January 4, 2005

New governor must deal with old deficit

WEST LAFAYETTE, Ind. – When Mitch Daniels is sworn in next week as Indiana's new governor, he will have to decide how to deal with an old problem. While the economic outlook has improved, the state coffers are still projected to be overextended to the tune of $500 million.

"Indiana has finally joined the rest of the country in the economic recovery, but we can't grow our way out of this problem," said Larry DeBoer, a Purdue University professor of agricultural economics and an expert on state finances.

What are some of the new governor's options?

"He could decide to propose spending cuts, raise taxes or both," DeBoer said.

Daniels and the Indiana Legislature also might try to solve the problem over more than one biennium and by continuing payment delays to local governments, schools and universities, DeBoer said.

"No matter how you look at it, it's going to be tight financially in the year to come," he said.

CONTACT: DeBoer, (765) 494-4314, ldeboer@purdue.edu

Writer: Beth Forbes, (765) 494-2722, forbes@purdue.edu

Ag Communications: (765) 494-2722; Beth Forbes, forbes@purdue.edu
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