Governor Wants New Savings Plan Law Could Cause Budget Woes, Wants To Use Tobacco Funds

A law that forces the state to put millions into a savings account when it has a good year could be headed for changes.

Gov. Dirk Kempthorne on Wednesday said the “concept … makes sense,” but he asked lawmakers to “rethink” the way the law works.

Instead of automatic deposits into the account, Kempthorne proposed beefing up the so-called budget stabilization fund with tobacco settlement proceeds. Idaho stands to collect $32 million over the next year and a half; Kempthorne proposed putting all that money into the fund.

The plan startled some North Idaho legislators who thought tobacco money should be directed to anti-smoking and health care programs.

Rep. Jim Clark, R-Hayden, defended the savings plan that he authored. Clark was just a freshman representative when he pushed the major legislation through last year, co-sponsoring it with longtime Sen. Grant Ipsen, R-Boise. If the measure had been in effect this year, the Legislature would have been required to deposit about $15 million - 1 percent of the state’s budget - into the fund.

The law kicks in only when the state’s revenues grow by more than 4 percent. In the coming year, Kempthorne is estimating revenue growth at 3.9 percent. But he said if his new commerce director, Gary Mahn, proves good at his job, that figure could rise.

If that happened, he said, “There will be no option other than a holdback. Wouldn’t it be ironic if an upswing in economic activity actually resulted in a reduction of services?”

That could happen, Kempthorne said, because the state would suddenly need to deposit $16 million into the stabilization fund, even though it hadn’t budgeted for that amount.

The fund is for use in case of revenue shortfalls or disasters. In past years, such events have forced mid-year budget cuts.

Rep. Jim Stoicheff, D-Sandpoint, wants to modify the savings law so that just 1 percent of the budget surplus, instead of 1 percent of the entire budget, is deposited in the account.

Stoicheff said state taxpayers’ money shouldn’t sit in savings. “We’re here to do work for the people with their money, so let’s give it back to them,” he said.

Said Clark of the idea: “When it comes up in committee, you can bet I’ll kill it right there.”