The Indiana Fiscal Policy Institute’s September quarterly update shows state revenues are running ahead of projections in the early months of the 2026 fiscal year, even as long-term forecasts point to slower growth.
According to the Indiana State Budget Agency, revenues through August totaled $3.17 billion—about $139.6 million, or 4.6 percent, above the state’s April 2025 forecast. Collections are also $218.7 million, or 7.4 percent, higher than at the same point last year
The current fiscal picture follows a major adjustment earlier this year. On April 16, 2025, state budget forecasters lowered expected revenues for FY 2025, FY 2026, and FY 2027 compared to the December 2024 outlook. The revised forecast trimmed $410 million from FY 2025 projections, $970 million from FY 2026, and $1 billion from FY 2027.
The reduction did not signal shrinking revenues overall, but a slower pace of growth, largely attributed to federal policy changes. As a result, lawmakers cut about $2 billion from planned state spending in the biennial budget
So far in FY 2026, sales and use taxes remain the state’s largest source of income, bringing in 59.5 percent of revenues—up from 47.9 percent last year. Individual income taxes account for 30.7 percent.
By contrast, corporate tax revenues continue to lag. Collections are running 33.4 percent below the April forecast and 35.5 percent below last year at the same time. Corporate receipts have fallen short of expectations for two consecutive fiscal years. Analysts point to both broader market conditions and Indiana’s relatively new pass-through entity tax, enacted in 2023 but retroactive to 2022, as contributing factors
The report notes that corporate tax payments are concentrated in April, June, September, and December, while refunds tend to depress totals in November and February. That timing, combined with underlying economic factors, has made forecasting particularly difficult
Riverboat and racino wagering taxes remain relatively flat, with only modest year-over-year changes. Other sources such as cigarette, insurance, and vehicle excise taxes continue to play a smaller role in the overall revenue picture.
Despite the April downgrade, the state is still seeing net growth compared to previous years. Fiscal leaders have emphasized the need for cautious budgeting, given the slower trajectory projected through 2027.
The Institute’s report underscores that while sales and income tax collections are carrying revenues above forecast in the short term, persistent weakness in corporate receipts could create pressure later in the fiscal year.
For now, Indiana’s coffers are healthier than expected—providing a buffer for state government programs and spending priorities—but budget writers remain wary of potential soft spots as the economy adjusts to federal policy shifts and ongoing market volatility
