Idaho budget writers have set a tax revenue target for balancing the state budget and will now start putting together the state spending plan with less of a budget hole than was previously announced.
The state budget has a $91.7 million shortfall for the next fiscal year, which starts in July. Gov. Butch Otter’s proposed cuts would trim $35 million, leaving $56.7 million in additional cuts needed. That would require a 2.2 percent across-the-board cut to all state agencies.
“We will either need to make further reductions, not approve some of the line items, or find other pots of money,” said Sen. Dean Cameron, R-Rupert
Around the Capitol, larger budget shortfalls totaling up to $185 million had been discussed for weeks. Those shortfalls were brought down when lawmakers voted to only partially comply with new federal income tax requirements. This week, the budget gap closed further when the Idaho State Tax Commission told lawmakers that a $47 million sales tax rebate for alternative energy production wouldn’t affect the general fund budget.
Miscommunication between the tax commission and budget writers led to the incorrect assumption that the claims for the tax rebate would affect the general fund, according to Dan John with the Tax Commission.
“We were asked how many dollars we thought were going to be rebated,” John told IdahoReporter.com. “People interpreted that as it was going to lower the general fund by that amount, and that’s not what we were saying.” John said the Tax Commission’s $47 million estimate for rebates is correct, but that the commission won’t pay that rebate to energy producers until it sees that the vendors selling them equipment have sent in the sales tax.
Gov. Otter’s budget chief Wayne Hammon said he and the governor met with officials with the Tax Commission multiple times, with the assumption that the alternative energy tax credit would affect the general fund. He said that since the issue was ironed out before lawmakers set a revenue target, it shouldn’t affect the budget.
“Nobody has bigger heartburn when the numbers change than the governor,” Hammon said. “He hates it when we change the numbers. What you’re seeing is, we’re trying to be open and honest and share things as soon as we get it … Had we waited, we could’ve probably sorted it out in some back room.”
Lawmakers on the Joint Finance-Appropriations Committee (JFAC) agreed to follow the governor’s revenue projections for the current and next budget. Revenues would grow 4.2 percent during the current fiscal year and an additional 3 percent the next fiscal year.
The four Democrats on JFAC voted against the plan. Sen. Nicole LeFavour, D-Boise, said the revenue target should be higher, given the projection of 6.9 percent growth by the governor’s economist and the number of people dependent on state services that could be eliminated.
“I find that really pessimistic, and I find it pretty low to what seems to be a reasonable explanation for economic recovery,” LeFavour said.
“It’s intended to be cautious,” Cameron said in response to LeFavour.
Now that lawmakers have a revenue target, JFAC’s focus shifts to how much spending authority to give to state agencies. “Now we’ll begin working the budgets,” said Sen. Shawn Keough, R-Sandpoint. She said the 2.2 percent across-the-board cut is just a starting point, and that the final spending plan will be different.
With the 2.2 percent cut, public schools would see a total cut of $5.7 million, while public universities, colleges and community colleges would see $8.5 million in cuts.
Keough said all 20 lawmakers on JFAC have ideas for where to reduce spending and where to avoid cuts. “Every legislator’s been working on the area they have a priority on,” she said.