Empty reserves a key factor in state budget crunch
As Gov. Butch Otter prepares the next state budget, he’ll have fewer places to look to other than state tax revenues to fund the government. As the economy fizzled, the governor and lawmakers turned to federal stimulus dollars and reserve accounts to balance the budget, but both those options are largely off the table for the next round of budget planning.
Idaho has spent $852 million in federal stimulus money since President Barack Obama signed the stimulus package into law last year, and emptied two key reserve funds to pay for state services. Both the Budget Stabilization Fund and Economic Recovery Reserve Fund are expected to be at zero when the current budget runs out next June, with close to $80 million being spent.
The Legislature’s budget analysts say Idaho’s next budget could have a shortfall of between $237 million and $438 million, which would need to be closed by lowering spending on state programs or raising revenue.
Lawmakers created the Budget Stabilization Fund in the early 1980s to cover budget shortfalls or pay for the costs of natural disasters. It’s funded by transferring general fund tax dollars, and it’s been emptied during past budget crises in 1985 and 2003.
The Economic Recovery Reserve Fund is newer, established in 2003 for similar purposes. It’s funded primarily by tobacco sales—29 cents from every pack of cigarettes sold goes into the reserve fund rather than the general fund.
There are other funds not directly tied to the state budget that lawmakers could tap to balance the next budget. The Idaho Millennium Fund, created after the 1998 settlement with tobacco companies, has more than $80 million, which could be drained to pay for other health care costs. The Public Education Stabilization Fund, another reserve fund created to prevent shortfalls in school spending, has more than $10 million remaining after $86 million was spent last year, but lawmakers have held off on spending the rest of the money because it could be needed for school renovation projects.
Other small potential sources of money for state spending are the more than 200 other dedicated funds that Idaho’s state agencies manage. Most of these funds are tied to a specific service, but some agencies can use dedicated fund rather than general fund tax dollars to pay for services. One agency doing this is the Idaho Department of Labor, which is using a special penalty and interest fund to pay part of employees’ wages, a new computer system for unemployment payments, and a merger with the Idaho Human Rights Commission.