Indiana Revenue Forecast Drops Estimated $2.4 Billion

Indiana faces a projected revenue shortfall of approximately $2.4 billion over the next three years, prompting lawmakers to consider a range of budget cuts or tax increases to address the gap. The primary drivers of this shortfall are slower-than-expected employment growth, leading to reduced payroll tax collections, and significant declines in corporate tax revenue due to market volatility and trade policy uncertainty. While some legislators have suggested increasing cigarette taxes or leveraging Medicaid-related fees, others warn that existing state reserves of $2.7 billion are insufficient to fully cover the deficit without compromising emergency funds. Education funding is broadly seen as a last resort for cuts, but concerns remain about flatlining or underfunding key areas like public education and Medicaid. Lawmakers from both parties acknowledge the seriousness of the situation, drawing comparisons to the Great Recession and emphasizing the need for bipartisan solutions. Despite the fiscal challenges, the legislature does not anticipate calling a special session to address the budget issues.