Otter may cut budget further

BOISE – Another month of dour economic news has Gov. Butch Otter considering a new round of state budget cuts.

“The governor is in active discussions,” Otter spokesman Jon Hanian said Tuesday. “The process is under way. I don’t think a figure has been determined yet. Based on what we’ve seen as far as tax receipts … we’re probably going to have to adjust accordingly.”

In September, Otter ordered most state agencies and institutions, including public universities, to cut $27 million in spending in fiscal year 2009 and to delay another $40.8 million in case economic conditions worsened. The edict amounted to a 1 percent cut in the state budget and an extra 1.5 percent held in reserve.

That holdback came after state economists reported tax revenue forecasts that were 5.9 percent lower than those from February, when economists issued the first warnings of a downturn in state revenue for fiscal year 2009, which began July 1. At the time, they blamed a falling housing market, higher unemployment and national financial market turmoil.

The Idaho Division of Financial Management reports that sales tax receipts for the month of September were $5.1 million below projections, a decline of 7.4 percent from the same month a year ago.

Economists said that marked the second consecutive month of underperformance and just the fourth time since 1968 that September sales tax revenue fell from the previous year. Those years include 1986, 1987, 2004 and 2008.

The report showed some mixed news for income tax revenue. Overall, income tax revenue in September exceeded expectations by $4.2 million, but that total was bolstered by the strength of collections on 2007 income taxes that weren’t counted until September.

More telling is that withholding taxes on September paychecks were down $8.2 million from projections for the first quarter of fiscal 2009, according to the report.

On a positive note, corporate income tax had its third consecutive month of higher-than-expected revenue, at $1.6 million above the projection for the month. That total put corporate income tax totals $5.4 million above projections, making it the only revenue stream ahead of projections for the fiscal year.

September figures also show taxes on products such as beer, wine, liquor and tobacco coming in on target, at $8.7 million.

Another factor to consider is the state’s growing unemployment rate. Last week, the Department of Labor reported the October jobless rate at 5.4 percent, the highest point in more than five years.