CHICAGO -- The Indiana Legislature early Friday morning passed, and Gov. Evan Bayh signed, a $12.4 billion general fund budget for the biennium that begins July 1.

The all-funds budget for the biennium is $21 billion, said DAvid Dawson, a spokesman for Gov. Bayh.

The state's budget provides the Indiana State Building Commission with the authority to issue bonds during the next two years to pay for three state prisons, estimated to cost about $131 million. The bonds will be paid off by lease payments made by the state to the commission.

The building commission's bonds are rated A1 by Moody's Investors Service and A-plus by Standard & Poor's Corp.

David Patterson, an assistant state budget director, said Friday that about $57 million of bonds for a maximum security prison probably would be issued within the next two months. He said there is no timetable yet to issue bonds for the other two prisons.

The prison system's population of 13,600 is about 1,600 inmates over the federally accredited maximum, and the state is under a court order to reduce overcrowding at three facilities, Mr. Patterson said. The new construction should add 1,000 beds to the system, he added.

A previously proposal by Gov. Bayh to expand a juvenile detention facility was not funded.

The Legislature balanced the budget by drawing down the state's rainy-day reserve fund to $160 million from $350 million, Mr. Dawson said.

Steven Murphy, vice president at Standard & Poor's Corp., said Indiana's use of the rainy-day fund was prudent given the recession and that the state is in a position to replenish the fund when the economy starts to rebound.

"They've done a lot better than some states have had to do and some states still have to do," he said. "Their revenue estimates are very conservative, so there is no wishful thinking in the budget."

Steve Hochman, a vice president at Moody's Investor's Service, said the rating agency had not yet received any detailed documents from the state, but added that the passed budget appeared to be fiscally sound.

"I haven't heard anyone raise any major concerns," he said.

The Legislature had been scheduled to pass a budget and adjourn by April 30, but partisian wrangling over legislative redistricting held up the process, Mr. Dawson said.

New Legislative districts are required under the U.S. Constitution to be drawn every 10 years after the completion of the census.

The redistricting impasse was fueled in Indiana by the lack of solid majorities by either party in either legislative chamber. Republicans hold a 26-24 advantage in the Senate, while Democrats hold a 52-48 advantage in the House.

The logjam was broken Thursday night when a budget and redistricting bill were combined. The Senate vote was 27-22 and the House vote 53-43.

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