Indiana election 2018: The voters decide

Domenica Bongiovanni | IndyStar

Kelly Wilkinson/IndyStar

A balanced budget amendment, an idea championed by Mike Pence and questioned by some Democrats, is now in the state constitution.

Hoosiers on Tuesday approved the "Indiana Public Question 1," a balanced budget requirement, by a wide margin. Seventy-two percent voted in favor of it with 90 percent of the precincts reporting.

The outcome is a victory for Vice President Pence, who as Indiana's governor introduced the idea in a 2015 speech, and the bill's Republican authors, who include state Sens. James Buck and Ed Charbonneau and former Sen. Brandt Hershman.

"I think it is one of the more enduring things that we've done to ensure that Indiana is positioned, as a government and as an economy, to succeed for generations to come because we will ensure that we don't fall into some of the fiscal problems that other states had," Hershman said.

What 'Indiana Public Question 1' said

The amendment, which applies to Article 10, Section 5 of Indiana's constitution, would only allow the requirement to be suspended if two-thirds of the legislature votes as such. It reads as follows:

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“Shall Article 10, Section 5 of the Constitution of the State of Indiana be amended to require the General Assembly to adopt balanced budgets for state government that do not exceed estimated revenues unless a supermajority of two-thirds of the members of the House of Representatives and two-thirds of the members of the Senate vote to suspend the requirement?”

Critics of the bill said that the constitution already keeps Indiana from taking on debt, except in special circumstances, and that legislators from both parties have been producing balanced budgets for years.

"There will be people who are fearful, I think without good cause, and there may be confusion in the future," said Rep. Ed DeLaney, D-Indianapolis.

When the amendment goes into effect

The amendment will go into effect for the next two-year budget cycle, which extends from July 1, 2019, to June 30, 2021, said Hershman, who stepped down early this year to join the Washington, D.C., office of Indianapolis-based law firm and lobbying powerhouse Barnes & Thornburg.

In the amendment, "revenue" refers to income that comes into the state general fund and all other state funds but not bond proceeds or other loans. "Expense" entails the operating costs of the government.

If costs exceed revenue at the end of a biennial budget period, then the next biennial budget has to subtract the shortfall from the projected revenue for the next budget period.

IndyStar file photo/Charlie Nye

The amendment started with Mike Pence

"A balanced budget requirement in the constitution of the state of Indiana will assure Hoosiers that today and tomorrow, Indiana will spend wisely, protect our state from an economic downturn, and unlike Washington, D.C., we won't bury our children and grandchildren under mountains of debt," Pence said in the address.

From there, legislators introduced Senate Joint Resolution 19, which passed the House and Senate first in 2015. Senate Joint Resolution 7 had similar language and passed in 2017. A proposed amendment must be approved in two sessions in a row before it can be presented to the public, according to the constitution.

"When Mike Pence approached me in 2015 and said, 'Hey, we really don't have a balanced budget requirement,' my first reaction was, 'Sure we do. It's in the constitution,'" Hershman said. "And it wasn't until I tried to prove him wrong and started looking at legal research that I understood he was absolutely right."

As it stands, Article 10, Section 5 of the constitution states: "No law shall authorize any debt to be contracted, on behalf of the State, except in the following cases: to meet casual deficits in the revenue; to pay the interest on the State Debt; to repel invasion, suppress insurrection, or, if hostilities be threatened, provide for the public defense."

The National Conference of State Legislatures already considers Indiana to require a balanced budget, according to a 2010 report. But Hershman said it's wrong and pointed to what he called "structurally imbalanced budgets in the early 2000s" and Illinois' "fiscal death spiral" as reasons to enact stronger language with the amendment.

Hershman also cited a 2015 report from Standard and Poor's, which stated that the constitution and statutes did not "require the state to initially approve or maintain a balanced budget throughout the year." The rating service gave Indiana a AAA rating, stating both that the state has handled its finances effectively already and that a "balanced budget requirement would strengthen Indiana's government framework."

Dwight Adams, dwight.adams@indystar.com

Does the amendment impact pensions?

In the months leading up to the election, some social media posts and emails circulated saying that the amendment could cut pensions to fill the budget shortfall. Both Hershman and DeLaney said that was untrue. Pensions will be actuarially funded, which means that they will be based on accounting practices that project future liabilities and the investment it will take to cover them, Hershman said.

"Not only does it not take anything away, it does the exact opposite. It requires money to be invested in them," Hershman said of older pensions that the state continually invests in.

"The one pension fund that is not fully funded is being taken care of," DeLaney said. "Both parties have worked diligently and cooperatively to get there."

IndyStar reporters Tony Cook and Justin Mack contributed this report.