by Abdul-Hakim Shabazz, Esq.
Indiana closed the fiscal year with about $1.855 billion sitting in its main checking account and roughly $4 billion in total reserves — around 16.5% of what the state expects to take in. That’s a hair above the 10-to-15% cushion the fiscal grown-ups say is prudent, which in Statehouse terms means we are officially Doing Fine and everyone is about to argue about what “fine” is for.
The usual suspects are lining up. Some want taxpayer refunds, which the law half-mandates anyway. Some want to shovel more into the old teacher pension hole, which never fills. And a few brave souls want to actually spend money on a thing. Allow me to nominate a thing: child care.
Here’s the setup. This year the state capped On My Way Pre-K at 2,500 kids. Last year it served more than 6,000. That’s not a typo and it’s not a rounding error — it’s a roughly 60% haircut on a program that helps four-year-olds from low-income families get to kindergarten able to sit still and count. The broader child care voucher waitlist has run near 31,000 children. So we have a near-record surplus and a record-ish line of people who can’t get help. Cool system.
Which brings me to the endowment idea, floated to me and dutifully bounced off Stephanie Wells at the Indiana Fiscal Policy Institute, whose organization does not advocate for anything and would like you to remember that.
“Yeah, like an endowment. I mean, that’s interesting,” Wells said. “To what purpose is that?… I think I’d want to understand what the purpose of creating that endowment was for. It’s interesting, right? You could create it as a set aside for a particular program that’s maybe persnickety, you know, and you’re having trouble funding it… So I’m not opposed to looking at it. I think I just want to know more details.”
Persnickety. A program you’re having trouble funding. Reader, I have found our persnickety program.
Now the arithmetic, because that’s where these fantasies usually die. An endowment spends the earnings, not the principal — figure a sustainable draw of 4 to 5%. Park $1 billion, and it throws off about $40 to $50 million a year, forever. Restoring pre-K to roughly 6,000 seats at the current $6,800 voucher runs about $41 million a year. That is a suspiciously clean fit. One billion dollars, permanently funding pre-K at about the level we just torched, without the General Assembly having to re-litigate it every budget cycle like it’s a hostage negotiation.
And before anyone clutches their pearls about “government picking winners,” Indiana already runs endowments. The Common School Fund has been baked into the state constitution since 1851 — principal untouchable, earnings locked to schools “and to no other purpose whatever.” When Mitch Daniels leased the Toll Road in 2006, he stuffed $500 million into a trust and told everyone to spend the interest, not the corpus. We know how to do this. We just usually do it for roads.
The honest catch: the surplus isn’t a one-time lease check or a pile of land grants. It’s operating money the Use of Excess Reserves law already half-promises to taxpayers and half to pensions. Carving out a billion for babies means telling those constituencies to wait, and they have better lobbyists than four-year-olds.
But Wells said the quiet part herself — she’s not opposed to looking at it. She just wants details. So here are the details: we have the money, we have the model, we have the constitutional precedent, and we have a waitlist 31,000 kids long.
It’s an idea worth looking at.
Abdul-Hakim Shabazz, Esq is an attorney licensed in Indiana and Illinois. He is also the editor and publisher of Indy Politics.
