that do not mean reduced educational service.” Overall, though, the state of Indiana has been spared the disasters that many states have had to confront. “Indiana went into the recession having cleaned up some unpaid bills and without the spending increases that had occurred in some other states,” Mikesell says. “When the recession hit, we didn’t have quite the problems or ticking time bombs that some states had. And we had the advantage of a significant rainy-day fund as an important backstop against the greatest disasters.” Mikesell praises the Indiana government for being “terribly willing to say no,” in contrast to other states that resorted to “various kinds of financial tricks to close gaps in their budgets, like moving paydays around, altering the timing of revenue flows, and delaying projects.” Despite this careful planning, however, it wasn’t possible for the state of Indiana to overcome the shortfalls caused by the recession. Back in 2008, when Mikesell sat down with the other members of Indiana’s revenue forecast committee to produce
losing about $45.5 million. State funding accounts for approximately 19 percent of IU’s budget, and the cuts are necessitating reductions across all campuses in areas such as administrative services and travel spending. In addition, some positions may be left vacant through the remainder of the budget cycle. A sliver of a silver lining Amid all the bad news, there is one small but potentially beneficial development in the state’s method of tax collection. A recent referendum transferred property assessment duties from Indiana’s townships to its counties. This consolidation gives local governments a “better shot at quality and uniformity” in distributing their tax burden across property owners, according to Mikesell. “Under the old system, some of the townships were assessed by trustees who had other kinds of government functions. Many of them had no particular interest in doing property assessments, so there was considerable variation in
Indiana University
“Unless a hint of economic recovery starts showing up in state revenues, there will be more reductions ahead. It will not be pleasant. There is some evidence of recovery, but not yet enough in state revenues to allow the conclusion that the bad times are behind us.”
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a revenue baseline for 2010 – 11, the depth and persistence of the economic problems ahead were not foreseen. “The big three taxes — individual income, corporate income, and retail sales — have been affected more than we expected,” he says. When the committee reconvened in December 2009, they had to revise projections downward by about $1.8 billion, or approximately 7 percent. The Indiana state constitution forbids the state from going into debt, so the Hoosier state government had no choice but to start cutting back expenditures. Mikesell describes Gov. Mitch Daniels’s unpleasant task of determining where those cuts were going to come from: “He rescinded appropriations to general state agencies first, then to state universities, and, most recently, to primary and secondary education. Unless a hint of economic recovery starts showing up in state revenues, there will be more reductions ahead. It will not be pleasant. There is some evidence of recovery, but not yet enough in state revenues to allow the conclusion that the bad times are behind us.” Indiana University itself is grappling with close to $59 million in budget cuts from this revision, which Gov. Daniels announced in December 2009. “[IU] is vulnerable because we are a nontrivial part of the state budget,” Mikesell explains. “You have to think like a bank robber — they rob banks because that’s where the money is. When you’re making cuts, you go where the money is.” As Indiana’s biggest state-funded institution, IU got the largest share of the cuts, with runner-up Purdue University
the quality of assessments being done,” he says. Assessments done at a larger level increase the chances of a more professionally done job and more consistent valuations. Indeed, even before the legal change in the system, a number of trustee assessors actually had the county assessor do the valuation work. Although the change may seem minor, Mikesell reiterates that there is nothing more important for local government budgets than property taxes. Improving the means of determining tax liability can spell only good things for municipalities and may avoid the type of drastic revaluation that led to the present tax caps. Still, Mikesell is hoping to see even greater changes in the way the government determines what property owners must pay. He says that electing assessors makes it too easy for popularity contests and conflicts of interest to damage this single most important factor in municipal finance. “Some assessors are capable, diligent, and exactly who ought to be hired for the job, but that is not uniformly the case,” he says. “The ultimate reform, of course, would be to appoint assessors based on their qualifications and evaluate them on the basis of their performance. We wouldn’t dream of having IRS auditors elected!” Elisabeth Andrews is a freelance writer in Bloomington, Ind.