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Year-end surplus highlights Otter’s choices: Grocery credit vs. Medicaid

Click below to read AP reporter John Miller's full report on today's state revenue news, which focuses on Gov. Butch Otter's decision to spend $15 million of the 2011 year-end surplus to reverse this year's decision to put off a scheduled $10 bump-up in the grocery tax credit, instead of calling a special session of the Legislature to restore some of the cuts made to Medicaid in next year's budget. Because every dollar cut from Medicaid means losing twice as much in federal matching funds, reversing some of this year's cuts could have restored tens of millions to the health care program for the poor and disabled.

Idaho ends fiscal 2011 with $85 million surplus
By JOHN MILLER, Associated Press

BOISE, Idaho (AP) — A healthy share of Idaho's $85 million 2011 budget surplus will go to offset taxes residents pay on food, but programs for the poor and disabled that saw a $108 million reduction in state and federal funding during the last legislature won't be restored.

The plan Gov. C.L. "Butch" Otter announced Tuesday for the extra revenue Idaho collected during the 12 months ended June 30 is already getting criticism from minority Democrats and one Republican budget writer, Sen. Dean Cameron, R-Rupert.

In all, Idaho took in $2.44 billion, up 7.9 percent from 2010 as hiring accelerated, more businesses turned a post-recession profit and the public resumed buying.

Despite the positive revenue, Otter said he's taking a cautious approach as Idaho tries to emerge from the recession. In recent months, job growth has stagnated, and the federal government's current talks over raising the debt ceiling are creating additional uncertainty.

"We're a long way from out of the woods," Otter said in a prepared statement. "You need to remember that this is about half a billion dollars less than we had in my first year as governor" in 2007.

Most of the extra 2011 cash, some $68 million, must be diverted to public schools and community colleges to fulfill commitments to the federal government to maintain funding levels. Combined with $51 million from the federal government to preserve teachers' jobs since last year, Idaho has nearly restored the $128 million fiscal year 2010 cut to public schools.

About $15 million will go to expand the grocery tax credit, Otter said.

Following a 2008 legislative compromise, Idaho's grocery tax credit has been lifted to $70 annually for low-income residents and $50 for others. The 2011 Legislature wanted to delay expansion, citing uncertain budgets, but Otter's decision to boost the credit will provide an additional $10 back on nearly everybody's income taxes.

Otter could have called a special session to ask legislators to partially restore Medicaid, but indicated he felt it was the best way to spend the money.

"That's one of the promises we made long ago, and we've desperately tried to keep it," Otter said.

Cameron, co-chairman of the Joint Finance-Appropriations Committee, said he'd have preferred to partially restore Department of Health and Welfare programs including Medicaid, the health insurance program for the poor and disabled. That would have leveraged federal matching funds of roughly $40 million, restoring about half the money the program is losing.

"My preference would be either restoring some of the current programs we have cut," Cameron said. "Health and Welfare would be a high priority."

Rep. Janice McGeachin, R-Idaho Falls and an architect of this year's Medicaid changes, didn't return a phone call.

But House Minority Leader John Rusche, D-Lewiston, said institutionalizing those cuts when money is available will ripple throughout the system: higher prison costs, busier emergency rooms, more human pain.

"The consequence of that is we're going to pay more in the out years," Rusche said.

In Tuesday's announcement, Otter conceded he lost a $100 wager — a "silly bet," he called it in the statement— with former Democratic Gov. Cecil Andrus that final collections for fiscal year 2011 would be closer to a forecast of $2.43 billion by former Idaho chief economist Mike Ferguson than Otter's austere $2.29 billion estimate.

Ferguson, who retired in 2010 after more than 25 years as Idaho's chief economic prognosticator, said Tuesday he was pleased Idaho's revenue exceeded even his own forecast. That's after Ferguson found himself at the center of a 2010 budget controversy as conservative legislators, wary the recession would linger, dismissed his projections as too rosy and adopted more austere figures — with the budget cuts to match.

Some of "the cuts that were made now may not have been necessary," Ferguson said.

A continued revenue recovery will put conservative Idaho legislators in an unusual, and maybe even uncomfortable, spot: Figuring out what to do with surpluses that could top $100 million as early as next July, even if revenue grows from actual 2011 collections at just the forecast 3 percent rate.

Wayne Hammon, Otter's budget chief, said the governor has two priorities for additional cash: Bolstering education and refilling rainy day reserves drained from $350 million to nearly nothing over the last three years.

"Everyone recognizes that without a hefty rainy day account, the last three years would have been much more difficult," Hammon said.

Others, too, have their eye on incoming cash. House Majority Leader Mike Moyle, R-Star, last year floated a proposal to reduce Idaho's corporate and individual income tax rates, and said the clamor could become louder as revenue resumes growing.

"We need to backfill some of the needs of education," said Moyle. "And then give it back to the taxpayers."

Copyright 2011 The Associated Press.

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Betsy Z. Russell
Betsy Z. Russell joined The Spokesman-Review in 1991. She currently is a reporter in the Boise Bureau covering Idaho state government and politics, and other news from Idaho's state capital.

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