Traffic flows near the Franklin Interchange on Interstate 84 in Nampa on March 28, 2018.

BOISE — Idaho’s state tax revenues came in below forecasts again in March, and now lawmakers are getting worried.

Legislation to authorize dipping into the state’s rainy-day fund to balance the budget was narrowly approved in the House Monday but will be reconsidered Tuesday; and a sweeping proposal to tap rainy-day funds to create a new endowment fund for road work got pulled Monday, with backers saying revenues are just too uncertain to start on that now.

March state tax receipts came in $1.1 million below forecasts, but the bigger concern was that for the fiscal year to date — which ends June 30 — Idaho is now $75.8 million below forecasts. Individual income tax receipts have been running far behind forecasts all year due to under-withholding after state and federal tax law changes. But in March, those receipts actually were slightly ahead of forecasts, while previously strong sales and corporate income tax receipts fell short.

“We’re $75 million upside down,” said Rep. Rick Youngblood, R-Nampa, co-chairman of the Legislature’s joint budget committee. Given that, he said, it was the wrong time to pull tens of millions out of the rainy-day fund to set up a new road endowment.

Youngblood said he’s still expecting state tax revenues to rebound in April, when Idahoans file their income tax returns. “We anticipate that it will come back,” he said.

With that background, the House on Monday morning voted narrowly — 34-32 — in favor of HB 302, the year-end transfers bill to cover any shortfalls that arise as the state finishes out the current fiscal year by tapping rainy-day funds. Rep. Doug Ricks, R-Rexburg, on Monday afternoon moved to reconsider that vote. His motion passed 33-31, with six House members absent. The House will take that issue up again on Tuesday.

The bill, HB 302, would allow the state Board of Examiners, which consists of the governor, the Secretary of State, the Attorney General, and the state controller, to transfer up to $140 million from the Budget Stabilization Fund, the state’s main rainy-day savings account, if needed to balance the state budget during the remainder of the current fiscal year. Current law allows transfers only up to about $18 million.

The stabilization fund currently has about $400 million in it, but under SB 1126 as amended in the House, the surplus eliminator bill, more than $270 million of that would be moved into a different fund. That would leave only about $140 million in the Budget Stabilization Fund — so if this clause were fully invoked, the stabilization fund would be emptied.

“It’s simply what’s in the account,” Rep. Neil Anderson, R-Blackfoot, told the House. “That’s why we have a budget stabilization fund, which generally kicks in in times of financial peril. And the Board of Examiners has the right to transfer moneys from that fund.”

Rep. Priscilla Giddings, R-White Bird, spoke out against the bill. “I just don’t see that this is a fiscally responsible bill to support,” she said. The last time Idaho tapped its rainy-day fund to that extent, she said, “was after a huge recession, and we’re nowhere near a huge recession. We did that to handle a problem. Now we’re allowing this authorization when there is no problem, we’re just guessing that there might be a problem.”

She suggested state employee furloughs or budget cuts might be a better move.

Idaho’s state tax revenues have been coming in far below forecasts in the current budget year, largely because of changes in state and federal tax laws that sharply changed withholding requirements but without individual Idaho income taxpayers changing their withholding to reflect that. Because of that, the shortfall is widely expected to be made up when taxpayers file their income tax returns on April 15 — but that’s not guaranteed; some might not be able to pay up, even if the taxes are due.

Rep. Britt Raybould, R-Rexburg, spoke out in favor of the bill, saying it’s a step needed now to make sure Idaho balances its budget this year, but that it’s also incumbent on lawmakers moving forward to look at how they can refill the rainy-day fund. “It is a very valuable resource and tool that we need going forward, regardless of whether we are in a recession or not,” she said.

Anderson said, “We’re obligated by the Constitution to balance our budget, so we need to pay our bills.” Transfers from the fund may not be needed, he said, but, “Let’s be sure that we vote to allow our state to pay our bills. … This bill will allow us to do that.”

SB 1126 started out as a Senate bill to extend for five years the current “surplus eliminator” program, in which surplus funds at the end of each year have been divided between a fund for road work and the Budget Stabilization Fund. The House amended it to create a new system in which big transfers, including $38 million at the end of this year, would be made to start building up an endowment fund for road work. Then, once the endowment was fully funded, the transfers would stop.

The plan was developed by a wide array of stakeholders, including highway districts, the Idaho Transportation Department, senators and representatives from both parties, the Walk-Bike Alliance, a representative of the governor’s office and more. Rep. Mat Erpelding, the House minority leader and a co-sponsor of the amended bill, said it took 70 drafts before everyone agreed on the approach. “It was kind of how I thought legislation should work,” he said.

Betsy Z. Russell is the Boise bureau chief and state capitol reporter for the Idaho Press and Adams Publishing Group. Follow her on Twitter at @BetsyZRussell.

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