Daniels signs new 2-year sate budget into law

FOURTH UPDATE AT 11:08 p.m. TUESDAY:

AP and TRIBUNE REPORTS

INDIANAPOLIS - Lawmakers passed a new two-year state budget with just hours to spare before the current spending plan was set to expire.

The Republican-controlled Senate voted 34-16 Tuesday in favor of the plan, which the Democrat-led House passed on a 62-37 vote amid impassioned debate earlier in the day.

Gov. Mitch Daniels quickly signed it into law.

"Like any compromise, this budget has its defects, but it meets the fundamental condition I laid down in January and every day since: to limit total spending enough to preserve our surplus and thereby protect taxpayers against the tax increases happening in virtually every other state," Daniels said in an e-mailed statement.

Republican leaders say he supports the plan, which would spend an estimated $27.8 billion over two years and protect the state's reserves.

Lawmakers had faced a midnight deadline to pass a new budget or stopgap funding measure to prevent most state government from shutting down.

Among local legislators, Republicans - Rep. Eric Koch and Sen. Brent Steele, both of Bedford - voted to approve the budget while Democrats - Rep. Terry Goodin, Crothersville, Rep. Dennie Oxley Sr., Taswell, and Sen. Jim Lewis, Charlestown - all voted no. House Speaker Pat Bauer, D-South Bend, did not cast a vote.

Koch's reaction to the budget was similar to that of the governor.

"Like any state budget, it's a compromise and no one - including me - likes everything in it," he said. "But while other states are raising taxes and making deep cuts to education, this budget does neither. Now is the time for government to be frugal, just as Hoosier families and businesses have had to be. I am pleased that 14 Democrats joined us in this bipartisan compromise to end the Special Session and avoid a government shutdown."

Public schools will see an average state funding increase of about 1 percent in the first year and 0.3 percent in the second year. That's less than House Democrats wanted for schools but $54 million more than Senate Republicans provided in their previous version of the budget.

Goodin, who's superintendent at Crothersville Community Schools, said recently education funding would play a role in whether he voted for any budget compromise.

The budget includes a "trigger" mechanism so that if the economy improves and state revenues increase above projections, schools would get a share of the extra cash.

It also includes no limits on charter schools as some Democrats wanted.