Indiana’s Next Economic Advantage Will Be Built Locally

Competitive businesses require competitive communities—and communities need the capacity to invest in themselves.

Indiana's fiscal discipline deserves real credit.

The state closed fiscal year 2026 with $3.99 billion in reserves, including a $1.86 billion surplus, according to the state comptroller's office. Reserves grew substantially over the previous year and now equal roughly 63 days of state expenditures—not an accident, but the result of cautious forecasting, spending controls and stronger-than-expected economic and revenue performance.

We should celebrate that. But we should also ask "what it's for?"

A strong reserve protects Indiana during a recession, a natural disaster or a sudden loss of federal support. It lets the state meet its obligations without immediately raising taxes or making damaging cuts. Maintaining that cushion is responsible government.

But fiscal discipline isn't just the accumulation of money. It should also give Indiana the capacity to confront the weaknesses holding back our economy and our communities.

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The Indiana Chamber's updated Prosperity 2035 report provides a useful guide to where Indiana’s fiscal capacity could make the greatest difference. The report deserves credit for broadening the state’s economic conversation beyond its traditional emphasis on tax and regulatory competitiveness. It recognizes that talent, childcare, health, housing, education and quality of place are now central to economic competitiveness.

The report also retains an ambition to move Indiana into the top five for business climate. Protecting the advantages Indiana has built remains important. But with Indiana already ranking 10th nationally for business, second in cost of doing business and fourth in infrastructure, the marginal return may now be greater from improving areas where we remain much further behind.

But the report also holds onto an ambition to move Indiana into the top five for business climate. There's nothing wrong with protecting the advantages we've built, but Indiana is already 10th nationally for business, second in cost of doing business and fourth in infrastructure. Our larger gaps are elsewhere: 48th in public-health investment, 33rd in air quality, 24th in population growth, and nearly 123,000 children who need early care or education still unserved. The marginal return may now be greater from improving a strong ranking from 10th to 5th—it's in moving a weak one from 48th toward the middle of the pack, and then higher.

These aren't just family or social-service issues. They determine whether people can enter the workforce, stay employed and build their lives here. They also offer a practical test for how Indiana should use its fiscal strength: protect what already makes us competitive, but invest most aggressively where we're falling furthest behind.

Build out behavioral health regionally
Mental and behavioral health should be one of the first places Indiana looks.

Indiana has made real progress through its Certified Community Behavioral Health Clinic model, which provides comprehensive mental-health and addiction services—including round-the-clock crisis response—regardless of a person’s insurance status or ability to pay. Eight demonstration sites began serving Hoosiers in early 2025, and the current budget maintains a $50 million annual General Fund commitment to community mental health. That is progress worth building on.

The next question is whether every region has the full continuum of care it needs: prevention, outpatient treatment, crisis stabilization, addiction services and enough acute or inpatient capacity for when community-based care is not sufficient. I would not begin by assuming every region needs a new state hospital. I would begin by mapping the gaps—where people are waiting in emergency rooms, where police and jails have become the default behavioral-health providers, and which regions lack crisis beds, psychiatrists or addiction treatment.

Indiana could use part of its fiscal capacity to expand regional facilities and services where the evidence shows real need, to build a connected system rather than a scattered collection of programs.

Expand early-childhood capacity
Early childhood should follow closely behind.

Indiana has already taken an important step by approving a one-year, $200 million augmentation for childcare assistance. That investment matters. It reopens access for families after voucher enrollment was frozen and recognizes childcare as workforce infrastructure, not a side benefit.

But the State Budget Committee’s discussion also exposed the limits of a one-time fix. Officials acknowledged that sustainable voucher funding will need to be addressed in the next budget and that fully serving the existing waitlist would require substantially more money.

The long-term answer cannot be vouchers alone. Indiana also needs more providers, classrooms and qualified early-childhood educators. Surplus dollars are well suited to one-time investments in facility expansion, startup costs, workforce training and employer-community partnerships because they build lasting capacity without pretending temporary money can support a permanent obligation. Ongoing family assistance still requires a sustainable recurring funding structure.

The surplus can help build the system. It cannot be the system.
 
Invest where public dollars unlock private growth
A third category is one-time investment in the things that let communities grow: water and sewer capacity, housing infrastructure, childcare facilities, behavioral-health centers, and the public groundwork that makes private development possible.

The current budget includes $50 million for housing infrastructure and $40 million for water infrastructure. Both point in the right direction, but the need across Indiana is considerably larger than that. State matching programs can multiply the value of surplus dollars by attracting local, federal, philanthropic and private investment—and they can be built around clear outcomes and regional priorities rather than scattered across disconnected projects.

Here in Bloomington, that could mean state support for housing infrastructure, childcare facilities, water and sewer capacity or regional behavioral-health services—investments that help local, philanthropic and private partners move projects that no single sector could carry alone.

Indiana shouldn't spend every dollar just because it's there, and a temporary surplus shouldn't be used to create permanent commitments without a recurring revenue source behind them. But there's also little virtue in building strong balances while childcare shortages keep parents out of the workforce, behavioral-health gaps push people into jails and emergency rooms, and communities lack the infrastructure to build housing or attract employers.
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The goal shouldn't be spending for its own sake, or neglecting the tax and regulatory advantages Indiana has built. It should be recognizing diminishing returns. Moving from 10th to 5th in an already strong business-climate ranking may produce less lasting value than moving from 48th to 30th in public health, closing the childcare capacity gap, or giving more communities the infrastructure they need to grow.

​Fiscal discipline should be the foundation for action, not a substitute for it. Indiana has done the hard work of building financial capacity. The next measure of leadership is whether we invest some of that strength in the people, systems and communities that will determine our prosperity long after this surplus is gone.

By: Christopher Emge, Sr. Director of Government and Community Relations 

​​Disclaimer: This piece was written by Christopher Emge, Sr. Director of Government & Community Relations for the Greater Bloomington Chamber of Commerce, with assistance from AI editing tools. While it is intended to represent the Chamber's broad advocacy priorities, it should not be interpreted as expressing a position on every aspect of the issue discussed. The article was edited with the assistance of artificial intelligence, with all analysis, opinions, and final editorial decisions made by the author.

Sources
Indiana Chamber Foundation. Indiana Prosperity 2035: Summer 2026 Update. Indiana Chamber of Commerce, July 14, 2026.

Indiana Family and Social Services Administration, Division of Mental Health and Addiction. “Certified Community Behavioral Health Clinics.” Describes Indiana’s CCBHC model, 24/7 crisis services and eight demonstration sites that began operating in early 2025. Accessed July 23, 2026. (Government of Indiana)

Indiana State Budget Agency. April 2026 State Budget Committee Minutes. April 16, 2026. Documents the one-year, $200 million childcare augmentation, the estimated cost of serving the full waitlist and the stated need for sustainable future funding.

Indiana State Budget Agency. Budget Director’s Report on Appropriations Made During the 2025 Regular Session of the Indiana General Assembly. June 9, 2025. Summarizes Indiana’s fiscal year 2026–2027 budget, including capital investments in housing and water infrastructure. (Government of Indiana)

Indiana State Budget Agency. State of Indiana List of Appropriations Made by the Regular Session of the 2025 Indiana General Assembly for the Biennium July 1, 2025, to June 30, 2027. June 9, 2025. Includes the annual $50 million General Fund appropriation for community mental health and biennial appropriations of $50 million for housing infrastructure and $40 million for water infrastructure.

Office of the Indiana State Comptroller. Comptroller Nieshalla and State Budget Leaders Announce State Reserves and Surplus at Fiscal Year-End Close. July 15, 2026. Reports fiscal year 2026 reserves of $3.99 billion, a $1.86 billion surplus and reserves equal to approximately 63 days of state expenditures. (Government of Indiana)