July 12, 2011 in Idaho

Idaho revenues up, Otter loses bet to Andrus

By The Spokesman-Review
 

BOISE - The final numbers are in, and after anguishing over deep budget cuts, Idaho ended the fiscal year well ahead of projections for state tax revenues, with an $85.3 million year-end surplus.

That means public schools will get an additional $59.9 million, and Gov. Butch Otter has decided to reverse this year’s decision to put off a scheduled $10 bump-up in Idaho’s grocery tax credit next year, at a cost of $15 million. It also suggests some of this year’s painful budget-cut decisions might not have been necessary, though most won’t be reversed.

Otter said he lost his $100 bet with former Gov. Cecil Andrus that state revenues would be closer to retired chief state economist Mike Ferguson’s projections than to Otter’s and the Legislature’s. “I made a silly bet with Andrus. I was hoping that he was right, and then I did everything I could do to make sure he was right,” Otter said. “It’s a payment that I’m very happy to make.”

The year-end revenues actually exceeded Ferguson’s forecast by $11.5 million, rather than falling more than $140 million short as lawmakers and Otter had predicted.

The improved revenue news comes after Otter and lawmakers made deep cuts to the state budget this year, including to schools and Medicaid services for the poor and disabled.

Ferguson said, “In that sense I don’t feel vindicated, because some pretty harsh things have been done, and it doesn’t look too likely that they’ll be undone.”

Rep. Maxine Bell, R-Jerome, co-chairwoman of the Legislature’s Joint Finance-Appropriations Committee, said, “None of us wanted to see further reductions in education, but the instability of the economic numbers forced us into a cautious approach.”

Her co-chairman, Senate Finance Chairman Dean Cameron, R-Rupert, said he’d have preferred to restore some of the Medicaid cuts rather than boost the grocery tax credit; because every dollar cut from Medicaid means losing twice as much in federal matching funds, Idaho could have restored tens of millions in services.

“My preference would be … restoring some of the current programs we have cut,” Cameron told the Associated Press. “Health and Welfare would be a high priority.”

Otter could have called a special session of the Legislature to restore cuts, but chose not to. He can restore the grocery tax credit increase without a special session, because that increase happens automatically unless the governor issues an executive order. Though he asked lawmakers this year to pass a concurrent resolution authorizing him to issue that order and they complied, he now plans to simply not issue it.

The escalating credit, which Idahoans claim on their income tax returns and which partially offsets the 6 percent sales tax they pay on groceries, was “one of the promises we made long ago, and we’ve desperately tried to keep it,” Otter said.

That means that next April, when Idahoans file their 2011 income tax returns, the credit they can take to offset grocery taxes will rise $10 from the current $50, to $60 for most taxpayers, and from $70 to $80 for the low-income; seniors also receive an additional $20 credit.

The payouts to schools come because of strings tied to millions in federal stimulus money that Idaho accepted in the past few years; schools and community colleges were entitled to a certain percentage of any unexpected state surplus, under federal “maintenance of effort” requirements. That’s why the schools will get $59.9 million; it’ll go out to school districts to spend as they choose, but state officials urged caution, saying more cuts could lie ahead.

Coeur d’Alene schools will get $2.1 million; Post Falls, $1.2 million; and Lakeland, $923,261. Many school districts are targeting the one-time funds to cancel planned teacher-furlough days or reverse other budget cuts already ordered.

Under the same federal requirements, Idaho’s community colleges will get $7.5 million of the year-end surplus.

Idaho’s state tax revenues for June exceeded projections by a whopping $19.1 million, with every category of tax finishing the year ahead of forecasts.

Ferguson, who served as Idaho’s chief economist for more than quarter-century, said the state’s rejection of his forecast a year and a half ago was unprecedented, but lawmakers and the governor did it again this year, budgeting for just 3 percent revenue growth next year when state economists forecast 6.9 percent.

“The thing that I think changed and that is worrisome is that the governor and the Legislature have taken to essentially rejecting the work of professional economists,” Ferguson said. “If it was just some kind of abstract thing, it wouldn’t really matter too much, but people’s lives and health are at stake.”

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