Pence submits lean budget built around tax cut

Pence's $29 billion, two-year spending plan increases state funding by about $200 million each year, or roughly 1.4 percent, while building the state's cash reserves. It also plans for a $790 million cut in the state's personal income tax, which has received a chilly reception from Republican lawmakers so far.

"Gov. Pence's budget is a jobs budget that focuses on fiscal discipline, providing permanent tax relief for Hoosier workers, small businesses and family farms, and funding our priorities in education, transportation and health care," Pence's budget director, Chris Atkins, told members of the State Budget Committee on Tuesday.

The budget pays for some of the proposals Pence floated during his campaign for governor, including $64 million in grants for schools that perform well on a trio of state metrics including the A-F grading system established by former Republican Superintendent Tony Bennett. It increases K-12 spending and higher education aid by 1 percent each year, and continues to fund the state's full-day kindergarten program.

Pence also proposes shifting excess state reserves used to pay down pension liabilities to create a new transportation investment fund.

The Pence budget also includes more funding for targeted areas, including $35 million more for the embattled Department of Child Services to hire more caseworkers and other staff, $18 million for adult workforce development programs, and an additional $6 million each for teacher performance grants and a dropout prevention program called Jobs For America's Graduates.

On the whole, it would increase state spending from an estimated $14.2 billion in this fiscal year to $14.4 billion in fiscal year 2014. It then would increase to $14.6 billion in fiscal year 2015.