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Spokane, Washington  Est. May 19, 1883

Idaho begins new fiscal year eyeing record $800 million-plus budget surplus

By Clark Corbin Idaho Captial Sun

Barring an unexpected last-second meltdown, the state of Idaho ended its budget year Wednesday with a record surplus in excess of $800 million.

State officials won’t know for sure for a few days, but Idaho Division of Financial Management Administrator Alex Adams said that as of Friday, revenue sources were tracking ahead of projections again for June.

“If we hit the June numbers, the actual surplus will be $809 million,” Adams told the Idaho Capital Sun on Friday. “It would be the largest surplus in state history.”

Thursday was an important day on the calendar because Idaho operates on a fiscal year that begins July 1 and ends June 30 each year. July 1 also is traditionally the day hundreds of new laws the Legislature passes each year become effective. Due to the length of the session and the unprecedented uncertainty over adjournment this year, state legislators and officials had to take all kinds of unusual steps to close the books on FY 21 and open the books on FY22.

Here’s a look at where things stand heading into the new fiscal year.

Idaho budget officials prepare for record surplus

Adams and other budget and finance officials knew the state was in good shape when the May numbers came in $580 million ahead of forecast, making May the largest month for state revenue in Idaho history.

A big part of May’s boost came because the state moved the deadline to file taxes from April 15 to May 15.

But it wasn’t just a one month-boon.

Through the first 11 months of the fiscal year, individual income taxes were 24.5% ahead of forecast, sales tax collections were ahead by 7.7% and corporate income tax was beating forecasts by 33.2%.

“This year it was easy, why? Income taxes and sales taxes are higher than had been forecast, and the economy was going much better than had been forecasted,” Adams said.

At least one Senate Democrat said the surplus isn’t the good news people might think.

“Idaho’s Republican Legislature and governor have glommed onto $800 million of the people’s money, while their needs for affordable housing, affordable child care, livable wages and quality education go unmet,” Sen. Grant Burgoyne, D-Boise, said in a written statement Wednesday.

What will Idaho do with the money?

In short, some of the surplus is likely to be directed into education funding and some will likely be returned via tax cuts.

The specifics will come together as Gov. Brad Little works with the Legislature over the next six months to develop a package.

The state will put out an updated forecast in August, and state agency budget requests will come together on Sept. 1.

But it won’t be until Little’s State of the State address in January and the 2022 legislative session where the bulk of the proposals will come together and be debated, Adams said.

Little’s budget office, which Adams heads, has told state agencies that Little will continue to keep spending lean to make investments in education and maintain a structurally balanced budget.

Little is likely to treat a portion of the surplus as a one-time funding source (instead of ongoing) and propose directing some of it to one-time capital and infrastructure projects.

“It means we are in a good position; it means we have the ability to do some substantial investments we wouldn’t do otherwise,” Adams said. “But we have to be pretty careful about not outdriving our headlights with the ongoing portion and not make bad long-term decisions with good short-term news.”

One additional factor this year: The state has more than $1 billion in federal American Recovery Plan Act stimulus money that can go toward infrastructure like water and broadband projects. That could take some pressure off the state’s general fund, Adams said.

In his statement, Burgoyne called for returning the money to Idahoans, or using it to cut property taxes by 33%, paying up to 50% of child care expenses, raising the minimum wage and reimbursing employers a portion of the cost and paying for all-day kindergarten.

Burgoyne said Republican legislators failed to act on those priorities during the 2021 session.

“Never has a Legislature taken so long to do so little, and to do so much harm to the people of the state,” Burgoyne said.

In March, Rep. Judy Boyle, R-Midvale, and Sen. Carl Crabtree, R-Grangeville, introduced House Bill 331 to create and fund optional full-day kindergarten. They put the cost at $42.1 million per year, but the bill never advanced.

As things stand today, Idaho funds half-day kindergarten. Last month, the State Board of Education issued a recommendation for full-day kindergarten and is hoping Little jumps on board, Idaho Education News reported.

Gov. Little repealed, reinstated thousands of agency rules

In a move that most Idahoans won’t have noticed, Little and the state repealed thousands of pages of administrative rules and reinstated them Thursday, Adams said.

The discussion sounds technical and is.

But rules are important in Idaho because they carry the force of law, and there are thousands of pages of them.

Everything from education standards, to awarding state scholarships, to how the state licenses medical professionals, to how to provide care at state veterans homes, to how the state implements the sex offender registry and much more is handled by rules.

The repeal and reinstatement process was necessary because the Legislature didn’t take the once traditional step to renew all administrative rules through an omnibus bill.

There was additional uncertainty created by the Idaho House of Representatives taking another recess instead of adjourning for the year. Some types of rules, such as non-fee rules, were going to expire June 30 regardless. But fee rules could have remained in place on a temporary basis until the end of December. Even with the temporary rules, there was uncertainty about when and if the Legislature would reconvene and whether it would extend the temporary rules.

One of the consequences of Little reinstating all rules is that they are now all temporary in nature, subject to review by the Legislature in 2022, Adams said.

That means legislators could reject rules that have historically been on the books for years. In normal sessions, legislators would only review the new rules shipped their way.

Something similar has happened in the previous two years. It started in 2019, when the Legislature adjourned without extending the rules. Little used the opportunity to work with state agencies to reduce the number of rule chapters from 736 to 595. He then reinstated the remaining rules temporarily shortly before July 1 that year in a massive Administrative Rules Bulletin publication spanning more than 8,000 pages.

Adams said the state will republish all the new rules this year in a new Administrative Rules Bulletin slated for publication July 21.

“It was a much more complicated picture this year,” Adams said.

“I wouldn’t say it’s ideal, and it’s quite a bit of work for the rules team,” he added.

Publishing a document thousands of pages long isn’t ideal for the public, either.

“There is not one person in Idaho who can meaningfully go through that and engage in a way that would be productive,” Adams said.

Little has tried to get the Legislature to break the rules review into smaller chunks based on a renewal cycle.

But faced with limited options this year, Adams said the state did the best it could.

“This takes the guesswork out of it and ensures continuity,” he said.

New law will allow many car buyers to skip the line at DMV

Due to this year’s session running for the longest period of time in state history, the Legislature passed emergency laws to ensure other new laws would take effect July 1 on the first day of the fiscal year.

One of those new laws is designed to cut into the long lines that plagued Idaho Division of Motor Vehicle locations over the past couple of years.

Senate Bill 1102 allows dealerships to have the ability to electronically register customers’ vehicles online, saving them a trip to the DMV. The goal is to have the service up and running by the end of the 2021 calendar year, public information officer Tucker Craig said.

The idea is this: When Idahoans are at the dealership, they will be able to have their registration and titling already taken care of before leaving the parking lot.

About half of the cars in Idaho, about 300,000, are bought through a dealer. There will also be ways for dealers to facilitate registration for private vehicle sales between individuals.

“We are talking about a major reduction in the number of people having to go to the physical brick-and-mortar locations,” Division of Motor Vehicles Administrator Alberto Gonzalez said. “It’s going to save time, and it’s going to be a significant change in how we offer options to do business with us.”

There are still some services Idahoans will need to travel to a physical location for, including taking a driver’s license test, getting a Real ID Star Card or updating their ID picture.

Driver’s license fees go up $5

Through House Bill 161, fees for driver’s licenses, instruction permits and identification cards increased by $5 effective Thursday. There is also a $2 increase in testing fees.

The fees have not changed in 30 years and the increase is going toward administrative costs for the county sheriff’s offices, which issue driver’s licenses on behalf of the state, according to a news release from the Idaho Transportation Department.

The new fees are as follows, according to the Idaho Transportation Department:

Class D (3-year) license – under age 18 years – $30

Class D (3-year) license – age 18 to 21 years – $30

Class D (1-year) license – age 17 years or age 20 years – $20

Four-year Class D license – age 21 years and older – $35

Eight-year Class D license – age 21 to 63 years – $60

Class D instruction permit or supervised instruction permit – $20

Duplicate driver’s license or permit issued under section 49-318 Idaho Code – $20

License classification change (upgrade) – $30

Endorsement addition – $20

Knowledge test – $5

Seasonal driver’s license – $44

4-year ID card – $15

8-year ID card – $25

Idaho Transportation Department board begins identifying projects

House Bill 362, one of the largest transportation funding packages in Idaho history, took effect Thursday as well.

The bill increases the share of sales tax revenue distributed to transportation, up from 1% to 4.5%. It directs about $80 million a year to the Idaho Transportation Department for large infrastructure projects and it allows the department to use that money for bonding capacity over a 20-year period.

Transportation officials think that could generate about $1.5 billion, depending on interest rates and terms, chief communications officer Vincent Trimboli said.

“This is funding that will go directly toward helping the state, all across Idaho, deal with the unprecedented growth we are seeing right now,” Trimboli said in a telephone interview.

The department wants to get to work on the projects over the next five to eight years. And the Idaho Transportation Department board took some initial steps during a May board meeting in Lewiston.

Those initial projects include expanding Idaho Highway 16 from Chinden Boulevard to Interstate Highway 84 and expanding U.S. Highway 20/U.S. Highway 26 to four lanes from Middleton Road to I-84.

Both projects should be under construction by next year.

“Certainly for the governor and the Legislature, this is a very important increase in funding because it will address some immediate needs we have due to the rapid growth we are seeing across Idaho,” Trimboli said. “The board will look at the potential projects over the coming months and into next year and make those decisions on what projects exactly we move forward with.”