UPDATE: Senate panel OKs budget with more school money

An Indiana Senate committee on Monday approved a state budget that relies on a new, more optimistic revenue estimate to direct more cash to schools, restore previously proposed cuts and leave Indiana with more money in the bank than prior versions.

The latest two-year spending plan that would take effect July 1 also removes a provision that would have sent taxpayers a refund if state reserves reach a certain level.

The Republican-controlled Senate Appropriations Committee voted 8-3 along party lines to advance the $28 billion proposal, which would leave Indiana with more than $1 billion in reserves at the end of the two-year budget cycle — more than both the House version and the version proposed by Gov. Mitch Daniels. The proposal now moves to the full Senate for consideration, but could be relatively close to a final product because Republicans control the House, Senate and governor's office.

A revenue forecast released Friday projected Indiana will take in nearly $650 million more during the two years than previously expected. Senate Appropriations Chairman Luke Kenley, R-Noblesville, said it's prudent to keep much of that extra money in reserves.

"The dollars are not here yet," Kenley said. "It's only a forecast."

Some Democrats said the Senate proposal is better than previous attempts, but wanted more of the projected extra revenue directed to public schools. Sen. Earline Rogers, D-Gary, said sweeping education proposals moving through the Republican-ruled Statehouse — including bills to create private school vouchers, expand charter schools and aid virtual schools that provide most instruction online — will siphon money away from traditional public schools. Rogers, a former teacher, said some schools will be hurt by the school funding formula in the budget proposal.

"I'm not certain that schools will be able to rebound as they have in the past," she said.

Schools would welcome the extra $150 million they'd get over the two-year budget cycle under the Senate plan, but some hope more money will be funneled their way as they deal with previous budget cuts and losses from property tax caps, said Dennis Costerison, an education lobbyist and executive director of the Indiana Association of School Business Officials.

"We would like to see a little bit more," Costerison said, acknowledging the state needs to keep some level of reserves in case of economic turmoil.

The Senate removed a provision included in previous budget plans that would have provided automatic taxpayer refunds if state reserves reached a certain level. Daniels has advocated the idea and included in his budget plan an automatic refund if state reserves exceed 10 percent of annual needs.

"Beyond some point, it is far better to leave dollars in the pockets of those who earned them than to let them burn a hole, as they always do, in the pockets of government," Daniels said in his State of the State address earlier this year.

Kenley said there were better ways to use extra money if the economy grows faster than expected. Under the Senate budget, if the general fund balance exceeds 12 percent of appropriations, the extra money would go to unfunded pension liabilities for teachers and public employees. Kenley said taxpayers questioned refunds in the 1990s when the state had large surpluses, asking why the state went to the trouble to send checks for just a few dollars. He said using any extra to pay for teacher pensions would help budgets for years to come.

"That's a fiscally more responsible way to do it," he said.

The Senate budget plan also would:

— Restore proposed cuts to horse racing subsidies.

— Use a performance-based formula to divide some higher education money among colleges meeting goals such as graduating students on time or graduating more low-income students.

— Eliminate a tuition freeze at state colleges, which had been proposed in previous budget plans.

— Provide extra money to all school districts with at least 500 students. Kenley said that's an effort to help some smaller districts while encouraging the tiniest districts to consider consolidation.

— Freeze lawmakers' pay for two years.

— Create a study committee to examine contentious labor issues that sparked a five-week boycott from House Democrats earlier this session, including a right-to-work bill that would prohibit union membership from being a condition of employment.

If the full Senate approves the bill, it will return to the House for consideration. Kenley said he expected the bill to end up in a conference committee of House and Senate leaders who will work to hammer out a compromise on areas of differences, including the taxpayer refund and the return of horse racing subsidies. But for the most part, Kenley said, Republicans leaders in the House and Senate agree.

"Philosophically I think we're on the same page," he said.