INDIANAPOLIS – The Indiana General Assembly closed out its 2012 session early this year, and many legislators left crowing about their accomplishments.
They increased funding for full-day kindergarten, repealed the so-called “death tax” (phasing out the state’s inheritance tax over nine years), gave away some more tax credits, and kept intact the new automatic taxpayer refund.
Good issues to campaign on in a campaign year: Every Indiana House seat is up for election, as are half the state Senate seats.
But what you may not hear them talking about is how they – actually, we – are going to pay for this?
After Indiana capped property taxes, it came to depend more heavily on revenue from sales taxes, gaming and personal income taxes. The health of the economy is intimately linked to state revenue that pays for much of what we depend on, including schools, critical social services, and local police and fire protection.
Last December, just as the 2012 Indiana General Assembly was about to start the session, the economy seemed to be looking much rosier than it had in several years.
One of the indicators of economic health is consumer sentiment – how good we feel about spending our hard-earned dollars. Last December, we seemed to be feeling good. The often-cited Thomson Reuters/University of Michigan’s reading of the overall index on consumer sentiment rose to its highest level in six months.
It was an indicator that Americans were feeling better about the economy’s prospects for the year ahead.
That looked like good news for the Indiana budget, too: The more stuff Hoosiers buy (and the more money we gamble away at the state’s casinos and racinos) the bigger the tax revenue stream.
Still, even back in December, people must have had some worry. That Thomson Reuters/University of Michigan survey also revealed consumers’ views of their own finances were guarded: A majority of families said they expected to see no increase in their incomes this year.
No increase in income isn’t too much of a problem if your expenses stay the same.
But guess what? The latest reading of consumer sentiment says we’re back to feeling anxious. The latest Thomson Reuters/University of Michigan survey found consumer sentiment dropped in early March (just as the Indiana Legislature was wrapping up the session). The drop coincided with the rise in gas prices and fear that other prices will soon inflate.
Timothy Slaper is the director of economic analysis at the Indiana Business Research Center in Indiana University’s Kelley School of Business. He reads the economic tea leaves each month and puts together a report called the Leading Index for Indiana.
Slaper’s latest report says our economic engines appear to be stalled, and he attributes it to the recent spike in oil prices. Slaper found the latest Thomson Reuters/University of Michigan survey worrisome, too; economists were expecting an increase in consumer confidence in March, not a decrease.
Slaper’s conclusion: The economy is indeed recovering, but “the recovery continues at a gradual pace and is still fragile.”
• Maureen Hayden is Statehouse bureau chief for CNHI’s Indiana newspapers, including the Kokomo Tribune. Contact her at email@example.com.