Thursday, August 14, 2008

Indiana's Rainy Day Fund

It does not surprise me that the proposal for Indiana's rainy day fund is 10%.

“Daniels proposes implementing tax credits if the money in the state's main checking account and reserve funds exceeded 10 percent of that year's budget. The money would be doled out to taxpayers on a per capita basis on the next year's income-tax filings.”

This may explain why our budgets are feast and famine. What happens when Indiana is hit by a recession? Unemployment goes up, unemployment payments increase, tax revenues decrease and red ink abounds. Looking at the last ten years shows this happens often. So my question is why does an educated person propose 10% as the bench mark when money is returned? Recessions last 2 to 3 years with tax revenue drops of 20 to 30%. It is clear that 10% is a drop in the bucket and is just politics. If he were serious and up front with the taxpayers, he would propose a rainy day fund of 50%.

However, unless there was some sort of “true” lock on this rainy day fund, some stinkin politician would spend it. Therefore, it is probably best that we have no rainy day fund.


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