State Politics

As economic slowdown looms, Gov. Little tightens reins on state spending, spares education

In September, state agencies submitted their 2021 budget requests totaling about $4 billion.

But there’s a problem.

As currently proposed, supplemental budget requests for this year, budget requests for next year and other statutory expenses and transfers exceed revenue projections by about $58 million to $90 million. That’s according to Paul Headlee, a budget and policy manager with Legislative Services who spoke before legislative leaders during a meeting Friday at the Capitol.

This news has not caught the governor, lawmakers or budget analysts off-guard.

Following President Donald Trump’s tax restructuring last year and Idaho’s subsequent concurrence with those changes, state officials were concerned about unknown effects on state tax collections. Each year, revenue forecasts are built on previous years’ tax collections. This past year, though, brought some major swings in Idaho corporate and individual tax collections as taxpayers and collectors adjusted to the changes. But now that they have almost a full year of tax-collection data under the new structure, forecasters say they are better prepared to make forecasts for next year.

Since taking office in January, Gov. Brad Little has been keeping tabs on this year’s state tax collection revenue and forecasts. When he does not like what he sees, he lets agency heads know.

In April, he sent a memo to all agencies cautioning them to be mindful of spending.

In August, he sent a second memo, forewarning of possible cuts.

On Oct. 29, Little sent a third memo calling for a “spending reset” and ordering the budget cuts he earlier forewarned.

“The goal is to better align state spending growth with anticipated state revenue growth in the coming years, to ensure the state fulfills its Constitutional requirement for a balanced budget,” the memo states.

Specifically, each agency’s general fund budget will include a 1% rescission to the 2020 budget and a 2% base reduction to the 2021 budget. Idaho’s fiscal year runs July 1 to June 30.

These cuts do not apply to K-12 education.

“Governor Little’s #1 priority is education,” states the memo sent by Little’s Chief of Staff Zach Hauge. “He has said it is our moral and Constitutional obligation to ensure Idaho students are prepared for a lifetime of learning and eventual careers. Governor Little’s executive budget recommendation not only leaves K-12 schools harmless, but is guaranteed to include continued investments.”

Little’s earlier messages to watch costs appears to have already been received by state agencies.

Last year, agencies submitted budget requests, including 400 new line items and $25 million in one-time replacement costs. In their 2021 budget requests, agencies submitted 222 new line items and just $825,300 in replacement items.

“I believe the governor’s memos have had the intended effect to caution the agencies, to direct the agencies, to really only request those items that are necessary,” Headlee told lawmakers.

Now that all state agencies have submitted their 2021 budget requests, Little will prepare his own budget request, which he will present on Jan. 6 during his State of the State address. The next day, the 105-member Legislature convenes, and it will spend the next couple of months tweaking and finessing that budget to ensure it balances. The Idaho Legislature does not have a choice; it is constitutionally required to pass a balanced budget.

Headlee told Legislative Council members the next three months “will bring more clarity.”

“We will have the governor’s recommendation. We will have three more months of revenue. We will have a new revised forecast. So things will become a little clearer,” he said.

Headlee also gave the council an update on the state’s reserve — or rainy day — funds.

As of October, budget stabilization, the main reserve fund, totaled $373.4 million.

“That is 10% (of previous year’s revenue) so that is at the statutory cap at this point,” Headlee said.

The public education stabilization fund, at about $62 million, and several other smaller funds bring total reserve funds to $486.2 million, which is 13% of the previous year’s revenue collections, Headlee said.

Top of mind for House Speaker Scott Bedke, R-Oakley, is replacing the $31.5 million lawmakers pulled out of public education reserve funds last year to meet education needs.

“I hope everyone within the sound of my voice that sets budgets puts that money back in there,” Bedke said..

Redistricting in Idaho on the horizon

Redistricting, where new congressional and legislative districts are redrawn based on population, is set for 2021.

The Legislative Council on Friday approved a $444,900 budget request from Legislative Services Office to get the ball rolling on the process, which takes place every 10 years following the U.S. Census. The money will be used to buy new mapping software, create a website, pay redistricting commissioners and temporary staff and provide national training for staff.

The U.S. Census Bureau should provide Idaho with its 2020 Census information by April 1, 2021, Legislative Services Budget and Policy Deputy Manager Keith Bybee told the council. In June 2021, the secretary of state will issue an order to create a redistricting commission, an independent body comprising three Republicans and three Democrats.

The redistricting commission then has 90 days to come up with a plan. Bybee said their work should be wrapped up by September 2021, barring any legal challenges.

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Idaho Statesman investigative reporter Cynthia Sewell was named Idaho Press Club reporter of the year in 2017 and 2008. A University of Oregon graduate, she joined the Statesman in 2005. Her family has lived in Idaho since the mid-1800s.
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