Idaho faces bleak budget news

Members of the Joint Finance-Appropriations Committee hear troubling budget news on Wednesday morning at their interim meeting. From left, they are Reps. Darrell Bolz and Maxine Bell, Sens. Dean Cameron, Shawn Keough and Joyce Broadsword, and Rep. George Eskridge. (Betsy Russell / The Spokesman-Review)
Members of the Joint Finance-Appropriations Committee hear troubling budget news on Wednesday morning at their interim meeting. From left, they are Reps. Darrell Bolz and Maxine Bell, Sens. Dean Cameron, Shawn Keough and Joyce Broadsword, and Rep. George Eskridge. (Betsy Russell / The Spokesman-Review)

BOISE - Idaho’s state budget news is bleak, lawmakers heard as they gathered Wednesday for the interim meeting of the Legislature’s joint budget committee:

One in five Idaho school districts has declared a financial emergency. State prisons are housing 500 more offenders than a year ago, with $28 million less in funding. Part-time state employees already hit with furloughs and other cutbacks will face sharp increases in their health insurance premiums. And Idaho’s Medicaid program could see a shortfall so extreme it’d have to eliminate 23 percent of the health benefits it provides to the state’s poor and disabled.

“It’s breathtaking,” said Sen. Shawn Keough, R-Sandpoint, vice-chairwoman of the Joint Finance-Appropriations Committee. “I think everyone in Idaho needs to understand where we’re at, and be prepared to sacrifice in a lot of ways. They need to communicate to us what their priorities are - what can they do without in services, and what do they feel they absolutely have to have, and how do they want to pay for that?”

Rep. Frank Henderson, R-Post Falls, said, “We just have a very serious financial problem to deal with. We can’t duck - we have to deal with it, and it’s going to take some real leadership.”

The joint committee took no action Wednesday on the state’s budget; that will wait until January, when lawmakers will convene for their annual session.

Already, however, Gov. Butch Otter has ordered mid-year cuts in the state budget totaling $99 million; the impact of those cuts is just starting to hit, and there’s another $52 million shortfall still unaddressed.

Bigger problems await lawmakers in January, however, when they’ll have to craft a balanced budget for next year, fiscal year 2011, without a big boost from the federal economic stimulus that staved off bigger cuts this year. Idaho received about $1 billion in federal stimulus money, and budgeted most of it to fill gaps last year and this year; about $50 million remains to be spent in fiscal year 2011.

Legislative budget director Cathy Holland-Smith warned that balancing next year’s budget will require major reforms, from restructuring government to finding new fees or other funding sources.

“It’s not going to be nibbling around the edges any more,” Holland-Smith said. “We just don’t have that type of flexibility. We’re talking about significant changes for some agencies.”

Already this year, lawmakers set a state budget that, at $2.5 billion, was lower than any state budget since 2006, and included Idaho’s first ever year-to-year cut in state funding for schools, to the tune of 7.7 percent. Since then, the state’s tax revenues have dropped even more, prompting Otter to order holdbacks to partially make up a $151 million shortfall. Schools are being protected from that cut by a draw from the state’s education reserve fund.

Idaho still has more than $200 million in reserve funds, but when Holland-Smith worked up possible budget scenarios for next year, they showed a need to spend all the reserves, delay a scheduled increase in the grocery tax credit, and cut funding for all agencies - including schools - to make the books balance.

Sen. Jim Hammond, R-Post Falls, said, “We’re going to work within our means, and it’s just going to be tough times for a while. But I am optimistic that if we can get through the next budget year, things will turn around, the economy will turn around. We just have to tough it out for another year.”

However, he added, “The Health and Welfare thing scares the heck out of me.”

Idaho Health and Welfare Director Dick Armstrong told lawmakers that the share of Idaho’s Medicaid program that’s shouldered by the federal government was boosted substantially this year as part of the economic stimulus legislation, but there’s no telling how much of that will continue. By one estimate, he said, Idaho could have to cut costs from the current level by $387 million a year - about 23 percent of the Medicaid program.

Various savings efforts already are under way, Armstrong said. But, he said, “The dilemma is this: Even with all of this cost-containment activity, we are looking at a shortfall that is just extreme.” Such cuts, he said, would be “extremely painful,” and “not good public health policy - it’s being driven by the budget.”

Armstrong said he’s heard rumors that the federal government will continue the higher matching rate for funding Medicaid, but Idaho won’t know that until well after it’s had to set its budget.

In 2003, Idaho’s state tax revenues plunged 14 percent amid an income tax cut and economic slump. The solution then was Gov. Dirk Kempthorne’s temporary penny tax hike that expired in 2005. Idaho has since raised its sales tax to 6 cents for every dollar permanently as part of a 2006 measure to cut property taxes.

Sen. Dean Cameron, JFAC co-chairman, said there’s no appetite for another tax hike, especially among House members who earlier this year rejected a push to raise gas taxes and vehicle registration fees. With so few options, the Rupert Republican is blunt about the task of making ends meet starting in January.

“It’s going to be horrible,” he said.

The Associated Press contributed to this report.

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