INDIANAPOLIS -- Indiana leaders patted themselves on the back on Thursday because of a bigger than expected amount of money in the state's checking account.

State Auditor Tim Berry said Indiana finished the fiscal year on June 30 with nearly $1.2 billion in the bank, more than 40 percent above last year's finish, when tax revenues were plunging and budget makers were worried that the state would run out of money this year.

Berry said the rebound happened because of a recovery in tax collections and Gov. Mitch Daniels' success in cutting the budget.

While the state received $1.34 billion less than it had anticipated over a two-year period, it spent $1.52 billion less than it had budgeted for in June 2009.

"Without raising taxes and by carefully watching spending, Indiana state government has continued to live within its means," Berry said. "For those who believe that raising taxes is the only way out of a fiscal crisis, I say take a look at the Hoosier state."

Indiana's financial situation is far better than its neighboring states, particularly Illinois, which implemented massive tax increases to shore up its finances.

"More money in Hoosiers' incomes and a terrific job of cost control by state employees working together combined to produce an even stronger result than we expected at budget time," Daniels said. "With the national economy still limping badly, and downside risks still abounding, it is reassuring to have a safety margin that other states would love to have."

But House Democratic Leader Pat Bauer said the surplus came at a cost and that the budget was balanced on the backs of schools and needy children.

"So this great $1 billion surplus is based on children, cutting children's health, cutting education, cutting people that have suffered because of this Great Recession," he said.

Bauer said Daniels needs to spend more on job creation, although Indiana has by far the lowest unemployment in the Midwest.

But Senate Appropriations Committee Chairman Luke Kenley said Indiana must remain wary because of the national economy.

"We shouldn't be breaking out the billfolds and spending money on programs yet," he said.

Daniels will talk to reporters Friday morning. He'll undoubtedly have a lot of job creation numbers to throw back at Bauer but he isn't likely to announce any new spending plans.

Daniels already said he'd like to restore some more of the cuts to schools if revenue comes in ahead of schedule.