State cuts higher education funding by $103M to help deal with worsening budget

Indiana Gov. Eric Holcomb’s administration continues to make budget cuts as the state prepares for revenue collections possibly being $2 billion lower than expected by the end of the fiscal year.

The latest round of cuts is hitting Indiana’s public universities, which will see a $103 million reduction in revenue under the proposed plan from Holcomb’s team.

A memo from State Budget Director Zac Jackson this week proposed a 7% reduction in the state’s $1.7 billion in 2020-21 funding to the seven public college systems in Indiana.

The memo said the federal coronavirus relief package approved by Congress allocated nearly $82 million to Indiana’s colleges that can defray expenses such as lost revenue and technology costs associated with distance education.

A table included with the memo shows that the cut would result in a slight overall decrease for schools from this year, rather than a 1.4% increase as approved by the Legislature in 2019 in the two-year state budget.

“These are difficult decisions,” Holcomb said during a press conference on Friday. “Decisions you don’t want to make or like to make, but under these circumstances, we have to.”

Purdue University would see the largest reduction of $3.2 million, followed by Indiana University at about $500,000. Ivy Tech Community College, meanwhile, would receive a $2.6 million boost. The plan will be reviewed next week by the State Budget Committee.

University funding makes up about 10% of the state budget, and the Indiana Commission for Higher Education said the planned cuts were expected.

“These cuts will require institutions to significantly adjust operations and services, and Indiana’s institutions have been developing contingency plans over the past several months in an effort to prepare for a variety of scenarios,” a commission statement said. “At the same time, these cuts will not impact student financial aid, which is important to ensure college affordability for all Hoosiers in a time when there will most likely be increased financial need for students and families.”

Indiana government agencies were told last month to cut spending by 15% for the coming budget year that starts in July. Capital projects totaling $466 million also have been sidelined for now.

When asked on Friday afternoon whether funding for K-12 education could be the next area of the budget to see cuts, Holcomb said he expects to share more information on Wednesday.

“We’re doing everything that we can to protect the dollars that go into K-12,” Holcomb said.

Education makes up the biggest portion of the state’s general fund, accounting for about 62%.

Officials have said the state could see a drop of more than $3 billion in tax revenue over the next 14 months of its current two-year $34 billion budget—more than the $2.3 billion in cash reserves the state has built up over several years.

State tax collections came in at $230 million, or 20%, below expectations for May, the third straight month of significant shortfalls.

Office of Management and Budget Director Cris Johnston said on Friday that the state has started dipping into its reserves to cover the shortfall, and budget officials are not expecting tax collections in June to be much better. Prior estimates showed the state should collect more than $2 billion in June.

Johnston said the state could end the fiscal year on June 30 with $2 billion less in revenue than expected.

“We are not optimistic about the month of June,” Johnston said.