“We’re going to be trying to cut through the fog and state information clearly, accurately and in a way that can’t be argued, because we’re just talking facts,” Ferguson told Idaho Reporter.

Ferguson’s center is part of the Mountain States Group, a Boise health and human services nonprofit that has several state and federal contracts. The center also received grant funding from the Northwest Area Foundation, a multi-state organization with a goal of reducing poverty.

Ferguson had several interesting but not immediately apparent observations on the state budget. The state ended its last budget year with an $85 million surplus, most of which went to education and the grocery tax credit. Ferguson pointed out that the tax collected in the last budget was $15 million more than lawmakers set as a revenue target for the current goal.

Ferguson wouldn’t comment on claims from some Democrats that the state had an artificial surplus, but said the state could have a $160 million surplus in the current budget. That’s subject to growth in Medicaid or public school student needs, as well as potential tax cuts.

“There’s still going to be a pretty sizable amount of excess revenue,” Ferguson said. He estimated that surplus could grow to $250 million in the next budget year.

In his former job, Ferguson used to provide economic forecasts and projected amounts of taxes the state would take in.  During the recent recession, lawmakers had set targets below those forecasts.  While there was news of a surplus this July, the opposite was true last year.

“I’m not going to be doing forecasting,” he said. “That’s a good thing from my perspective, because that’s not a fun thing to be doing.”  When it comes to forecasting, Ferguson joked, weathermen are doing better than economists these days.

Ferguson said he’s not coming into the job with any specific changes to fiscal policy in mind. He has two initial projects.  The first is a budget primer that will make the process of putting a budget together more understandable.  The second is a comparative tax report that looks at how Idaho tax revenues measure up to other states, as well as other points in state history.

Part of the budget primer will be explaining the difference between general funds, the tax revenues that are usually bantered about when discussing the state budget, dedicated funds, which come from fees and other sources, and money from the federal government.

Chart courtesy of Legislative Services Office

“Everybody talks about the general fund, but the budget is really much more than that,” Ferguson said. “I think there is a need to look at it from a broader perspective.”

“There were big cuts in Medicaid last (session) … $34.5 million was a number that you saw most of the time,” he said. “Well, that is the number that was the JFAC (Joint Finances-Appropriation Committee) number, the general fund portion. But if you look at the entirety of it, it was somewhere in the neighborhood of $105 million, and that’s because there’s matching funds (from the federal government).”  Democrats, who opposed those reductions, also brought up the loss in federal Medicaid dollars.

Budgeting is a balancing act with two sides, revenue and spending.  Ferguson’s work will start out on the revenue side, where he has more experience, though he said both are equally important.  “You don’t raise revenue just for the sake of it,” he said. “The expenditure side is really what it’s about — that’s the reason you have a revenue system.”

Ferguson outlined four principles of tax revenue that will factor into his two projects

1. Fairness in the tax structure, both vertically, between people with high incomes and low incomes, and horizontally, across different tax circumstances.

“If you give someone a sales tax break that someone else doesn’t get, that would on its face undermine horizontal equity,” Ferguson said. “There may be some justification for it, but one of the important points is there needs to be some clear justification.”

2. Efficiency, including what it costs taxpayers to comply with the tax code, state officials to collect taxes and how tax policy affects business decisions.

3. Adequacy, ensuring that the amount of tax revenue is enough to pay for all state services. Ferguson said that’s changed over time, and that Idaho’s sales tax base has eroded as the state shifted from a goods-based economy to a service-based economy.  He said Idaho is among the states that includes the fewest services in its sales tax.  For example, other states tax dry cleaning, though Idaho doesn’t.

“On its face, that undermines the adequacy principle,” he said.  “What it means is that the economy is shifting in a way that it undermines the base of the … sales tax. Maybe that’s something Idaho wants.”

4. Stability in collecting revenue. “As we’ve all seen, that’s an elusive goal,” he said.   “We’ve seen more instability in the revenue structure in the last decade or so than I had in the previous several decades of my career.”

Ferguson said he thought the 2001 recession would be “the big one, the equivalent of a 500-year flood.” It was surpassed by the recession that started at the end of the last decade.

“I certainly didn’t see anything that I would consider to be inappropriate,” Cameron said about bonuses paid out to workers at the Legislative Services Office (LSO).  All LSO employees received a bonus of more than $1,200 this year, for a total more than $90,000.  Those bonuses were within LSO’s budget for the fiscal year.

Agency head Jeff Youtz said the payments came after several years of stalled wages and were recognition and compensation for workers doing less with more as the agency reduced its overall staff.

“That savings was what generated enough funds for them to give these one-time salary adjustments, in essence replacing the money that was lost because they were furloughed,” said Cameron, one of the co-chairs of the Joint Finance-Appropriations Committee (JFAC), which sets the state budget every year.

JFAC members reviewed the payments to LSO staff at a meeting earlier this month.  Cameron said there were questions about the payments and that it was a perception issue, since the so-called bonuses come as other agencies face cuts and economic growth is slow.

While the payments to LSO workers weren’t as big an issue, Cameron said he was more worried by salary increases given to other state workers.  “In my mind, the permanent increases are more concerning because they won’t necessarily have the money next year in salary savings to maintain those,” Cameron said.

Cameron mentioned the Division of Financial Management (DFM), the office that helps Gov. Butch Otter put together a budget plan every year.  Six DFM budget analysts received salary increases this year, though budget chief Wayne Hammon said those bumps in pay brought those workers in line with their co-workers.

“It’s a fairness issue: I can’t have two people sitting right next to each other doing exactly the same job, getting exactly the same performance review, but getting different salaries,” Hammon said.

Hammon said the salary increases in his office are sustainable amid tight state budgets.  “Every one of [LSO’s] staff members got bonuses—a couple of DFM staffers got raises that total less than $8,000 a year,” Hammon said adding that raises won’t lead to an overall increased budget for DFM.  He also said that DFM, which has fewer employees and tax dollars funding it than LSO, trimmed its budget by 36 percent in the last few years, which is more than LSO.  “We have led by example.”

LSO paid out the most to its workers in a report of one-time payments released by the state controller’s office earlier this month.  Second on the list was the state court system, which paid 40 court reporters slightly less than $1,000 each.

Court administrator Patti Tobias said those payments to court reporters, who keep records of what happens in courts, aren’t bonuses, but a necessary payment.  Reporters’ payroll period and pay days were pushed back by two weeks due to an administrative decision by the court, which would’ve delay their pay for work this year into 2012.

“The court reporters would have experienced a negative financial impact,” Tobias said.  “The court did not want them to suffer in 2011.”  Court reporters will get another one-time payment later this year.

Other agencies that gave workers bonuses or one-time payments include the Department of Finance, State Appellate Public Defender, and Industrial Commission.

Tax revenues are currently $66 million over the state budget’s expectations with one important month of taxes yet to be collected. If that amount holds, public schools would get $50.7 million and community colleges would get $5.5 million. That money is required to go to schools because Idaho accepted hundreds of millions from the federal government for schools in the 2009 stimulus plan, as well as additional millions for educators’ salaries last year.

That money is supposed to be for the current school year, though the money won’t be paid out until at least July. Once local districts get that money, they’re free to spend or save the money as they choose, though some districts have already accounted for that money in contracts with teachers.

“They can do whatever they need to do,” said Sen. Dean Cameron, R-Rupert, though he added that he’s encouraged districts to be cautious, because future years may hold more funding cuts for education.

Cameron is one of the leaders of the Joint Finance-Appropriations Committee (JFAC), which met Wednesday to discuss issues in education funding. Cameron and his co-leader, Rep. Maxine Bell, R-Jerome, both cautioned that districts shouldn’t be counting on additional money from the state.

“You know what? June isn’t here yet,” Bell said. June is the fourth-largest month for tax revenues. Cameron said Idaho’s sales tax and personal income tax collections have been slacking behind otherwise good tax collection numbers.

If the money holds, it would offset the $42 million spending cut JFAC approved for public schools for the next school year.

The money would give each classroom in the state approximately $24,000 in discretionary funds, which legislative budget officials said is close to an all-time high. However, Sen. Nicole LeFavour, D-Boise, said that money now has to cover programs including textbooks and talented and gifted programs that previously had a separate line in the state budget.

“There’s a long list of things that we threw into discretionary,” LeFavour said.

Lawmakers also received an update on the $51 million in federal funds Idaho received last year for educators’ salaries. So far $13.7 million of that money has been spent, which could grow to $15 million by the end of the month, which also marks the end of Idaho’s fiscal year. That money must be spent by the end of September 2013.

Read IdahoReporter.com‘s previous story on districts’ decisions on spending that federal money here.

Sen. Dean Cameron, R-Rupert, the co-chair of the Joint Finance-Appropriations Committee (JFAC), which writes the budget, said the committee may need to meet Wednesday to rewrite spending plans due to two pieces of legislation, one that restores funding stability for school districts with declining enrollment and one that would set up a school for high school dropouts.

UPDATE: Rep. Maxine Bell, R-Jerome, Cameron’s co-chair on JFAC, said Wednesday that the committee isn’t planning on meeting.

Lawmakers have been talking about adjourning for good on Thursday, but Cameron said if JFAC meets, that could be delayed until Friday or Monday. “It would make things very difficult for us,” Cameron said. “We’d really like to not have to meet if we can avoid it.”

The delays in the session would be due to the turnaround time for legislative staff to approve changes to the budgets for public schools, as well as the state’s military division and the Department of Commerce.

The plan to restore a funding floor for school districts with enrollment drops could cost $1.9 million. The plan passed the House Tuesday. Cameron said there’s funding to cover the program, and he’s not sure if JFAC will need to re-open that budget.

The other item that could delay the session is the “Youth ChalleNGe” program, run by the Idaho National Guard, to set up a school in Pierce in north central Idaho. The Senate approved the plan Tuesday.

Cameron said his concern with the program is that it’s funded by grants from the Idaho Department of Commerce, which normally can’t issue business grants to other state agencies. It’s also unclear whether JFAC gave Idaho’s military division adequate authority to spend federal money for the program. The U.S. National Guard is paying for the bulk of the program.

“If we vote for this bill, right or wrong, good or bad, we may be asking for us to be here longer than we would like,” Cameron said during the Senate debate on the National Guard program. Cameron did urge lawmakers to consider only the merits of the “Youth ChalleNGe” plan, not the timing of the legislative session. “We’ll figure out the logistics later.”

Legislative budget analyst Cathy Holland-Smith said the “Youth Challenge” program may not meet the terms of the $300,000 in grants from the Department of Commerce that are mentioned in the legislation. That could require JFAC to reopen the budget and shift those grants, which come from the taxpayer-supported general fund, directly to the military division.

Another alternative to a JFAC meeting could be delaying the budgeting changes until next January, when lawmakers return for a new legislative session. Cameron said JFAC members are looking at whether schools and the military could last with their current budgets until supplemental changes could be made then.

The legislation for closed primaries follows a successful lawsuit by the Idaho Republican Party, which convinced a federal judge that Idaho’s open primaries, which let voters pick any party’s ballot, violated its constitutional right to assemble. On Monday, budget writers also agreed to repay some of the GOP’s attorney fees.

The Joint Finance-Appropriations Committee (JFAC) agreed to pay the Idaho Republican Party $100,000 to cover lawyers’ fees for the lawsuit striking down open primaries. The state owed the GOP those costs as a result of the GOP’s victory. State GOP Executive Director Jonathan Parker said the actual attorney costs were closer to $143,000, but the party and the state government agreed to the smaller payment.  The money for the GOP comes from the state general fund.

The closed primary “will also allow independent voters to join the Republican Party at anytime, providing a great opportunity for us to continue to attract and recruit like-minded folks to the cause,” party chairman Norm Semanko said on the party’s website.  He said he supports implementing the legislation before next year’s primary.

The legislation would require Semanko or other state party chairmen to notify the secretary of state six months before a primary if the party would allow unaffiliated voters or voters who identify with a different party to cast a vote in their party’s primary.

Idaho Democratic Party State Chair Larry Grant said his party supports open primaries. “The more people who vote, the better candidates you get,” Grant said. He also said that while Semanko and other Republican officials say they welcome independents, that may not hold true next year.

“This is just slight of hand and a nod to the independents,” Grant told IdahoReporter.com. “This is probably just a head fake.” Grant also said he expects Democratic lawmakers to stand up for voters and oppose the closed primaries and party registration system.

State GOP Executive Director Jonathan Parker said the party’s central committee would likely vote on how to handle independent voters. “we want those like-minded folks to join the Republican Party,” Parker said. “We just don’t want Democrats crossing over and negatively impacting our elections.”

The new plan was introduced Monday in the Senate State Affairs Committee. For next year’s primaries, it would instruct county clerks to add check off boxes to their poll book to ask all current registered voters to declare a party affiliation, which would include being unaffiliated. Party registration would also become part of new voter registration cards.

If a party allows unaffiliated Idahoans to vote in its primary, a poll worker would need to check off a box in the poll book saying which party’s ballot a voter receives. Voters’ party registration or party choice in a primary election would become public record. Idaho currently doesn’t ask or keep track of such information.

Down the road, voters could switch parties or declare themselves unaffiliated, but they’d need to inform county clerks of those changes more than two months before the primary election, on the deadline for candidates to declare for a primary race.

Party registration and the closed primary system carry a $215,000 price tag to the state for new voter registration cards and a voter information ad campaign and $160,000 cost to the counties for more poll workers and processing new voter data.

The new primary and party registration system next faces a full Senate committee. It’s part of the “going home list” that lawmakers put a high priority on during the last few days of the legislative session. The $100,000 payment to the Idaho Republican Party must be approved by the Idaho House and Senate.

The Joint Finance-Appropriations Committee (JFAC) approved a new budget for the Department of Insurance that includes spending $500,000 from insurance fees on efforts to help the department protect Idaho against the federal government from regulating the state’s insurance industry.

“It’s a firewall for us,” Rep. Maxine Bell, R-Jerome, said about the additional money. Bell, one of the co-chairs of JFAC, pulled the old version of the Insurance budget that included the federal reform money.

That $2.5 million would have let the Department of Insurance research health insurance exchanges, which are government-run marketplaces that help individuals and small businesses compare and purchase insurance. Under the federal health care reform plan, states need approved exchanges by the beginning of 2013, or else a federal exchange will be created. Gov. Butch Otter and the Department of Insurance both requested the federal money.

“What’s at risk here is state regulation of our own industry,” said Sen. Dean Cameron, R-Rupert, the other co-chair of JFAC. Cameron also owns an insurance company. “You’ll put a lot of people out of business that way.”

Department of Insurance Director Bill Deal wouldn’t comment on how his department would use the $500,000 to protect state regulation. That $500,000 in fees would otherwise revert to the state general fund.

The new $8 million budget for the Department of Insurance now needs House and Senate approval.

Four-year public universities and colleges would see a $7.6 million drop in state general fund dollars, while community colleges would receive a reduction of slightly less than $1 million. Both reductions are larger than 3 percent. Higher education would receive $232 million in the next state budget.

“It is a significant decrease and has been substantially decreased over the years, but this is what it takes to have a balanced budget,” Sen. Dean Mortimer, R-Idaho Falls, said about the reduction to colleges and universities.

Democrats argued that the reductions could lead to higher increases in tuition, which could limit access to learning and retraining for college students.

“Once more, our students will be paying more in tuition and fees, which really means fewer people can attend and fewer people that are unemployed can be retrained,” said Sen. Diane Bilyeu, D-Pocatello.

Sen. Elliot Werk, D-Boise, said universities and colleges have taken a bigger hit than other budget items, with a drop of funding of more than 25 percent in the last three years. “It is the economic development engine that we are starving,” Werk said.

Republicans argued that those reductions are tough but necessary, and that Democrats haven’t had to make difficult budgeting decisions.

“The advantage of the minority is that they can demand with money for everything and everyone and not live with the consequences of it,” said Senate Majority Leader Bart Davis, R-Idaho Falls. “They get to nip at the heels of the majority. It’s not fun to vote for some of these appropriation bills.”

Sen. Nicole LeFavour, D-Boise, said Democrats would be honored to set the budget, and have pointed out several areas where the state could enhance revenue. Davis responded to LeFavour that Republicans were elected to be the guardian and watchdog over voters’ pocketbooks.

Officials with Idaho’s three four-year universities were supportive of the budget when it was set by the Joint Finance-Appropriations Committee, when further cuts were contemplated, although they said it could trigger additional tuition increases. The University of Idaho is asking for an 8.4 percent tuition increase, according to The Argonaut.

Sen. Jim Hammond, R-Coeur d’Alene, said Idaho tuition is still one of the best buys in the country, and that much of the added budget is due to demands for better services and facilities by students. He said they deserve to pay for some of that. “They’ve got to have some skin in the game,” Hammond said.

The budgets for higher education now head to the House for consideration.

“We’re trying to keep our effective and trained people working as hard as they can to minimize that tax gap,” said tax commission chairman Bob Geddes, the former Idaho Senate leader. Geddes agreed with the budget set by lawmakers.

All tax commission staff are taking six unpaid furlough days in the current budget year, matching a tactic from other state agencies to reduce costs without laying off workers. Those furloughs are contributing to a drop in tax collections, but the changes in the next budget are expected to lead to a surplus of almost $20 million in the next budget. That additional money could go to support public school, though lawmakers have yet to make decisions on school spending.

The tax commission would see a $2.8 million budget increase to $34.9 million in the next budget year, which starts in July. Auditors and other staff would be expected to bring in an additional $19.7 million in tax revenues.

Rep. Darrell Bolz, R-Caldwell, called the increased spending a good investment, given the return of extra tax collections. Lawmakers on the Joint Finance-Appropriations Committee (JFAC) approved the budget on a unanimous 20-0 vote.

The budget would also make 48 temporary tax auditors hired during the current budget year permanent employees and add 22 new temporary auditors, which is down from the original plan of 48 new workers. The extra auditors are part of a plan to narrow the gap of uncollected taxes, and the auditors must meet performance goals, showing they are bringing in tax dollars while keeping their expenses low.

Geddes said not hiring the new auditors could make collections more cost-effective. “It helps us to be more efficient, because our current auditors would be the ones to train new auditors,” he said. The commission was also looking into renting new office space in Canyon County to give those new auditors a place to work, but that is no longer necessary.

The current new auditors have already collected an additional $15 million, which beats their goal of getting $11.4 million by the end of June. However, regular tax staff were $21 million behind their collections at the end of February. Furloughs contributed to that shortfall, as did a problem with the commission’s phone system, which went down in December for two weeks. The budget includes $275,600 for the commission to lease a new phone system.

With the extra $19.7 million expected in collections, lawmakers would have a $13 million surplus in the next general fund budget. Geddes said it wouldn’t be typical for lawmakers to spend that money and that the surplus could easily be wiped out if the $2.4 billion in projected tax revenues dips even slightly.

Sen. Dean Cameron, R-Rupert, said he and Rep. Maxine Bell, R-Jerome, the co-chairs of JFAC, both support putting that money into public schools. Spending for public schools, which makes up more than half of the general fund, has yet to be set by JFAC. Cameron said it’s up to lawmakers, not the tax commission, to set spending on state tax dollars.

Senate Majority Leader Bart Davis, R-Idaho Falls, said on the floor of the Senate that lawmakers could wrap up their business within two weeks if all the stars align perfectly. House Majority Leader Mike Moyle, R-Eagle, said the April 1 deadline is doable.

House and Senate Republican leaders are meeting frequently to discuss issues that still need to see action before the session ends. Davis calls the list of legislation the going home list, which currently has more than 10 items on it.

Some of the items on the list likely need to pass before the session can end. That includes legislation that would balance the next state budget, including the more than $1 billion budget for public schools, the reductions to Medicaid, and the delaying of the grocery tax credit. Other items on the list are priorities of Gov. Butch Otter, including the last part of the education reforms backed by state schools superintendent Tom Luna and a tax credit for employers that create jobs, which moved forward Monday.

Lawmakers will probably also need to create a new format for primary elections. The state Republican Party won a lawsuit declaring the current open primary system, in which voters don’t need to register for a party, unconstitutional. New legislation has been expected for weeks, but Davis said leaders held their first formal talks on the new primary plan at the end of last week.

Davis said other items on the list are priorities but wouldn’t need to pass both the House and Senate, and could see legislative action to end their progress this session. Such items on the going home list include banning texting while driving, outlawing most abortions after 20 weeks of pregnancy due to fetal pain, making assisted suicide illegal, raising the tax on tobacco, including on Native American reservations.

The Senate also must confirm several more appointments from the governor, who made a number of appointments earlier this month.

Davis said if lawmakers don’t meet the April 1 deadline, it could be due to the education budget. He said that budget could be set on Wednesday, which would keep lawmakers on schedule. He said delays could push back the end date by a few days.

Sen. Dean Cameron, R-Rupert, who chairs the Joint Finance-Appropriations Committee (JFAC), which sets the budget, said he won’t hold a meeting on the budget until the Senate acts on the last part of Luna’s proposed reforms, which could target some school funding for technology improvements and could raise minimum salaries for teachers.

The Senate Education Committee will hear that plan Tuesday. If the committee rejects the plan, Cameron said the budget could be set sooner. If it passes the education committee, JFAC would wait until the Senate vote the plan up or down.

Sen. John Goedde, R-Coeur d’Alene, who chairs the education committee and is sponsoring the reform plan, said he expects the hearing to last two hours. He wouldn’t say whether he expects the committee to support the plan.

The old version of the reform legislation passed out of Goedde’s committee on a 5-4 vote, before being pulled back to committee and stalled. One of the two Republicans to vote against the plan, Sen. Mitch Toryanski, R-Boise, said some of his concerns with the earlier legislation, including the mandate that high school students take online classes, the increased class sizes, and questions over the lack of input from education stakeholders, have been addressed in the new version.

Toryanski wouldn’t say whether he’d support the new legislation, but said he’s looking forward to the committee’s debate. Goedde said public testimony won’t be taken on the plan, but the education stakeholders, which include teachers, administrators, school board members, and business leaders, will discuss the legislation.

The budget approved by the Joint Finance-Appropriations Committee (JFAC) actually increases state tax dollars going to Medicaid by $137 million, a 46 percent jump. That’s due to a decrease in the share of Medicaid paid by the federal government, which had been boosted due to the federal stimulus program.

Medicaid offers medical services, primarily to low-income children and adults, with the federal government still contributing 65 percent of the proposed $1.8 billion in spending for the next budget year, which starts in July. The reductions approved by the House could lead to a total reduction of $108 million, given the federal match.

The four Democrats on JFAC opposed the Medicaid budget. All House Democrats also opposed the $34.6 million in reductions that passed the House.

Medicaid is part of the Idaho Department of Health and Welfare (DHW). On Friday, JFAC also approved most of DHW’s budget, which includes money for state-run substance abuse treatment programs, mental health programs, food stamps, and psychiatric hospitals. Almost all of the budget followed the recommendations from Gov. Butch Otter.

Substance abuse funding would see a total $2.5 million increase, due largely to an increased federal grant for the Access to Recovery program, which offers treatment for adults who have committed misdemeanors, at-risk youth, and National Guard members who served in Iraq.

Rep. Fred Wood, R-Burley, who worked on the DHW budgets as well as the program reductions that passed the House, said there aren’t other sizable changes to other DHW programs. “There is nothing fancy or strange or different about any of the other budgets,” Wood said. The state-funded welfare programs also include a $1.3 million reduction to the Aid to the Aged, Blind and Disabled program that’s been approved by lawmakers.

Sen. Nicole LeFavour, D-Boise, tried to add $2.2 million to mental health spending for people dropped from state-backed treatment who could be a danger to themselves or others. That extra money would come from the Idaho Millennium Fund, which is funded by money from a national tobacco settlement. Millennium Fund dollars are paying for other parts of the DHW budget.

LeFavour said the money would prevent suicides by people who lost services, as well as violent incidents like the shooting of Ryan Mitchell of Pocatello by a man thought to be mentally ill.  She offered information from DHW saying that 452 people were transferred off DHW services from mid-2008 to mid-2010.  Nine of them have been incarcerated, 48 have been hospitalized at least once, and two have committed suicide.

“We would have something ensure that we have a back up so that we do prevent harm to them and harm to others,” LeFavour said.

That effort failed on a party-line vote, with the 16 Republicans on JFAC opposing it. Wood said lawmakers are planning to fund mental health services at the level requested by DHW. He also said the extra money would be an end-around circumventing the reductions approved by the House.

Wood also said the added money may not be able to stop incidents like the Pocatello shooting. “To date we haven’t figured out a perfect system to prevent all of those horrible mishaps to our citizens,” he said.

Health and welfare makes up the second-largest item in Idaho’s $2.5 billion state budget. Budget writers on JFAC have yet to act on the public schools budget, which would likely take up half of the general fund budget.