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Eye On Boise

Another big hole in the budget

It’s pretty much just what no one wanted to hear: There’s potentially another $38 million hole in the budget that lawmakers are nearly finished setting for next year. When Congress passed the economic stimulus act – the same one that’ll send rebates to taxpayers across the country – it included some goodies for business, in the form of bonus depreciation and a one-time option to deduct expenses early. Normally, Idaho conforms its state income tax laws to federal income tax laws. If we do so in this case – for the stimulus law that President Bush signed on Feb. 14 – it’ll cost $38 million in next year’s general fund budget, according to the latest figures, but bring Idaho an extra $1.5 million the following year and another $59.5 million in fiscal years 2011 through 2015. Over the whole time period, that’s a $20 million gain.

The problem: Next year’s budget, at this point, doesn’t have a spare $38 million. So when JFAC this morning set the capital budget for next year, covering major building projects, it left off the $70 million secure mental health facility. That facility still would be built, but lawmakers are toying with the idea of bonding for that expense, rather than paying cash up front, to allow some room for the IRS conformity cost. Senate Tax Chairman Brent Hill, R-Rexburg, said, “Overall, Idaho would come out $20 million ahead over seven years, but it’s timing.”

In 2001-02, Idaho faced a similar dilemma, with a recession looming. That year, the state opted not to conform with a similar IRS one-time change on bonus depreciation. That saved the state money in that year, but cost it revenues in subsequent years, because of how that affected the timing of depreciation of business equipment. It also meant differences between state and federal tax calculations – differences that last for the entire seven-year term of the depreciation. “The hard part is for the citizen, because he’s got to keep two sets of depreciation schedules,” said Hill, a CPA.

Senate Finance Chairman Dean Cameron, R-Rupert, said the prospect of a $38 million hit has “really put our budget target in jeopardy.” The state still has money in all of its reserve accounts, which it could tap. But Cameron prefers not to, out of concern that further revenue declines are ahead. “I think we have the best bond rating available,” he said. “If the economy continues to deteriorate, we’re going to need every bit of available cash we can in order to sustain public schools and universities and public safety appropriations at the level we expect them to be at.”

Gov. Butch Otter today met with state Treasurer Ron Crane to look into the prospects for bonding. “With our bond rating, we get money cheaper than anybody else,” Otter said. “Ron has a professional that’s looking at that.” Otter said he’s reserving his decision on whether bonding for the secure mental facility is the way to go until he gets the results of that analysis.

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Eye On Boise

News, happenings and more from the Idaho Legislature and the state capital.