Indiana’s state budget reserves jump 60% in past year to $4B

by Tom Davies, Indiana Capital Chronicle
July 15, 2026

Indiana’s state government cash reserves grew by $1.5 billion over the past year as tax collections increased much faster than expected.

Rising revenue combined with an ongoing clampdown on state spending led to a 60% jump in the reserves to just shy of $4 billion as of June 30, according to the 2025 fiscal year report released Wednesday.

Republican Gov. Mike Braun touted Indiana’s balance sheet as providing budget “flexibility” that most other states lack.

“It gives us the option on difficult places — like infrastructure, reining in healthcare costs, early childhood learning — to invest, give some relief to taxpayers,” Braun told reporters at the Statehouse.

State tax collections jumped 6.8% during the 2026 fiscal year after growth of just 0.8% was projected when the current state budget was adopted in April 2025. 

The ongoing suspension of Indiana’s gas taxes ordered by Braun doesn’t factor into the state’s general fund fiscal status as that money is directed into separate accounts dedicated to state and local road funding.

Democrats say extra money should go toward unmet needs

The State Budget Agency report released Tuesday estimated that the cash reserves will grow by $1.3 billion, or 32%, in the coming year to $5.3 billion next summer.

That would be about 23% of current state spending, well above the 10-15% level that Republican budget-writers have typically targeted.

Democrats said Tuesday that Braun should not wait until the Republican-dominated Legislature returns in January to take action on addressing urgent needs facing Hoosiers.

Rep. Greg Porter of Indianapolis, the top Democrat on the House Ways and Means Committee, called for transferring money to support K-12 schools and other programs that were pinched under the current budget.

“Take some of that money now,” Porter said. “You know we can talk about having AAA bond (rating) and how great we are, but what about the infrastructure? What about the students? What about those parents that need (childcare vouchers) to go to work?”

The fiscal year report showed general fund spending up by 1% from the previous year, with 0.6% spending growth expected for the coming year.

Lisa Hershman, Braun’s secretary of management and budget, said the administration remained cautious in forecasts and spending.

“Indiana never waited for conditions to improve,” she said. “We positioned ourselves to succeed no matter the cycle.”

“Future budget pressures” looming

The dramatic jump in the state’s reserves to the current $4 billion follows that level dropping to $2.5 billion in mid-2025. The reserves peaked at $6.1 billion in 2022 as state coffers were boosted by federal COVID-19 pandemic relief funding.

Senate Appropriations Committee Chair Ryan Mishler, R-Mishawaka, called the fiscal report a “positive sign” for the state but also urged caution on additional spending.

“Indiana’s economic circumstances are evolving, and the state is facing several current and future budget pressures, including an over $500 million shortfall in road funding, the Department of Child Services being over budget and the unfunded liability of the Pre-1996 Teachers’ Retirement Fund,” Misher said in a statement. “All these things make it important to remember previous years when difficult decisions needed to be made.”

The gas tax suspensions — totalling about 61 cents per gallon for July — has reduced revenue for state and local highway funding by more than $500 million since April, according to state officials.

The state Board of Finance is scheduled to consider July 21 a proposal for transferring money that would normally go toward state road projects to reimburse county and city governments for their revenue shortfalls. 

“Indiana’s incredible fiscal strength at the moment has allowed us to suspend those taxes and have revenue retention now here in the general fund to back the state highway fund,” State Budget Director Chad Ranney said.

The larger general fund surplus, however, won’t trigger the state’s automatic taxpayer refund law.

That process kicks in during odd-numbered years if the cash reserves top 12.5% of state spending, with the excess revenues split between paying down state pension obligations and refund payments Hoosiers. It was last triggered with $125 refund payments that were issued in 2022.

This story has been updated with information about the state gas tax suspension and other details.

Indiana Capital Chronicle is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Indiana Capital Chronicle maintains editorial independence. Contact Editor Niki Kelly for questions: info@indianacapitalchronicle.com.