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Idaho will balance state budget at year-end June 30 without additional holdbacks

Idaho’s State Board of Examiners made it official this week - no further holdbacks will need to be imposed to balance Idaho’s state budget by the end of the fiscal year on June 30. Instead, following legislation passed this year and signed into law by Gov. Butch Otter, the state will meet any year-end shortfall by dipping first into any unexpended money in the Budget Stabilization Fund; second into unspent money in the Permanent Building Fund that’s now tabbed for state building maintenance work next year; and third, if needed, into the Economic Recovery Reserve Fund. None of those three funds actually have extra money sitting in them; all their funds are budgeted to be spent next year, in fiscal year 2011. But Wayne Hammon, Otter’s budget chief, said some year-end reversions are expected to put unspent money back into the budget stabilization fund, and shifting building maintenance money was identified as a second step that should easily cover any shortfall.

“While building maintenance is important, people are more important than buildings,” Hammon said. “For right now, they’ve decided that people come before buildings.” The state Board of Examiners was presented with two scenarios for the year-end state budget picture: One showing a $19.6 million surplus, which is what would happen if original revenue forecasts held true; and one showing a $7 million shortfall. State tax revenues have come in short of projections, including notably in April, but came in $4 million ahead of projections in May, leaving the cumulative shortfall at $7.5 million. The state also anticipates a possible shortfall in June revenues, but expects some money to revert back to the general fund from the state’s income tax refund account at the end of June, leading to the $7 million projection.

If Idaho had to take the third step laid out in the budget-balancing bill - dipping into the Economic Recovery Reserve Fund, which already is budgeted to be fully spent next year - it’d have to make cuts in next year’s budget. But Hammon said that now appears unlikely. Idaho’s only remaining budget reserve funds now are $17.5 million in the public education stabilization fund, which the plan doesn’t touch; and $71 million in the Millenium Fund, which lawmakers and the governor chose to keep as a reserve in case a federal funding boost for Medicaid doesn’t come through.

To listen or watch…

There was intense interest in Gov. Butch Otter’s announcement today on new state budget cuts; this shot shows the line-up of TV cameras at the press conference. Not visible are many additional reporters and photographers (including me) who were ranged around the sides of the room. The governor’s office has posted several audio clips of the press conference here, here, here, here and here; the first four are Otter speaking, and the fifth is state Superintendent of Schools Tom Luna. And you can click below to watch the uncut video of the entire thing, thanks to Idaho Public TV.

ITD also making cuts

The Idaho Transportation Department has announced an $8.6 million holdback on its own department budget - a 3.4 percent cut - even though it wasn’t required to participate in Gov. Butch Otter’s holdbacks because the agency receives no state general funds. ITD Acting Director Scott Stokes said the move comes because ITD’s revenues are falling short, mainly in fuel taxes. “We recognize that our revenue is failing to meet expectations and believe that reducing our budget by $8.6 million is a prudent business decision,” Stokes said. “We will continue to monitor department revenue to determine if additional changes might be necessary.”

The cut will come from the contract construction program, but the funds being cut hadn’t yet been tagged for any specific projects, the department said. Spokesman Mel Coulter said fuel tax revenues to the department have continued to decline, at a time when they normally kick up from the summer travel season. “I think what we’re seeing is the public is doing the same thing we’re doing, and that is they’re having to continually monitor their expenditures and be very frugal with the money they have,” Coulter said. “We’re in that same position.”

Otter says he rejected some deeper cuts proposed by Idaho state agencies

There were even deeper cuts proposed by state agencies that Gov. Butch Otter rejected, when he put together the holdback plan he unveiled this morning, Otter told Eye on Boise. “Yes, yes,” he said to the question, but he declined to give examples. “I’m not going to get into that,” he said. “We said, ‘No, we believe that’s too critical to your mission.’” He noted that Corrections and Medicaid were held to some of the smallest cuts - 2.5 percent for corrections, and 3.3 percent for the state Department of Health & Welfare, including Medicaid. Both departments already had seen cuts; this year’s state budget assumed zero growth in inmate population in Idaho’s state prisons.

In fact, much of Idaho’s state budget has seen major cutbacks over the past two years; this year’s state general fund budget was set at a level $330 million below the budget from two years ago, and that was before today’s holdback announcement. Otter said, “After much discussion with legislative leaders from both parties, with my cabinet, with other constitutional officers, I believe we now have a strategy to put in place for addressing this shortfall.” He said his strategy is designed to set the stage for discussion about longer-term revisions to make “our government leaner and more focused on its core mission.” His new holdbacks apply to general fund agencies, and not to those that are funded with dedicated or federal funds. The courts and the other constitutional officers have voluntarily agreed to join in the holdback, the governor said. Here’s a link to my full story at spokesman.com on today’s announcement.

Bedke: ‘The impacts now are going to be real’

Idaho House Assistant Majority Leader Scott Bedke said, “We’re ready to stand and work with the executive branch to work this thing out.” He told Eye on Boise that many lawmakers are wary of spending down the state’s budget reserves, when they already face a daunting challenge to put together next year’s state budget. Many holes in this year’s budget were filled with so-called “one-time money,” which won’t be there next year. “Every dollar that we use to prop up the 2010 budget is a dollar we can’t build the 2011 budget around,” Bedke said. “You can’t keep having the worst economy since World War II without it starting to show up in government. All of the slack is out of the system, and the impacts now are going to be real.”

Luna: Last year’s cuts pay off for schools, mean no new cuts today

Idaho state Superintendent of Schools Tom Luna said, “I think the reality that we find ourselves in today validates … the decisions that we made in the last legislative session,” when lawmakers made the state’s first-ever cut in state funding to public schools. Luna said some urged spending all of the state’s reserves instead to avoid that. Instead, he said, “We took a more prudent” approach. “If we had not done that, we would be talking about cutting schools in the middle of the school year. … For that reason, we’re not cutting education today.”

Dems: ‘A question of priorities’

Idaho’s legislative minority party says it’s unhappy with the governor’s holdback plan, but the Democrats, like Otter, also say they oppose raising taxes to cope with the state’s budget shortfall. Senate Minority Leader Kate Kelly, D-Boise, said the Dems would prefer to tap more of the state’s $274 million in reserves; Otter is only tapping the public schools portion of that, for $49.3 million, to protect schools from the holdbacks. Kelly noted that Idaho also has about $50 million in unspent federal stimulus funds that it’s saving to use in next year’s budget. “Sitting in a savings account, the money does not do us any good from an economic development standpoint and from a recovery standpoint,” Kelly said. The Democrats also oppose cutbacks in higher ed and Commerce during the current recession. “Higher ed is taking a bigger hit than the governor’s office or legislative services,” she said. “It really is a question of priorities.”

Otter’s holdbacks, by agency…

Here’s a link to the governor’s holdbacks from state agency budgets, broken out by agency, showing both the dollar amounts and percentages for each agency.

Otter calls press conference on state budget shortfall

Idaho Gov. Butch Otter has called a press conference for tomorrow at 10:30 a.m. “for an important announcement on his plan for dealing with an impending revenue shortfall.” The governor’s been reviewing proposals from state agencies and meeting with legislative leaders for the past two weeks to decide how to respond to a $151 million shortfall in the current budget year; he could order holdbacks, or mid-year cuts, in the already much-trimmed state budget, or he could strike a deal with lawmakers to dip into Idaho’s $274 million in reserves, or there could be a combination of the two. If Otter opts to cover the entire shortfall through new budget cuts, he’d have to order holdbacks of 6 percent.

Budget cuts could trim jobs, but lack of jobs drives budget shortfall…

As Gov. Butch Otter ponders whether to make additional cuts in Idaho’s already much-trimmed state budget, he faces a dilemma: Budget cuts could trim state jobs, at the same time that a precipitous drop in jobs is what’s driving Idaho’s state budget crunch. In August, Idaho had fewer jobs than it had in August of 2005 - despite adding more than 100,000 residents.

“We talk about the budget shortfall, but that’s the symptom,” says House Minority Leader John Rusche, D-Lewiston, a physician. “The disease is the fact that people aren’t working.” So far, proposals coming in from state agencies on ways to make further cuts include possible additional layoffs or furloughs of state employees.

Since the current state budget crisis began, Idaho has laid off 71 employees due to budget cuts, according to state payroll records. In addition, more than 4,500 state employees were given unpaid furloughs in the last fiscal year, which ended July 1, resulting in more than 12,000 unpaid days off work. Since July 1, 4,625 employees have been put on furlough and taken more than 7,000 unpaid days off, and that’s less than three months into the fiscal year. Some agencies have shut down entirely on specified days, for agency-wide furlough days. Not included in those figures are cuts made by attrition, where state agencies opted not to fill vacancies when they occurred and instead eliminated the positions.

Most expect Otter to impose some kind of additional cut, though this year’s state budget already is $330 million less than Idaho’s budget was two years ago. “I don’t see any way he can not,” said Rep. Maxine Bell, R-Jerome, JFAC co-chair. You can read my full story here in today’s Spokesman-Review.