Balanced Budget

$8.0 Billion11%

$27.8 Bil-lion

39.0%

$35 Billion50%

FY14: All Funds Budget$71 Billion

Federal Funds Other State Funds General Revenue Funds

$3.6 billion of $35 billion GRF is at-tributed to fed-eral match on Medicaid spend-ing.

Personal Income

45%

Corporate Income8%

Sales 21%

Other Sources 15%

Federal Receipts 11%

FY14 General Revenue Funds by Source$35.5 Billion

Personal Income - $16.0B

Corporate Income - $2.9B

Sales - $7.4B

Other Sources - $5.1B

Federal Receipts - $4.0B

Government Services 3.3%

Public Safety and Regulation4.8%

Human Services 14.7%

P- 12 18.9%

Higher Ed 5.6%

Medicaid/Healthcare 23.5%

Pensions 16.9%

Debt Service on Pension Bonds

4.7%

Debt Service on Capital Bonds1.7%

Public Transportation1.9%

Transfers to Local Governments 4.3%

FY 2014 Enacted GRFDiscretionary and Non-Discretionary Appropriations

$35 billion

Government Services - $1,178Public Safety and Regulation - $1,692Human Services - $5,202P- 12 - $6,687Higher Ed - $1,991Medicaid/Healthcare - $8,311Pensions - $5,988Debt Service on Pension Bonds - $1,655Debt Service on Capital Bonds - $527Public Transportation - $664Transfers to Local Governments - $1,508

State Employees =

$4 billion (11%)

$ below in millions

Paying Our Bills

Paying Bills

• The budget office estimates that we will end the current fiscal year with $3.5 billion less bills on hand when compared with FY12

•Major reforms to state law will continue to drive this number down in later years

FY12 FY13 est. FY14 est.$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0

$10.0

$9.1

$6.1

$2.8

Unpaid Bills: End of Fiscal Year($ in Billions)

By FY14 half of the unpaid billswill be less than 60 days old.

$2.8

$5.6 total

Pension Obligation Bonds Issued in FY10 and FY11

• For fiscal years 10 and 11, the state issued $7.166 billion in bonds to make the required contribution to the pension systems

• By the end of fiscal year 14, the state will retire $3.8 billion in costs associated with those bonds

2011 2012 2013 2014 2015 2016 2017 2018 2019$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

$9,000,000

$10,000,000

$802,477

$1,791,240

$2,765,815

$3,817,370

$5,036,678

$5,818,607

$6,870,770

$7,874,648

$8,827,541

Cumulative Debt Service Paidby the End of Each Fiscal Year

($ In Thousands)

Pension Obligation Bonds Issued in FY10 and FY11

• Strong performance has meant a return of nearly $1.52 billion to the pension systems, or $806 million more than the interest costs

•Bonds will retire by FY20

FY10 and FY11 POBsInterest vs. ReturnJuly 1, 2010 through July 1, 2013

Interest Return$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000

$1,400,000,000

$1,600,000,000

$715,392,200

$1,521,163,041

FY10 and FY11 POBsInterest vs. Return

July 1, 2010 through July 1, 2013

Difference = $805.77 million

FY10 FY11 FY12 FY13 est. FY14 est.$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

$16.0

$18.0

$20.0

$9.2

$8.0

$9.1

$6.1 $5.6

$8.8

$8.0 $7.0

$6.1

$5.0

End of Fiscal Year - Bills and Combined Debt Service on Pension Bonds($ in Billions)

Bills Owed Bonds Owed

$7.4 billion in combined debt service and backlog reduction since FY10

Taxes

$0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,0000.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

Personal Income Tax Rates of Midwestern States

Iowa

Wisconsin

Missouri

Kentucky

Illinois

Indiana

Illinois - 2015

Income (Married Filing Jointly)*Indiana's tax rate includes an average county tax rate of 1.28%

Tax

Rat

e

Top Corporate Marginal Income Tax Rates of Midwestern States

Kentucky Missouri Illinois Wisconsin Indiana Iowa0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

6.00% 6.25%7.00%

7.90% 8.00%

12.00%

Top Corporate Marginal Income Tax Rates of Mid-western States

Inc

om

e T

ax

Ra

te

Government Services - $1,1783%

Public Safety and Regulation - $1,692

5%

Human Services - $5,20215%

P- 12 - $6,68719%

Higher Ed - $1,9916%

Med-icaid/

Healthcare -

$8,31123%

Pen-sions - $5,98817%

Debt Ser-

vice on Pen-sion

Bonds -

$1,6555%

Debt Ser-

vice on Capital Bonds - $527

1%

Public Transportation - $6642%

Transfers to Local Governments - $1,5084%

FY 2014 Enacted GRF$35 billion

$ in Millions

State Employees =$4 billion (11%)

Human Services, P-12, and Higher Education Total $13.88 bil-lion

Pensions

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

2032

2034

2036

2038

2040

2042

2044

2046

-5%

0%

5%

10%

15%

20%

25%

30%

2.9%3.

3%3.7%4.

3%4.4%4.

7%5.4%6.

2%8.

4%

6.9%

4.7%5.

6%7.

3%9.

6%

5.1%

4.8%

17.1

%20

.0%22

.4%22

.9%

21.7

%22.6

%22

.7%22

.7%

20.6

%20

.8%21

.1%21

.3%21

.6%21

.9%22

.1%22

.3%22

.6%22

.8%23

.0%23

.1%23

.3%23

.3%23

.4%23

.4%23

.4%

23.4

%

23.3

%

23.3

%

23.2

%

23.1

%

23.0

%

22.9

%

22.8

%

22.7

%

3.4%

GRF Pension Cost as a Percentage of Total General Funds

Current Law; Assuming No Expiration of Tax IncreaseFY 1996 - FY 2046 (Projected)

Notes: All future projections of State pension contributions come from the Retirement System Actuaries.Only the GRF portion of the regular pension appropriation plus pension bond debt service is shown here.GRF FY 2013-2016 projections provided by CoGFA's revenue staff; figures for FY 2017 - 2045 used an assumed growth rate of 2.3%.Approximately 66% of SERS' total annual appropriation is assumed to come from GRF while the rest comes from other State Funds not shown here. FY 2010 and FY 2011 amount do not reflect the pension bond/note proceeds pursuant to P.A. 96-0043 and P.A. 96-1497.

-5%

0%

5%

10%

15%

20%

25%

30%

GRF Pension Cost as a Percentage of Total General Funds

Comparison; Assuming No Expiration of Tax IncreaseFY 1996 - FY 2045 (Projected)

Statutory Contributions SB 2404

SB 1

Notes: All future projections of State pension contributions come from the Retirement System Actuaries.Only the GRF portion of the regular pension appropriation plus pension bond debt service is shown here.GRF FY 2013-2016 projections provided by CoGFA's revenue staff; figures for FY 2017 - 2045 used an assumed growth rate of 2.3%.Approximately 66% of SERS' total annual appropriation is assumed to come from GRF while the rest comes from other State Funds not shown here. FY 2010 and FY 2011 amount do not reflect the pension bond/note proceeds pursuant to P.A. 96-0043 and P.A. 96-1497.Projections including transfers pursuant to the PSA were not available for neither GARS nor JRS.

SB 2404 choice: Younger 50% of Actives Elect Choice A, Older 50% of Actives and 100% of Inactives Elect Choice B, Option 2; Retirees: 100% Elect Choice A

Questions and Answers