Gov. Otter warns against fiscal recklessness as Idaho waits for its stimulus money

WASHINGTON - One of the first decisions Idaho Gov. Butch Otter had to make about spending Idaho's share of the economic stimulus money came just four days after President Barack Obama signed the $787 billion bill into law.

On Friday, Otter agreed to increase unemployment benefits in Idaho by $25 a week - even though some other Republican governors, such as Bobby Jindal of Louisiana and Haley Barbour of Mississippi, have decided to turn down that portion of the federal stimulus money.

They'll take the money in Idaho, Otter said, but with their eyes wide open.

Everyone collecting unemployment also will receive a cautionary letter in the mail. The $100 monthly increase is a temporary one, the letter warns, and will end in November when the extra federal money runs out.

"My direction to them is: I want you to know from the get-go, that this isn't going to last forever," Otter said Sunday, during an interview at the winter meeting of the National Governors Association in Washington, D.C. "I have an obligation, that when I do take it, to remind everyone who becomes a benefactor of that, that it's temporary."

The letter reflects perfectly Otter's own wary approach to the stimulus. With heavy job losses and a declining economy, Idaho needs the money right now. But he also said he knows that in two years, Idaho will have to figure out how to do without a one-time cash infusion worth about 30 percent of the state's annual budget.

Otter said his own "quick and dirty" estimates show that about $650 million of the estimated $1 billion the state is expected to receive will be money the state might have to find a way to cover on its own, down the road.

If all that federal money is added to the state budget and the national and state economies fail to recover, Otter said, two years from now, Idaho would face staggering sales and income tax increases to meet the current spending levels - which are propped up now by the federal money from the stimulus package.

"You're going to add expectations, you're going to add constituents that want that service or education program, or whatever it might be," Otter said.

"The most important job I think political leadership has today is to not oversell, to not create expectations that can't possibly be met," he added. "Our responsibility is, No. 1, to be very, very careful about how we infuse $1 billion into our economic structure."

He points to the effect the economic downturn had on Idaho's education budget, which faced $62 million in proposed cuts. Now, state education superintendent Tom Luna has millions of federal money coming in for school construction and operating expenses.

"When you take a look at it, he's got over $300 million to fill a $62 million hole," Otter said. "That's problematic. And that's dangerous. The reason that's dangerous is in unguarded times, when you say, 'Oh, let's expand this program, and let's expand that program."

Already, Otter said, he's seen the consequences in other areas of state spending.

He has spoken to some lawmakers who are reluctant to support his state transportation plan because they see the $203 million in federal money Idaho will receive for transportation infrastructure as replacing his proposed fee and gas tax hike.

But the federal money they're getting won't pay for the $240 million maintenance backlog or the annual unmet expenses taking care of the state's infrastructure, Otter said.

The federal stimulus money only will pay for new construction or the replacement of old, deteriorating bridges and roads.

"In some ways it's disappointing," Otter said. "Those people who are now saying, 'Well, now we don't need to raise this gasoline tax, and now we don't need this registration fee, because we now have this stimulus money,' they would no more do that in their household if one of their favorite uncles died and left them a little bit of money. They would no more shirk their personal responsibilities for their ongoing necessities in that household than they should at the state level."

Otter said Sunday that he is "hopeful" Idaho also would see job creation because of the stimulus.

Any of the state's residents who are out of work and want a job "should be of concern to us," Otter said.

But he also said he was "suspicious" of the overall proposal. The Obama administration hopes that spending in the stimulus package will save or create 3 million to 4 million jobs.

Otter said he's not optimistic the state will soon return to the 3 to 4 percent annual growth rates seen before the recession.

"I think there's parts of the stimulus package that are going to do exactly what was intended as far as putting people back to work, or saving jobs," Otter said.

He specifically pointed to infrastructure spending.

"I'd hate to spend a billion dollars and not do any good."