As the majority of states face large budget shortfalls this year, Idaho is an exception. Our state is one of the few in the nation that projects a surplus, which means that we will have a bit more revenue coming in than we anticipated (whether we have as much revenue as we need can be debated).
At the Idaho Center for Fiscal Policy, we value common-sense, responsible fiscal policy that plans for the future. While we enjoy this enviable surplus, state leaders should also pay attention to changes on the horizon. Several developments tell us that now is the time to uphold our commitment to prudent tax and budget policy, especially if we want to maintain investments in education and other public services.
Looming federal cuts could affect our state budget. If the budget passed by the Republican-controlled House last year is an indication of what is to come, our state budget could be expected to stretch further. Take transportation: Idaho could be forced to shoulder more of the load when it comes to maintaining and repairing roads.
Federal block grants could shift costs to states. Congress is considering changes to financing for poverty-reduction programs such as Medicaid. “Block grant” schemes allow states more flexibility but also cut the financial support we receive over time. Under a new structure the state could have to pick up more costs and/or cut care for pregnant women, seniors and Idahoans with disabilities.
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State health care costs could rise. State costs for uncompensated care declined substantially when thousands of Idahoans became eligible for tax credits to purchase health insurance. Repeal of the Affordable Care Act — without a comparable replacement — would reverse this trend. Newly uninsured Idahoans would increase costs to our state’s Catastrophic Health Fund by $20 million annually.
The next recession could be around the corner. Our nation is in the fourth-longest period of economic growth on record. Recently these periods have lasted an average of eight years, with the last period beginning in 2009. We should expect and plan for the next recession, which will strain our budget as revenues decrease suddenly and dramatically.
The good news is that Idahoans are generally content with our tax and budget system, although many would like to see increases in public investments. Boise State University’s polling last December revealed high levels of satisfaction. Most Idahoans (65 percent) believe taxes in Idaho are about right. When asked how to direct the budget surplus, 46 percent said it should go to fund public education, 24 percent said the rainy day fund, and 17 percent wanted improvements to roads and bridges. Only 9 percent thought it should be the basis for tax cuts.
Lawmakers are always faced with multiple priorities and urgent challenges. This push-and-pull is nothing new. The long-term stability of state finances — in good times and bad — should be a key consideration in tax policy decisions.
Lauren Necochea is the director of the Idaho Center for Fiscal Policy.