BOISE — It’s still early in the budget process — Gov. Brad Little won’t present his proposed budget to lawmakers until they convene their legislative session in January — but lawmakers got an early look at agency budget requests on Tuesday, and by several key measures, they’re down.
While all requests totaled show a 6.3 percent increase in general funds over the current year’s original appropriation, or 5.1 percent in total funds, the number of requested new line items comes to just 224 — far below the 400 to 450 that were requested in each of the last four years. And funding requests for replacement items came in at only $2.2 million; that figure was $24.6 million last year.
“I think that’s what we need to do,” said Rep. Rick Youngblood, R-Nampa, co-chairman of the Legislature’s Joint Finance-Appropriations Committee. “Obviously when we left the session, we were under the impression that we had a pretty good fund balance. Revenues have not come in like we anticipated.”
In September, Idaho saw its first revenue surplus compared to forecasts for the fiscal year; at this point, the state is projected to end the 2020 fiscal year July 1 with $75.9 million in the bank.
“We’re going to be solid for 2020, it looks like,” Youngblood said, after several hours of detailed budget briefings as JFAC opened a three-day interim meeting at the state Capitol on Tuesday. “Into 2021, we’ve got to make some adjustments, there’s no question. I think ultimately we’ll grow — Idaho’s growing. But we’ve got to be conservative going into 2021.”
“I appreciate the governor jumping out ahead on that,” Youngblood said.
The Little administration sent memos out to all state agencies in August and September, both urging budget caution because state tax revenue estimates had been revised downward substantially for the current year, though a year-end surplus still was predicted.
An Aug. 19 memo called on agencies to restrict their line-item request for next year to “emergency requests only”; to minimize requests for replacement items; and to be prepared to identify offsets in their base budgets if they did decide to make supplemental budget requests for the current year or ask for replacement items.
On Sept. 9, Little’s chief of staff, Zach Hauge, sent another memo, this time calling for all agencies to develop plans to hold 5 percent of their current year’s budget as a “contingency” in case state tax revenues continued to slide as the year progresses.
Little plans to make that a part of every year’s budget process going forward, the memo said. “Planning and preparation now will preclude us from the very disruptive consequences of a late-year holdback,” Hauge wrote.
At this point, economists in Little’s Division of Financial Management are forecasting that the state’s tax revenues this year will come in 5.2 percent higher than they did the previous year. But before the revenue forecast was revised in August, they’d projected 8.2 percent growth in general fund state revenues, which largely come from state income and sales taxes. In dollars, the new forecast is $128.8 million lower for the fiscal year.
Lawmakers didn’t budget to spend all the available revenue, however, and they also carried over $101 million in one-time funds left over from the previous budget year.
As a result, Legislative Budget Director Paul Headlee told JFAC, “Right now, this is a balanced budget … and it’s structurally balanced as well. The ongoing revenue exceeds the ongoing appropriations, so it’s balanced and it’s structurally balanced.”
Lawmakers on the budget-writing joint committee heard briefings on each agency’s budget requests for next year, and a large portion of the proposed funding increases — more than half — were “maintenance” requests, including items already required by law to be funded. Those amounts increase, for example, based on increased numbers of students enrolling in Idaho public schools or increased numbers of inmates in Idaho prisons.
One request from the State Board of Education for Idaho’s higher education budget, including colleges and universities along with community colleges, was to return to something the state used to do in the past: Fund any required percentage salary increases for state employees next year from the state general fund, to avoid that cost prompting student tuition and fee increases. Lawmakers haven’t covered that “fund shift” in recent years, but they’ve become increasingly concerned about rising student tuition and fees.
“I think that’s up for discussion,” Youngblood said.
Rep. Jeff Agenbroad, R-Nampa, said, “I think it has to stand on its own merits and fit in with the entire context of their budget request.” He added, “We haven’t seen the governor’s recommendation — he’ll have an opportunity to weigh in.”
JFAC also learned that the state currently has $486.2 million in its main state rainy-day funds, including the Budget Stabilization Fund, which has reached its statutory cap of 10 percent of the state’s general fund budget.
In addition to that, lawmakers last year directed newly collected online sales tax funds into a special account for “tax relief” that currently has collected about $16 million, just in the first three months of the fiscal year. That wasn’t included in the state savings totals because it’s earmarked for tax relief.
Sen. Mark Nye, D-Pocatello, noted that the most recent comparison study by the state Tax Commission found that Idaho’s total tax burden was 19 percent below the national average. “We’re fourth-lowest in the country,” he noted.
Within the past two years, major tax law changes cut both individual and corporate income taxes for Idahoans at both the state and federal levels.