The latest projections show state revenue this fiscal year could come in $96.1 million lower than originally estimated, which could spell tight times when the Legislature sets next year’s budget.
The general fund budget monitor report the Division of Financial Management released Friday is predicting $3.929 billion in revenue for the 2020 fiscal year, which spans from July 1, 2019 to June 30, 2020. This is 5.2 percent more than the 2019 fiscal year but is down $96.1 million from the estimates lawmakers used to set the 2020 budget.
The report says revenues in July came in $6.2 million lower than projected. As a result of all this, the report now estimates a year-end balance for 2020 of $51.1 million, rather than the $173.8 million projected before.
“We didn’t hit our revenue targets last year,” said Rep. Wendy Horman, R-Idaho Falls, who is on the Joint Finance-Appropriations Committee, which sets the state’s budgets. “We didn’t hit the (fiscal year) 19 targets, and so you need to readjust your starting point for 2020.”
The state took in $3.735 billion in the 2019 fiscal year, $15.7 million less than expected. The biggest reason for this is individual income tax collections came in $120 million less than expected, which was partially offset by higher-than-projected sales tax and corporate income tax revenue.
As well as the lower-than-expected individual income tax collections, Horman said a bill passed this year that aligned the federal and state income tax codes to incentivize corporations to repatriate offshore income is affecting projections. While corporate tax revenue has been strong in general, “the federal tax changes impacted that, and so they’re not going to count that as ongoing revenue necessarily. ... It’s great that we have that, it’s just not a given that we can count on that in the future,” Horman said.
Alex Adams, administrator of the Division of Financial Management, said Idaho is following the national trend. Revenue is slowing down elsewhere too, he said, as economic growth has slowed down. Adams said Idaho’s 5.2 percent growth in revenue from 2019 to 2020 would still put it in the top 10 states nationally in terms of revenue growth.
“As with any forecast, there’s uncertainty, and that’s why the governor and the Legislature have the commitment to govern conservatively, in conservative budgets, and that’s why we set large year-end balances,” he said.
Adams said he doesn’t expect any shortfalls to affect services or require revisions to this year’s budgets.
“We don’t feel we’re in that position yet, based on what we’re seeing, because of the cushion the governor and the Legislature left us in 2020,” he said.
One big question is how this could impact budget-setting for next year when lawmakers reconvene in January 2020. As well as funding increases caused by population growth, lawmakers need to come up with an estimated $42 million to cover the first full year of Medicaid expansion, although some of this could be offset by savings elsewhere in the budget due to expanded coverage.
“I think it really speaks to maintenance-level budgets, especially knowing that we have Medicaid expansion to fund (and) figuring out where we’re going to get the funding for that,” Horman said. “Certainly, growth in our student populations (too). We had to pull that $30.5 million out of the Public Education Stabilization Fund, and a lot of that was related to student growth. I don’t see it being a year for a lot of big new programs. We’ll need to look at every dollar closely, as we usually do, but with caution.”
As well as affecting any proposed new programs, Horman said lawmakers might have to reexamine current ones.
“I think it is important for people to understand that the Legislature sets the budget,” Horman said. “And so really, it’s our job to take a close look not only at new programs such as Medicaid or (the) career ladder and their impact, but base programs. Maybe there are programs that are not as effective as they once were. And so I think it’s really occasions like this, or economic conditions like this, that maybe compel us to take a step back and look at base programs as well.”
Adams said state agency heads are due to turn in their budget requests for next year by Aug. 30. He also said it’s possible the situation could change between now and the December revenue forecast.
“We’ll have a clearer picture by the end of this month what the agencies’ needs are, but it’s looking like 2021 is going to be a year where we’re not necessarily going to be looking at a lot of enhancements,” he said.