Indiana could receive more than $2.6B from federal stimulus package for state, local spending

The state of Indiana could collect more than $2 billion from the pool of money in the latest federal stimulus package designated to help state and local governments with anticipated budgetary problems.

The Coronavirus Aid, Relief, and Economic Security Act, which President Donald Trump signed into law on March 27, provided $2 trillion in economic aid for business, hospitals and governments struggling with the impact of the pandemic.

The package included $150 billion for state and local governments to use for expenses related to coronavirus response efforts. Distributions are expected to be based on population, with a minimum of $1.25 billion per state.

According to a recent report from the National Conference of State Legislature, Indiana should receive $2.61 billion.

State officials say they’ve seen that estimate. But they say won’t know if it’s accurate until the state receives an award letter from the federal government.

Gov. Eric Holcomb has said already said the state may have to spend $1 billion of its $2.3 billion in reserves to get by for the rest of the fiscal year, which ends June 30. The state is budgeted to spend about $17 billion for the year.

The state’s highest tax collection month is usually April, but state officials are not expecting that to be true this year.

The projected $2.61 billion payment to the state would be on top of other federal programs in the stimulus package that are specifically targeted to education, disaster relief funds, the National Guard, public health agencies, unemployment and election administration.

States are expected to have some freedom on how to spend their portion of the $150 billion. According to NCSL, the funding can be used for any necessary expenses that were incurred due to COVID-19, that weren’t accounted for in the state’s most recent budget and were incurred between March 1 and Dec. 30.

Some of the funding will trickle down to local governments, but it’s unclear how much that will be. The legislation required that 45% of a state’s fund be set aside for local governments with populations of 500,000 or more, but in Indiana that would only apply to Indianapolis.

Indianapolis officials are uncertain what its share will be.

“While we understand that it is likely that Indianapolis and Marion County will benefit from the federal CARES Act we have not yet received guidance on how much we will receive, when it will come, or how it can be spent,” said Taylor Schaffer, spokeswoman for Indianapolis Mayor Joe Hogsett.

The National Governors Association has sent a letter to the U.S. Department of Treasury requesting guidance and flexibility on how the funding can and should be spent.

Matt Greller, CEO of Accelerating Indiana Municipalities, a cities and towns association, said he expects some of the confusion and questions about how the money can be spent to be cleared up when the Treasury Department issues its guidelines. But he said local governments are definitely starting to be worried about the impact to budgets long-term.

“We think it’s going to be pretty significant,” Greller said.

That’s because the closure of many restaurants, retailers and casinos, along with employers laying off tens of thousands of Hoosiers, is expected to significantly decrease sales, income and gambling tax revenue for state and local governments.

According to data released Thursday, gambling tax revenue was down 52% from February to March, as the casinos were closed for half of the month. That’s expected to continue to decrease as casinos remain dormant.

Earlier this week, Indiana Office of Management and Budget Director Cris Johnston said revenues in March were $70 million lower than predicted, but the state is still ahead of its forecast for the year.

Johnston said the March revenue report, which the state is expected to release soon, doesn’t show much of the impact of the coronavirus shutdown yet because it largely reflects activity from February. State budget officials are expecting to have a clearer picture of the new financial reality when the April report is released.

“We have already started working with our agencies as far as looking at cost savings and other areas where we can hold back expenditures, because we do not know what the future holds,” Johnston said.