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Idaho’s Debt-Free Image To Be Shattered New Accounting Standards Forcing New Financial Statement

Idaho politicians like to brag about the state’s debt-free policy.

It’s been said many times in the Legislature that if the federal government required a balanced budget as the Idaho Constitution does, there wouldn’t be an astronomical federal debt.

But Idaho’s balanced budget is an illusion. Several recent state budgets have been in the red, balanced only by accountants’ manipulations. And new government accounting standards say Idaho might have to finally acknowledge millions of dollars owed by organizations indirectly connected to the state.

Since 1912, there has been a provision in the state Constitution limiting debt to $2 million. But it’s been winked at for years.

Now the state is trying to prepare its first true financial statement, showing all assets, liabilities and even lawsuits that might cost money. It’s obvious the $2 million limit will have to be junked.

And despite the great dislike most politicians have for anything that looks like a tax increase, House Speaker Michael Simpson of Blackfoot believes there will be little problem raising or eliminating the debt limit.

“It’s more or less a bookkeeping thing more than anything,” Simpson said. “I don’t think it’s a problem if that’s what needs to be done to modernize.”

And it’s not just an abstract exercise for number-crunchers. Some organizations have to be listed in the state financial report to qualify for federal funds.

Controller J.D. Williams’ staff is putting together the first comprehensive state financial report now, and there’s some question about how far it should go.

Some experts say Idaho’s report should list the debts and assets of “affiliated organizations.” That could mean such groups as the University of Idaho Foundation, the Boise State Foundation and the Idaho State University Foundation, booster groups such as the Vandal Boosters and Bronco Athletic Association and fund-raising organizations such as public television’s Friends of Four and the Idaho Parks Foundation.

The incoming chairman of the Government Accounting Standards Board, Utah State Auditor Tom Allen, says the board’s preliminary proposal to include those organizations didn’t go over well.

“We’re getting the crap kicked out of us in the responses,” he said.

As an example of how tough the decisions will be, Allen said that two-and-a-half years ago he asked the Utah attorney general’s office whether booster groups or other organizations affiliated with the universities needed to be included in the state financial report. He’s still waiting for the answer.

Idaho’s Williams says he’s using a checklist to decide if an agency should be considered part of the state. The questions include whether there are state obligations and who appoints board members.

If it’s the governor, and there are state ties, the agency probably will be listed as an “affiliated organization” or state agency whether they like it or not.

That means the Idaho Housing Agency and the State Building Authority could show up on the state financial report. Both like to consider themselves separated from the state, but their board members are picked by the governor. Each finances construction - the Housing Agency provides subsidized home mortgages for lower-income families and the Building Authority underwrites major public works projects.

The housing bonds are backed by sales tax revenues if they can’t be repaid with cash from the borrowers. Taxpayers pay off the building authority bonds directly.

And right now, the obligations of the two agencies combined exceed $900 million.

“There are some questions that we have to resolve regarding long-term debt,” Williams said.

Legislative Auditor Larry Kirk says the new standards will give a better understanding of all the financial arrangements the state has entered into, and just what its assets and debts are.

“If you look at a financial statement now, you don’t know if they are broke or not,” he said. “It will take three or four years to get a really good one (report).”


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