the-board reductions. The Indiana Association of United Ways has encouraged local affiliates facing their own revenue shortfalls "to think strategically about their priorities," said Lucinda Nord, the group's vice president for public policy.

Ruhl said that through March 31, or the first nine months of the current state fiscal year, state revenues have come in $867 million below projections, a 9.4 percent shortfall that comes on the heels of a 7.4 percent gap a year ago.

The most recent state revenue forecast shows 2011 fiscal year collections coming in lower than they were as far back as 2006, before the national economic downturn, Ruhl said. If spending levels remained constant without a state tax increase, the state would deplete its current reserves within 14 months and begin the 2012 fiscal year with a deficit.

Austerity moves by various agencies already have included layoffs, pay freezes, cuts in services and postponed building projects. For example, highway crews have shuttered rest stops, some medical providers have received lower Medicaid payments for treating poor patients, and child welfare officials have trimmed a counseling program aimed at preventing abuse and neglect.

Agency spokesmen reached Thursday indicated the spending cuts will continue. Doug Garrison, a Department of Correction spokesman, said the agency was "in the process of examining all facets of our budget."