Indiana’s economy under Mitch Daniels

I was disappointed to see the usually-sharp Ed Kilgore fall into the trap of buying Mitch Daniels’ spin – in a recent piece on Mitch Daniels’ presidential prospects, Kilgore wrote that “his state’s positive fiscal record stands out sharply against a national landscape of state fiscal disaster.” Ed, if you believe that, I think Mitch has a bargain-priced $50 billion invasion of Iraq to sell you.

Far from being the “island of growth” that Mitch Daniels likes to pretend we are, Indiana is struggling just as much as the rest of the region. And it’s not just Daniels’ phony jobs announcements that are the problem – Indiana has a real problem with unemployment. And I don’t see any hope of fixing that when the party that controls the state executive branch and the state Senate won’t acknowledge that there’s a problem.

Indiana’s unemployment rate over the last decade:

Graph of Indiana's unemployment rate from 2000-2010

Indiana unemployment, 2000-2010 (Source:

A cursory glance at Indiana’s unemployment rate gives you the outlines – 10% unemployment, using the standard U-3 measure. When you look at the bigger picture, it gets even worse. Using the broadest measure – U-6, which includes “marginally attached” workers and those working part-time who would rather be working full-time – more than 18% of Hoosiers can’t find a real job. That means Indiana is worse off than our neighbors in Illinois, Ohio, and Kentucky.

Just yesterday, the Indianapolis Star ran a piece on how Indiana’s job picture is worse than our neighbors. A recent study by the Brookings Institution’s Hamilton Project shows that Indiana ranks 6th-worst in the nation when they measure declines in employment from November 2007 to May 2010. It’s simply unacceptable for the Governor of the state that ranks 44th in employment growth to be celebrating our nonexistent jobs. The objective reality is that Indiana’s employment growth trails Michigan, Illinois, Ohio, and Kentucky (and almost every other state in the US).

It’s easy for Mitch to spin Indiana’s unemployment when our neighbors to the north in Michigan are facing the worst unemployment rate in the nation. But he shouldn’t get a free pass just because Hoosiers are marginally better off than the hardest-hit state.

But what about Indiana’s budget? It’s often asserted that Indiana has a “positive” budget and that we have a surplus. And that’s true – if you choose to selectively leave out a large chunk of Indiana’s finances.

Indiana is one of 26 states who are in debt to the federal government because they can’t afford to pay out their unemployment insurance benefits, according to ProPublica. Indiana’s Unemployment Insurance Trust Fund has been insolvent since at least 2008, and we currently owe almost $2 billion to the federal government for the state’s share of UI benefits. Just a couple of months ago, at Mitch Daniels’ urging, the state postponed a law that would raise UI rates to start paying off that debt.

March 2010 marked 17 straight months of Indiana’s revenues falling well short of projections. In April, we learned that:

Sales tax collections, though higher than April 2009, are lower than FY 2008, FY 2007 and even FY 2006 levels. Year to date sales tax collections are 5% below prior year. If the -5% trend continues for the full fiscal year it will be the worst performance in state history, exceeding FY 2009’s record of -4.7%. The budget as passed projected sales tax collections equal to prior year. April individual income tax collections are the lowest in five years. Year to date income tax collections are 11% below prior year—on top of an 11% decline for FY 2009. The budget as passed projected a 1% decline in individual income tax collections for FY 2010. (Source: Indiana State Budget Agency)

May’s monthly revenue report showed that “revenue collections through eleven months of the current state fiscal year are now $1.032 billion or 9% below the budget passed by the General Assembly.”

And too much of our state’s budget remains a mystery, even to those in charge of voting on it. When state lawmakers requested details on Mitch Daniels’ budget cuts, he released 476 pages of news clippings, but none of the actual information.

All this shouldn’t surprise Hoosiers. We elected – twice! – a man who oversaw record budget deficits when he ran the Office of Management & Budget for George W. Bush. We elected a man who rushed out to denounce critics in his own party by promising the Iraq War would cost only $50-60 billion. We elected a man who predicted that health care costs were done rising in 1994, so there was no need to address the issue. Given that record, it’s hard to believe anyone would buy Mitch’s spin about the Indiana economy.