State reserve funds are being spent, hiring has been frozen and spending cuts — including to education — are among ways the state is staving off the effects of the continuing recession, according to Indiana Gov. Mitch Daniels.

He spoke to members of economic development agency One Southern Indiana during a Wednesday luncheon at DeCrane Aerospace at River Ridge Commerce Center.

“Statistically, economists have said [the recession] is over, but in human terms I don’t think it is,” he said. “In business terms I don’t think it is.”

Delivering the good news first, Daniels highlighted a few of the key factors that he believes have kept Indiana afloat during the recent economic instability: He said the state is routinely recognized as one of the nation’s most business-friendly, with low taxes for companies.

However, he noted that state revenue will be lower this year than last. Even when anticipating a recovery in 2011, he said, Indiana’s revenue will still be at a level below anything since about 2005. Revenue collections across every category — with the exception of gaming — have been down, he said.

And he warned that revenue may stay down, arguing that a “permanent reset button” had been pushed.

“[Consumers] were spending more than [they] were taking in,” he said. “People aren’t going to go back to that.”

As the revenue has decreased, the state’s reserves are being spent, he said.

“Thank goodness we had those reserves,” Daniels said.

The governor said he believes that if spending cuts would not have been made, the reserve funds likely would not have made it to summer.



EDUCATION CUTS

As Daniels opened the floor to questions, one audience member asked him about the cut to education funds. He likened the 3 percent cut to kindergarten through 12th grade education to a last resort. He noted that 41 states across the country have cuts to education as well — many of which have been larger in amount than Indiana’s.

Further, he pointed out that K-12 education accounts for half the state’s budget and that education spending has increased five times since his administration took office in 2005. Only 10 or 11 states spend more than Indiana does per pupil, he said, illustrating his point with a graph he brought along just in case the question came up.

“We’re spending lots more money on education than we used to,” he said. Despite those increases, results “haven’t gone anywhere.”

Further, he challenged education’s administrative costs, saying that teachers raises are not based on merit, but flatly given to both good and bad teachers.

“No taxpayer ought to feel defensive on our funding of education.”



TALKING TOYOTA

Daniels also spoke briefly about a letter he and fellow governors in Kentucky, Mississippi and Alabama had recently sent, scolding federal officials for speaking out against Toyota in light of its recent auto recall regarding sticking accelerators.

Transportation Secretary Ray LaHood told owners of recalled Toyotas to stop driving their vehicles, Daniels noted. He also warned that fines related to the recall could be higher than normal.

“A prolonged witch hunt might unduly drive customers away from Toyota,” the governor said.

The letter says “no other automaker has addressed safety in such an emphatic manner by not only recalling vehicles but also voluntarily stopping production and sales of those vehicles until safety issues were addressed.”

He called Japan-based Toyota a thoroughly American company, based on sales and where their parts and vehicles are assembled. Indiana has two Toyota plants, boasting about 5,000 jobs, one near Evansville and the other near Lafayette.

“It looks kind of fishy when the federal government has gone into the car business itself,” he said, referencing bailouts to domestic automakers General Motors and Chrysler.