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Idaho gov tells agencies to prepare for new cuts

Fri., Sept. 11, 2009, 3:15 p.m.

BOISE — Gov. C.L. “Butch” Otter has given state agency directors until the end of next week to draft plans to cut millions from their spending as state tax revenue continues to lag expectations.

Otter is meeting with Republican leaders Friday afternoon to discuss state finances for the 2010 fiscal year amid continued gloomy economic forecasts. He’ll meet with minority Democrats on Wednesday.

By next Friday, Idaho agencies that receive general fund money are under orders to submit plans for trimming their budgets. That includes the Department of Correction, the Department of Education and the Department of Health and Welfare, all of which have already been forced to make do with less money.

The state said earlier this month that general fund revenue is on track to leave a $151 million shortfall in the $2.5 billion spending plan for the 2010 fiscal year, which started July 1. The gap likely leaves Otter and Division of Financial Management officials with little choice other than to intensify austerity measures that began in mid-2008 as the economy soured.

Unlike a year ago, however, Otter at least for now hasn’t given state agency directors specific savings targets as a percentage of their total budgets, his budget chief, Wayne Hammon, told The Associated Press in an interview.

“At this point, the governor is waiting to see the suggestions put forward by the cabinet,” Hammon said.

Idaho state government still has about $275 million in four budget reserve accounts, including for public education, that could be tapped to make up some or all of the difference.

That’s down from nearly $400 million earlier this year, and Otter has been reluctant to siphon away too much, for fear the economic downturn will linger and the state will eventually be left with nothing in its rainy day funds to take care of emergencies.

“The governor will take a holistic approach and look at all the tools available, including the reserves,” Hammon said.

Agency directors got their marching orders from Otter on Thursday morning.

A day later, some said they’ve long been expecting to be forced to readdress the issue, given the headlines about the economy.

Correction Department Director Brent Reinke’s budget for 2010 was cut by $27 million, or 14 percent, to $169 million, from his original 2009 spending plan, forcing him to eliminate 44 positions and order employees to take four to 12 days of unpaid furlough. He’s now looking at shifting positions from state to other funding sources, among other measures.

“We’re looking at literally everything to see what we can squeak out. It won’t be a lot,” Reinke said. “We’re down to mission critical balances right now. I think the governor’s office understands that.”

Tom Shanahan, a Department of Health and Welfare spokesman, said Otter asked agency head Dick Armstrong for explicit details about how any proposed cuts might affect the agency’s programs like Medicaid, public assistance, and mental health and substance abuse treatment.

“We’re going to have to be very careful about how we go about it, because we’re seeing more people than ever coming through our doors, and we need to provide good service,” Shanahan said. “If we provide him with good detail, the governor will make good decisions, given the circumstances.”

Otter doesn’t plan to make any announcements on possible cuts until he’s had a chance to meet with leaders in both parties and until after he receives the agency’s savings plans next Friday. That would give his financial advisers at least next weekend to pore over proposals and decide the most likely areas to be pared back — or where ill-advised cuts could undermine state services.

“It is reasonable to assume the earliest decisions like that might be made the week of the 21st of September,” said Jon Hanian, Otter’s spokesman.

Last year, Otter responded to the economic downturn by asking state agency heads to slash $130 million, or 4 percent, from spending in the final six months of fiscal year 2009. This year’s state budget cut spending by another 8.6 percent.

Cuts to agency budgets and programs and transfers from savings accounts would have been deeper if not for the $1.1 billion the state received in federal stimulus cash.

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