Agencies were told that the 5% of funding in reserves “are unlikely to be released” on top of earlier budget cuts. Photo from Getty Images.

By Whitney Downard
Indiana Capital Chronicle

INDIANAPOLIS — The Braun administration has directed agencies to withhold 5% of their funds from specific budget line items — rather than allowing department heads to identify areas for reserves. This is in addition to appropriation cuts already enacted in the state budget passed in April.

In previous years, the Office of Budget and Management traditionally directed agencies to reserve funds but gave agency leaders more discretion in how to achieve the savings. The change appears to stem from a General Assembly addition to the 2025 budget, rather than Gov. Mike Braun.

“For the first time in recent memory, nearly every agency across all three branches of government finds itself entering the first year of a new biennium with fewer resources than it had the year before,” reads a letter from OMB director Chad Ranney dated Monday, June 2. “At the same time, the costs for the state’s major programs continue to increase at unsustainable rates. Overcoming these challenges will require each of us to place a renewed focus on fiscal responsibility as well as collective commitment to budget discipline.”

The letter goes on to say that “the amounts withheld are unlikely to be released,” meaning that agencies might need to operate with essentially a 10% budget cut. Ranney asks agencies to identify areas that could be targets for reversions, or mid-year transfers from fund to fund. Such moves were popular prior to COVID-19, when the federal government sent billions to states to avert economic disaster.

That state is projected to maintain between $2.25-2.5 billion in reserves throughout the biennium.

More On Cuts

Budget line items run the gamut from the governor’s office and residence to the Indiana State Fair Commission.

Even agencies that got a slim budget boost in the 2025 budget — the Department of Correction and the Department of Child Services — were directed to reserve funds related to salaries and general operating funds.

Those agencies were allocated scarce budget dollars due to a shortfall of funds for local jails holding state inmates and increased child caseloads.

The state’s higher education institutions also weren’t spared. Indiana University, Purdue University, Indiana State University, the University of Southern Indiana, Ball State University and Vincennes University all will have funds held back, including specific cuts to satellite campuses.

That’s on top of lawmakers cutting their appropriations in the two-year budget beginning July 1.

The directive follows a grim revenue forecast earlier this year that projected the state would have $2 billion less to spend in the next two-year budget, prompting lawmakers to institute 5% agency cuts largely across the board.

The budget bill included another provision, instructing the state’s budget director “to withhold not less than 5% of any appropriation to a state agency to be used for salaries or other wages for state agency employees or general operating expenses of the state agency.”

Agency plans are due to the Office of Management and Budget by the end of the month.