State’s Economic News Good Positive Indicators Allow Batt More Leeway In Budget Plan

Gov. Phil Batt, having survived a sluggish economic expansion that prompted two bare-bones budgets and denial of a pay raise for state workers, is preparing his final spending blueprint in the glow of a brighter future.

The Division of Financial Management’s final economic forecast of 1997 sees thousands more jobs than analysts anticipated just last summer. And for the second straight quarter it boosts the projection of new jobs in the typically higher-paying, goods-producing sector.

Even economists at the Federal Reserve Bank in San Francisco took note of the development in their November assessment of the region.

“The state’s manufacturing sector was weak in the first half of the year but picked up in recent months,” they said, specifically citing gains in high technology.

The new state forecast actually sees more than enough expansion in manufacturing, even including the troubled timber industry, to offset a scaled-back estimate for employment in the normally lower-paying service sector.

In addition, dramatically lower inflation estimates should stretch every paycheck further.

“The outlook for Idaho’s economy has been raised a notch,” according to the new state forecast, and “should remain one of the nation’s strongest.”

And new developments suggest that the latest projections may underplay what could be a new growth spurt for Idaho.

The Simplot Co. announced just a week ago that it was hiring back a third of the 300 workers it laid off last summer.

And new federal figures on Idaho personal income show that key indicator markedly higher during the first half of this year than the numbers used in the forecast. Incorporating those figures in the projections to be released in January could mean an even stronger increase in income.

The assessment reinforced Batt’s belief that the diversification of Idaho’s economy over the past decade is shielding the state from dramatic financial swings.

While Idaho’s economy has been solid since the late 1980s, recalculations based on updated statistics showed growth in 1996 and earlier this year was slower than originally thought. The federal Bureau of Economic Analysis found that retail activity, a key indicator of consumer confidence, was stagnant statewide from winter through spring.

That sluggish interval forced significant cuts in the 1995-1996 and 1996-1997 state budgets on top of the governor’s campaign to curb general growth in government. And the financial problems were aggravated by the administration’s decision three years ago to divert what is now more than $50 million from the state treasury for local property tax cuts.

But tax collections since midyear suggest consumer activity is back on track for a sustainable growth rate of 4.5 percent. And paycheck withholding for income tax is running ahead of expectations, underscoring the forecast’s projection for annual increases in nonfarm jobs of 2.5 percent or more for the next four years.

That would place Idaho at twice the national rate for job expansion after next year.

Idaho’s average annual wage, which rose more slowly than the average nationally the past two years, will begin exceeding the increases projected for the rest of the country next year, averaging just over 3.5 percent annually to top $28,000 by the end of the decade.

And with the annual cost of living now expected to increase at an average of barely 2.5 percent, that means a noticeable boost in real spending power.

The tight budgets of the past three years have kept the state in the black and should enable Idaho’s conservative governor to fashion a final spending blueprint that goes a notch above the status quo during the election year legislative session.

But those same tight budgets - compounded by the revenue lost to the property tax cut - have also fallen short in financing the level of programs and services needed in a state growing by more than 2 percent a year, over twice the national rate.

Indeed, money from a somewhat more robust economy cannot begin to meet a growing list of demands on state revenues.

They include: welfare reform’s demand for increased child care and job development, coping with the skyrocketing prison population, expanding recreational resources, drinking water system improvements and reversing the decline in the share of state cash going to public and higher education.

That mounting pressure on the state treasury has prompted a number of policy-makers to suggest there may have to be a major tax increase - the state’s first since the mid-1980s - in another year or two.