If you were counting on Idaho lifting its sales tax from groceries, you’re probably in for a disappointment.
Likewise, all that extra money needed to raise salaries for beginning and veteran teachers likely won’t be available.
Even cost of living increases may elude state workers.
Why?
Idaho just lowered its expectations.
In January, Gov. Brad Little’s budget shop predicted state tax revenues would grow 8.2 percent — or $307 million — during the fiscal year that began July 1.
This month, the forecast got revised — downward. Now, the state expects to bring in only 5.2 percent more money — or $174.5 million.
That doesn’t put the state in the hole. It still expects a cushion when the budget cycle closes on June 30, 2020. But it’s going to be $51 million — or about $122 million less than expected. The last budget cycle closed $20.4 million short. The current revenue forecast cuts $96 million. July tax collections were down another $6.2 million. And if a state law had not required Idaho to transfer $40 million from a rainy day fund to its checking account, the balance would be a paltry $11 million.
So Little’s slamming on the brakes. Unless it’s an emergency, spending on new equipment, supplementals and new programs will be on hold. And the governor is telling his agency heads to outline where they’d cut budgets if necessary.
No, the economy is not slowing down. Unemployment is low. Businesses are expanding. People are moving into the state at such a clip that they’re bidding up the price of housing.
What’s driving this is politics.
Once again, Idaho’s GOP-led Legislature went on a bender
Not a spending bender.
A tax-cutting bender.
Under Little’s predecessor, Gov. C.L. “Butch” Otter, lawmakers in 2018 rushed to conform Idaho’s income tax laws with changes Congress approved to the federal code just a few weeks before. Not only did Idaho lower its rates, but the state also drastically changed the definition of taxable income.
And it turned out the lawmakers were overly optimistic about what their tax cut would cost. When collections lagged for months, they insisted it was a withholding problem; by April’s income tax filing deadline, collections would recover.
That never materialized. Instead, individual income tax collections came in $112.7 million behind predictions.
Looking ahead for the new budget year, the updated economic forecast is suggesting individual income taxpayers will pay about $170 million less than originally anticipated.
Brightening the picture had been corporate tax collections. During the last fiscal cycle, corporations paid nearly $60 million more than predicted.
But you couldn’t count on it.
For one thing, it was a windfall generated by the congressional corporate tax relief of 2017.
Those changes encouraged the repatriation of assets and profits that had been parked offshore for years. As that money came home, corporations paid taxes on it.
But Little and legislators could not leave well enough alone. This year, they extended additional relief to multinational corporations repatriating assets within the state. Only three lawmakers — one in the House, two in the Senate — voted against that bill.
So the state now expects corporate income tax collections to actually fall by $20 million in the new year.
Assuming these trends continue, the state may have just about enough money to cover its costs of doing business — such as handling public school enrollment growth and the normal caseload expansion within Idaho’s traditional Medicaid program — but not much else. Don’t forget, the state withdrew more than $30 million from the Public Education Stabilization Fund to pay for an unexpected tide of new enrollment.
So where will it get about $100 million to cover the cost of removing sales taxes from groceries — as every candidate for governor promised in 2018?
Where will the state find $42 million to pay its share of Medicaid expansion?
Where’s the next $100 million installment of education reforms — especially for veteran teachers who did not share in the benefits of the career ladder program?
If the state needs to expand its prison system in response to overcrowded conditions, where will the money come from?
Likewise, where will the state find the more than $27.9 million it costs to extend cost-of-living increases to public employees, including school administrators and classified staff, who are paid through the state’s general fund? Make that $49 million if you include state workers whose compensation comes from dedicated accounts and federal funding.
If you think things are tight now, just wait until the economy slows down. — M.T.
