House backs higher cap on rainy day fund

BOISE – The House voted unanimously Monday to raise the cap on Idaho’s rainy-day fund, but that change could have a tough time competing against school funding and grocery tax relief, a key senator said.

The bill, sponsored by Rep. Jim Clark, R-Hayden Lake, would lift the limit on the state’s budget-stabilization fund to 8 percent of Idaho’s yearly income, from the current 5 percent, starting with the 2007 budget. The Senate Finance Committee, however, will hold the bill until Republican leaders set priorities for the session, said Sen. Dean Cameron, R-Rupert, committee chairman.

“It actually isn’t a bad idea,” said Cameron, who is also co-chairman of the Joint Finance-Appropriations Committee. “The difficulty for us as we are starting to look at the budgets and the amount of money it would require, and look at the tax proposals that are perpetually coming out of Rev and Tax. There just frankly isn’t enough money to do both.”

Members of the House Revenue and Taxation Committee decide whether to introduce tax legislation.

A similar bill, also introduced by Clark, passed the House last year but stalled in Cameron’s committee because of fears that then-Gov. Dirk Kempthorne would veto it, Clark told lawmakers. The legislation would allow Gov. Butch Otter to increase the rainy-day account by roughly $11.4 million in 2007 and $13.3 million in 2008, said Ray Houston, a budget analyst for the Legislature.

“If you’re looking forward, if you don’t think interest rates are going to go up, if you don’t think there’s going to be a lot of pressure on this good economy, and it will keep on growing, pass this bill,” Clark said. “This is good legislation.”

The fund is nearly full for the first time in nine years, with $115.1 million.

The bill contains an emergency clause, meaning it would take effect immediately after being signed by the governor.

State officials expect the fund to grow through 2008, but the governor’s budget projects just 3.75 percent growth that year, less than the minimum needed to add to the fund in 2009.

The lower projection stems partly from an expected decrease in tax revenue resulting from a construction slowdown. Yet Clark said he thinks Idaho’s economy will continue to prosper and lawmakers could safely save more money.

Cameron said the bill is problematic because it retroactively applies to 2007 and there just isn’t enough money to go around.

If lawmakers use Otter’s proposal of a $22 million grocery tax credit, Clark’s bill might work, Cameron said.

“But if you go to an expanded grocery tax credit beyond what the governor recommended, you probably eat up the revenue that you would need,” he said. “We can make some of those things work, but the bottom line is that we have a limited amount of resources, so something has to give.”

House Speaker Lawerence Denney said leaders from both houses would likely discuss the matter, but they haven’t done so yet.

Denney, of Midvale, said he would like to see the cap raised to help provide a cushion in case the economy slows down.

The bill also could be amended to add money more gradually, Cameron said.

Cameron said education and tax relief are more important than adding to the stabilization fund, but he will wait for direction from leadership to decide the fate of Clark’s bill. “We’ll just hang onto it,” he said.

Otter spokesman Jon Hanian said the governor is following the legislation but declined to comment further.

Clark, who recently suffered a mild stroke, returned Monday after a weeklong absence.

“I would like to thank everybody in the body for all the calls, all the flowers, all the cards,” he said before introducing the bill in the House. “I really need a good yes vote on this bill.”

The vote was 66-0.