Idaho Republicans face a budget crisis of their own making | Opinion

In 2023, Wes Tharpe, of the Center on Budget and Policy Priorities, issued a warning to states that were flush with cash at the time:

“States face a critical choice: whether to squander current revenues and undercut future ones on tax cuts designed to mostly benefit the wealthy and corporations, or whether to instead learn from the mistakes of the past by reinforcing and strengthening the revenue systems to protect people and communities from immediate harm and to help build broad-based prosperity and equity down the road.”

Idaho Republican legislators mostly chose the former path, cutting taxes and issuing rebates.

The Idaho Legislature has reduced state revenue by a combined $4 billion through a series of five income tax cuts passed since 2021, according to the Idaho Center for Fiscal Policy.

Idahoans in the top 1% of earners — those with an annual income of $738,300 and above — benefited the most from the income tax cuts, receiving an average annual income tax cut of $20,407, the Idaho Capital Sun reported.

So here we are.

Just three years after reporting a $1.4 billion surplus, Idaho is now projected to end the current fiscal year with a deficit of nearly $60 million, according to the state’s Legislative Services Office, with a projected gap in 2027 of over $500 million.

And it could get even worse.

Because Republicans in Washington, D.C., passed a series of tax cuts as part of the “One Big, Beautiful Bill” this year, if legislators in the upcoming session conform with the federal tax structure, Idaho could lose as much as another $300 million in revenue.

So Idaho could go from a $1.4 billion surplus to a $1 billion deficit in just a few short years.

“We weren’t three months into the new fiscal year when even the most optimistic people, the most irrationally exuberant — whatever you want to call them — had to pause and say, ‘The math is not working,’ ” Lt. Gov. Scott Bedke, a Republican, said Dec. 3 at the annual Associated Taxpayers of Idaho conference. “We’ve got some tough sledding ahead.”

He said Idaho lawmakers acted “more like Washington, D.C., than we did Idaho” by approving costly projects and programs before establishing a realistic plan for revenue, according to previous Statesman reporting.

It’s a fair criticism.

For years, Washington lawmakers have spent about a third more than the federal government collects in revenue — and they’ve gotten away with it.

But Idaho lawmakers don’t have the luxury of running up astronomical budget deficits like Congress.

Idaho lawmakers have a constitutional mandate to balance the budget.

So if revenues come in lower, that means lawmakers have to reduce spending by a commensurate amount.

Gov. Brad Little has already ordered holdbacks in some state agency budgets.

To be clear, the state budget has grown considerably over the past five years, from $9 billion to $14 billion, and Little and legislators have socked away more than $1 billion in reserves.

In addition, the state has increased funding for education and infrastructure.

So it perhaps seemed reasonable to also offer tax cuts amid a boon in state revenues.

But the state’s general fund, which is composed of personal income tax, corporate income tax, sales tax and other revenues, dropped from more than $6 billion in 2022 to a little more than $5 billion in 2024 before creeping back but still less than $6 billion in fiscal year 2026, all at a time when Idaho’s population continues to boom.

And just as conservatives complain that once a government program is established, it never goes away; once a tax is cut, it never seems to come back.

Certainly not in Idaho.

And so it would seem the party’s over for Idaho lawmakers, who will come back into session in January with the unenviable task of cutting budgets.

And the cuts they make likely will disproportionately affect those who need government services the most.

The Idaho Freedom Foundation is already licking its chops by suggesting $1.9 billion in cuts to Medicaid expansion, the Department of Health and Welfare and public education — but not private school vouchers, according to the Idaho Capital Sun.

When legislators start having to make hard decisions, they’ll likely regret the decisions they made to cut taxes so deeply.

They’re going to miss at least some of that $4 billion they kissed goodbye.

As Bedke, a rancher by trade, likes to say: “It won’t be the bad years that put you out of business; it’s what you did in the good years that sets you up for failure or success.”

This is what failure looks like.

Statesman editorials are the opinion of the Idaho Statesman’s editorial board. Board members are opinion editor Scott McIntosh, opinion writer Bryan Clark, editor Chadd Cripe, assistant editor Jim Keyser and community members John Hess, Debbie McCormick and Julie Yamamoto.