Idaho agencies face more cuts

With income and sales tax revenue continuing to lag projections, Idaho state agencies could soon be forced to cut budgets, just as they did a year ago.

Unlike last year, however, the fiscal 2010 budget has already been trimmed to the point agencies may have to consider eliminating entire programs or services.

"I think that's exactly where we're at," said Wayne Hammon, Gov. C.L. (Butch) Otter's budget director.

"If the next revenue forecast is down slightly, we have the tools to address that," Hammon said. "But if it's down significantly, trimming won't work. We've already trimmed a lot of the fat. It's going to be a case of the state no longer providing 'X' service. I don't know what 'X' is, but we're going to have to find something."

The fiscal 2010 budget, which began July 1, anticipates $2.55 billion in general fund revenue. That's a 3.4 percent increase over the actual 2009 collections of $2.466 billion. July revenues, however, came in 9 percent under last year's numbers, or about $27 million less than what they needed to be. That alone ate up most of the budgetary cushion.

Budget analyst Ray Houston with the Legislative Services Office noted the Legislature assumed fiscal 2010 would end with a general fund balance of $49 million. Not including the July shortfall, that has already dropped to $39.5 million because of a smaller-than-expected beginning balance and other changes. Add in the $27 million from July, plus another $7.7 million in unbudgeted wildfire and pest control expenditures, and whatever wiggle room agencies had is essentially gone, seven weeks into the fiscal year.

"When DFM (Division of Financial Management) revises its revenue projection at the end of this month, that $39.5 million is going to drop to something negative, based on the July numbers and the latest economic forecast," Houston said. "Even if they just reduce the 2010 estimate to the 2009 actual, we'll still be short more than $70 million. We have quite a hole to dig out of."

Otter is scheduled to meet with legislative leaders on Sept. 11. Hammon said he didn't expect any announcements regarding budget holdbacks prior to that time. He declined to provide details about the coming revenue projection, but said it's reasonable to think it will be lower than $2.55 billion.

DFM's last economic forecast was released in July. It estimated that non-farm employment in Idaho would decline almost 5 percent in calendar year 2009, followed by another slight drop in 2010. Employment is anticipated to be weakest during the last three months of '09 and first three months of 2010.

"Our main sources of revenue are income tax and sales tax, so we need jobs before state revenues will recover," Hammon said.

A similar scenario played out last year. The August revenue forecast predicted a $174 million drop in general fund collections for the year. Otter responded by ordering a 1 percent budget holdback on Sept. 30. As revenue projections continued to fall, additional cuts were ordered. Eventually, $213 million in spending was eliminated, or more than 7 percent of all general fund expenditures.

That lower spending level then became the starting point for fiscal 2010.

Sen. Dean Cameron, R-Rupert, said it's too early to predict whether holdbacks will be needed to balance the budget, but given the current economy, "it's a real possibility."

"We know the income tax numbers will be down, because they reflect last year's economy," he said. "But we're hoping sales tax revenues will increase as the year goes along. If we have a good Christmas season, it could make a huge difference."

Moscow Rep. Shirley Ringo, who sits on the joint budget committee with Cameron, said Idaho families are already hurting, even before any new holdbacks are announced. Recently adopted cost-containment measures in the state Medicaid program, for example, could cost families of disabled children hundreds of dollars each month.

"I know some people in the Legislature think shrinking government is a fine idea, but I think the cuts we'd have to make would be too harmful," she said. "My preference would be to look for ways to augment revenues. House conservatives would resist that, but this could be a time when it's really up to people to raise their voices and say what they'd prefer we do."

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Spence may be contacted at bspence@lmtribune.com or (208) 848-2274.