Ten percent smaller state budget potentially the new normal
Idaho lawmakers getting a head start on the next state budget are facing challenges balancing diminished tax revenues with ongoing state services.
Idaho's general fund revenue has dropped from $2.9 billion three years ago to under $2.4 bilion during the past year. Tax collections are expected to increase this year, but the state won't have the backup of reserves and federal stimulus funds to prevent further cuts.
The state would have a budget shortfall of between $237 million and $438 million in the latest projections prepared by the Legislature's staff. That could lead to a cut in the state budget of 10 percent or more. Gov. Butch Otter's budget chief, Wayne Hammon, said that range is accurate, and that the governor is putting together a balanced budget based on the $438 million amount.
Lawmakers on the Joint Finance-Appropriations Committee (JFAC) reviewed the budget Monday in preparation for the next legislative session. JFAC co-chair Maxine Bell, R-Jerome, said that state agencies will need to start preparing for smaller budgets over the long haul.
“I hate to see those agencies hanging on to a structure that will perhaps never look like it did in years past,” Bell said.
The depleted one-time funds and stimulus money and lack of a large economic rebound could precipitate larger cuts to state programs, unless lawmakers agree on new sources of revenue. Democrats on JFAC have suggested revenue increases that could offset some of the reductions.
“The take home message is that revenues are still not enough to cover the costs and expenses that have occurred,” said Sen. Dean Cameron, R-Rupert. He said that many people hoped that there would be a quicker economic recovery and that state agencies may have to look at their lower budgets as the new norm.
Cameron said that it's too premature to discuss what options are available to balance the budget and that such measures will be discussed toward the beginning of the next legislative session. He said collaboration will be key to setting the next budget.
“This is a year where we need everybody's help,” Cameron said. “If you're not part of the solution, you're part of the problem.” Cameron said that sentiment applies to state agencies, the governor's budget staff, JFAC, as well as other legislative committees handling issues including education and health and welfare.
The state would have more options to reduce funding for public schools and Medicaid, which are two of the largest spending areas in the state. The federal stimulus funds Idaho received for those programs included strings attached that the state couldn't reduce funding too heavily. With that stimulus money disappearing after the current budget year, those strings will go away as well.
State dollars may also be squeezed by state agencies, which are requesting more that $300 million in new funds. “Obviously, not all the requests will be funded,” said Hammon.