The Legislature's budget chief says Idaho's grave financial picture may require major reforms in state programs, including additional austerity measures and possible fee increases at universities and state parks.

Cathy Holland-Smith, the legislative budget director, told legislators Wednesday that she's heard suggestions lawmakers unearth "skeletons" to help make up a projected $151 million budget shortfall and meet the Idaho Constitution's demand for a balanced budget.

"I've been to the graveyard; it's empty," Holland-Smith told the Senate and House Joint Finance-Appropriations Committee.

The recession has driven state unemployment to nearly 10 percent. Fiscal year 2009 tax revenue declined more than 15 percent from 2008 to just $2.46 billion. Revenue is expected to fall an additional 3.6 percent in the year that began July 1.

This summer, universities and colleges, the Department of Health and Welfare and prisons announced additional cuts to meet Gov. Butch Otter's budget-cutting demands. That's on top of cost-saving measures including layoffs, furloughs and pay cuts they have undertaken since mid-2008.

Otter plans to tap a rainy-day fund to protect public schools from the latest decline. A $13 million state settlement announced Tuesday with drug company Eli Lilly and Co. will help; half will go to Idaho's general fund.

But there's still a $40 million shortfall to make up. And that could grow: There's a $13 million shortfall in the Medicaid program for the poor and disabled, plus an $8 million request to help shore up a state fund that helps counties pay for medical costs for indigent people.

Holland-Smith said one option is to delay the third year of an expansion of the state income-tax credit for groceries to save $15.5 million. The state could also take steps to ensure agencies aren't using temporary hires to get around employment caps.

"Now is the time for major changes and reform," Holland-Smith said. "We just don't have time for nibbling around the edges."

In 2003, state tax revenues plunged 14 percent amid an income tax cut and economic slump. The solution then was Gov. Dirk Kempthorne's temporary one-penny sales-tax increase that expired in 2005. The Legislature later raised the sales tax to 6 cents permanently to help pay for school maintenance and to cut property taxes.

Sen. Dean Cameron, co-chairman of JFAC, the budget writing committee, said there's no appetite for another tax increase, especially among House members. Earlier this year, the House rejected a push to raise gas taxes and vehicle registration fees.

With so few options, the Rupert Republican is blunt about the task of making ends meet after lawmakers convene in January.

"It's going to be horrible," he said.

MEDICAID: A DIRE OUTLOOK

The federal government's enhanced Medicaid match, a 2009 stimulus-act provision that reduced Idaho's share to just 21 percent, is due to expire come the middle of the next fiscal year. If that happens, states like Idaho fear they won't have the money to maintain the program.

If the state share were restored to about 75 percent, Idaho could have to trim Medicaid by $387 million - more than a fifth of the program.

"That is going to be extremely painful," Health and Welfare Director Dick Armstrong said.

THE STIMULUS: GOOD RIDDANCE?

Wednesday's meeting gave conservative lawmakers a chance to vent at the federal government, in particular the more than $1 billion the state is getting from the stimulus. It's gone to shore up holes in public education, fund about $200 million in road projects and help reduce Idaho's share of Medicaid.

Rep. Fred Wood, R-Burley, contended the state would have been better off without the extra cash. He's among people who say the infusion added to the federal deficit and merely caused states to delay confronting tough budget questions.

"It shouldn't have been there in the first place," Wood said.

Holland-Smith said the 2011 budget is being based on the likelihood the stimulus won't continue.

She said "all that money has been removed" as her office crafts the budget for the year starting next July.

Idaho Statesman reporter Dan Popkey contributed.