Printed on: January 26, 2013

Putting on rose-colored glasses

From the Lewiston Tribune

When Idaho's conservative governor and legislators needed political cover to justify unnecessarily deep cuts to public schools, higher education and health programs, they conjured up an unduly pessimistic economic forecast.

And when it's time to hand over an untidy sum of tax goodies to Idaho's richest corporations, the economic forecast becomes giddy with optimism.

That's no conspiracy theory. It's history.

Three years ago, Mike Ferguson, then wrapping up nearly three decades as the state's chief economist, predicted Idaho's still struggling economy would generate $2.43 billion by the time the budget cycle ended nearly 18 months later.

Some thought he overshot the mark. The Associated Taxpayers of Idaho pegged its estimate at $2.4 billion; the State Tax Commission came in at $2.41 billion. Others thought Ferguson was a bit low. Economists from Idaho's universities predicted the state would produce $2.6 billion.

Gov. C.L. "Butch" Otter thought he knew more than his veteran economist and sliced $85 million from Ferguson's revenue forecast.

The Legislature's GOP leaders figured they understood the economy better than Ferguson and Otter: They lowered the revenue forecast another $60 million.

All of which translated into huge losses for public schools, colleges and universities and health programs. Whenever they were challenged to defend the cuts, Otter and lawmakers pointed to the revenue forecast. Their hands were tied. If the money materialized later, they promised to restore the cuts.

About a year later, taxes produced $2.44 billion -- about $11.5 million more than Ferguson anticipated. And the money that had been needlessly withheld from state budgets?

Some of it found its way into state rainy day accounts. Some of it went into tax cuts for Idaho's corporations and the state's most prosperous families. School spending remains below its pre-recession levels.

Fast-forward to last week's Economic Outlook and Revenue Assessment Committee.

Before it was a robust forecast issued by Ferguson's successor, Derek Santos. He predicted the state would receive $2.799 billion during the budget cycle that opens July 1 and closes June 30, 2014.

That's above the Associated Taxpayers of Idaho forecast of $2.74 billion.

The State Tax Commission also was more conservative at $2.72 billion.

Even the academic economists from the universities came in lower at $2.74 billion.

And Otter?

He stood by Santos' number.

How did the legislative forecasters react? Did they express alarm about a state expectation of tax revenues growing by more than 5 percent?

Yes -- at least individually. A poll of the revenue projection committee's members put their median prediction at $2.74 billion -- $60 million below Otter's.

Stick with that number, however, and a lot of things begin to disappear.

Such as Otter's plan to set $35 million aside in a rainy day account.

Or his expectation to leave almost $14 million unspent.

Most importantly, Otter could not allocate $20 million as a down payment on repealing $141 million worth of personal property taxes Idaho's businesses pay on equipment. Almost all of that would be divvied up by handful of rich corporations and utilities.

"I'm not willing to close the door (on property tax relief)," said House Speaker Scott Bedke, R-Oakley. "And if we tighten that number down too much, it will stymie those discussions."

Never mind that getting this number wrong could trigger shortfalls later on -- possibly leading to further cuts in a school budget that Otter would expand by only 1.6 percent next year.

Never mind that Otter and GOP lawmakers were all too willing to artificially low-ball revenue estimates when the only consequence was whacking away at education and health care.

Lowering the revenue forecast now would mean foregoing tax cuts for big business. That, they would not do.

The panel voted 14-4 to adopt Otter's higher number.

Go figure.