October 26, 2011 in Idaho

Idaho welcomes good news for budget

No further cuts likely necessary; reserves may be replenished
By The Spokesman-Review
 
Across the border

In Washington state lawmakers are preparing to meet next month in Olympia for a special session to deal with a $1.3 billion shortfall. State agencies have been told to brace for spending cuts as high as 10 percent.

BOISE – Idaho lawmakers are facing something they haven’t seen in years: A “manageable” budget.

When they convene in January, they’ll likely be able to balance next year’s state budget without further cuts, and even make up some cuts and start refilling the state’s drained reserve funds, according to figures unveiled Tuesday.

They’re still wary, however.

“We’ll certainly know a little bit more by the time the legislative session begins,” said Senate President Pro-Tem Brent Hill. “It’s a long ways from where we were five years ago, but at least it shows we’re headed in the right direction.”

Idaho’s state tax revenues fell 16 percent from fiscal year 2008 to fiscal year 2011, and though they’re now growing again they still haven’t hit the 2008 level. The state’s general fund budget, set at $2.96 billion in fiscal year 2009, was set at $2.53  billion this year, down 15 percent in three years. Lawmakers and Gov. Butch Otter intentionally left $91.5 million unbudgeted this year for fear that revenues would dip below state economists’ projections.

But the latest budget outlook, presented to the Legislative Council on Tuesday, shows that the strong revenues of the past year combined with frugal budgeting and deep, controversial spending cuts have put the state on track to cover its costs easily next year. That’s even with an automatic transfer of $26 million to the budget stabilization fund – a move triggered by the revenue growth. In recent years, Idaho has drawn down all its reserve funds just to balance its budget.

“I’m optimistic that it’s not going to be as painful of a budget year as it’s been the last few years,” said Wayne Hammon, Otter’s budget chief.

Lawmakers who serve on the Legislative Council, the joint committee that handles the business of the Legislature when it’s not in session, were briefed on the budget news on Tuesday. Legislative budget chief Cathy Holland-Smith presented a budget scenario assuming 3 percent revenue growth in the coming fiscal year. That would be enough to fund all the costs needed to keep state services at their current level – which means a 6.9 percent increase, due to growth in everything from Medicaid caseloads to school enrollment – plus a $26 million transfer to the rainy-day fund and at least a 1 percent raise for state employees.

After covering those costs, the state would have $73.5 million left over. It could see more than $30 million in supplemental budget requests for unanticipated expenses this year, from the costs of the new closed primary election to rising costs in the Catastrophic Health Care Fund, which would eat into that figure. But there’d still be money left to start addressing additional budget requests; state agencies have submitted $142 million worth of those.

“We never have enough money for all the line items,” said House Speaker Lawerence Denney. “But considering some of those line items is progress, I think.”

Among the proposed line items for next year’s budget: Public schools would see $19.7 million trimmed from their salary funds to help underwrite a new merit-pay bonus program, under the new “Students Come First” school reform law. State Schools Superintendent Tom Luna is requesting that lawmakers add $19.7 million back into the school budget, so the bonuses won’t undercut existing salaries.

Hammon said the governor’s top priority for additional spending is education, so requests like that one could fare well. “He’s said all along when we had to cut education, that the first new dollar went back to education,” Hammon said.

Otter’s looking at jobs and economic development as a second priority; restoring rainy-day funds third; and addressing state employee compensation fourth. “We need to remember that these are the people that have gotten us through the hard times,” Hammon said. “Most employees have not seen a raise or a bonus in four or five years, and it’s time that we do something about that.”

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