The Hoosier way: A model of fiscal responsibility
Indiana Comptroller Elise Nieshalla has built a reputation as a leading voice on fiscal responsibility, both in her state and across the country. As chair of the National Debt Crisis Task Force for the State Financial Officers Foundation (SFOF), she has been outspoken about the dangers of the $37 trillion federal debt and the importance of responsible budgeting. She recently spoke with American Habits editor Ray Nothstine in New Orleans at State Policy Network’s 33rd Annual Meeting about Indiana’s fiscal success, federalism, and why other states should join the call to rein in federal spending.
Dale Falwell, the former North Carolina treasurer, called himself “the keeper of the public purse.” Love that framework.
Your former governor Mitch Daniels once called the federal debt the “new red menace.” As chair of the National Debt Crisis Task Force and an advocate for addressing the $37 trillion national debt, how can Indiana’s success with balanced budgets and low debt serve as a model for federal fiscal policy?
Elise Nieshalla: You referenced our former governor, Mitch Daniels, who has been an absolute champion, sounding the alarm on the massive problem of the nation’s debt load. When he came to Indiana, he had just finished serving as the director of the Office of Management and Budget under President Bush, where he became known as “the Blade” for the cuts that he made.
When he came back to Indiana, he became “the Blade” for our state — and we needed him. At the time, Indiana faced significant debt and cash flow problems. Daniels had the fortitude to lead both the state and the legislature through the tough cuts that were necessary. His leadership put Indiana on a new fiscal trajectory, and today we stand as proof that a state can turn its financial position around.
Thanks to those cuts and innovative thinking, more than 20 years later Indiana now ranks fourth lowest in debt per capita nationwide. We have healthy cash reserves and balanced budgets, which is now a requirement added to our state constitution in 2018. Our pensions are well funded, and we’ve earned a AAA credit rating from all three major rating agencies.
Much of the credit goes to Mitch Daniels, whose leadership helped turn Indiana into a model of fiscal responsibility.
You’ve talked about how Indiana Senate Resolution 51 was adopted by the American Legislative Exchange Council (ALEC) as a model resolution. How has Indiana recently led the call for fiscal restraint, and how does this promote federalism? Can resolutions like this influence federal policy? Are you optimistic about building a groundswell of support among other states to address the national debt and spending?
Nieshalla: I am very optimistic about this. As hard as Indiana has worked and the states work to balance their budget and to be financially solvent, we are all realizing that we are vulnerable to the rapidly dissolving financial position of our country. We have a duty to speak out on behalf of our states and their well-being on this. We’re focusing on several efforts.
You mentioned how the Indiana Senate passed a resolution calling out the national debt for the national security threat that it is and get our financial house in order—the malpractice of deficit spending.
We stand as proof that a state can turn its financial position around.
That was a response of, we’ve done the hard work here, and now we’ve got to provide support for Congress and President Trump to restore the country’s fiscal solvency.
That resolution was later adopted by ALEC as a model for other states. The goal is to encourage as many legislatures as possible to pass similar resolutions so we can build a groundswell of support for Congress and the president to rein in deficit spending and put us on a path of reducing our debt-to-GDP ratio.
This is something our friend Dale Falwell has also discussed. You’ve been vocal about ESG and debanking, issues affecting Indiana and many other states. What role can a comptroller play in addressing these concerns, especially if individuals or businesses feel they’ve been debanked? And with ESG, how do you balance fiduciary responsibility with transparency in managing Indiana’s funds?
Nieshalla: I serve on the board of the Indiana Public Retirement System and chair the board for the Indiana Deferred Compensation Plan. For the sake of our beneficiaries, we must fully embrace fiduciary duty and ensure the best possible risk-adjusted return on their investments.
Regarding ESG, our legislature required us to review our asset managers and determine whether they were prioritizing ESG initiatives over fiduciary duty. When we found that was the case, we made a change. We also established a policy for the Indiana Public Retirement System affirming that fiduciary duty is paramount and that ESG priorities cannot take precedence over return on investment. This policy now applies to the deferred compensation program as well.
On the China front, the legislature gave us five years to divest from any fund invested in Chinese entities. We completed that process for the Indiana Public Retirement System in just one year and have since applied the same standard to the deferred compensation plan.
As for debanking, I was proud to join fellow financial officers in signing a letter to major banks urging them to reinstate customers who were debanked for political reasons. We encouraged them to evaluate prospective and current customers based on financial criteria — not politics.
As comptroller, do you see yourself as a civic educator? Do you find yourself helping lawmakers understand issues like unfunded federal mandates in the state budget? And how can states like Indiana push back when federal programs end up costing more than the funding they provide?
Nieshalla: Yes, absolutely. A recent example comes from our last budget session. We invited small groups of legislators to our office to review Indiana’s finances and give them a clear picture of how we got to where we are today. The response was excellent.
One of the key points we shared was the history of federal dollars coming into Indiana. For several years before COVID, the state received between $12 billion and $14 billion annually from the federal government. During COVID, that number shot up to $26.4 billion — and even with the pandemic well behind us, federal funding remains elevated at $22 billion to $24 billion a year.
We talk about how that is really a problem because we all see how the national debt has skyrocketed. What’s happening in Indiana with federal dollars coming in is a microcosm of what’s happening across states, across federal agencies.
As hard as it is for budget writers to accept, we need to prepare for less federal money. As Washington comes to terms with fiscal problems and the practice of spending money it doesn’t have. The status quo of federal spending unfairly burdens future generations and raises serious ethical concerns of taxation without representation.
I’ve really been wanting to ask you this question because there are debates about it. There doesn’t seem to be a clear consensus on what a “Hoosier” really means. What does the term mean to you personally, and what do you love most about Indiana? What does “a Hoosier” mean in your eyes?
Nieshalla: Let me lead off by saying it is so good to be a Hoosier due to the strength of our financial position.
I saw a couple of interviews with you where you say that the obligation for every Indiana citizen on their state debt is around $180.00. I think one of the things you could do is also compare it to what the federal obligation is for every American. I know it’s over $100,000 for every American.
Nieshalla: Our state debt is $186 per capita, and the federal debt per capita is $109,000 on the shoulders of every man, woman, and child counted in the 2020 census. A friend of mine, Gary Volvo, is a wonderful political cartoonist. Volvo has this cartoon that shows a mom and a dad at the hospital with their first child just having been born. The doctor holds up the baby and says, “in America, we don’t have to spank the babies to get them to cry anymore — we just tell them how much of the federal debt rests on their tiny shoulders.” That is a travesty.
Getting back to your question about what a Hoosier means, there are a lot of different ideas out there. The one that I think holds the most credibility is a gentleman and pastor by the name of Harry Hoosier. He was going into the pioneer areas of the country and spreading the good word. He made a visit to Indiana, stayed here for quite some time, and made a real impact. We believe we got our name from Harry Hoosier and we’re proud of that.
