Idaho Democratic candidate for governor, Keith Allred, said in a prepared statement that the lower-than-expected early tax revenue numbers for April show that Idaho’s economy has suffered in the past year, but that good sales tax revenues show things are turning around. Gov. Butch Otter made a similar assessment of the tax figures Monday, but Allred said that turnaround shows that the governor and lawmakers made unnecessary reductions in the next state budget, which begins in July.
Allred said the April sales tax numbers, which were $2.6 million above expectations, are a better indicator of the state economy than the overall tax numbers, which were $55.5 million below expectations. “Viewing policy decisions for next year based on last year's income tax returns is like trying to drive by looking in the rearview mirror,” Allred said. “In contrast, the ongoing trend of higher-than-expected sales tax revenue tells us that we need a major course correction.”
Allred and other Democrats have criticized the governor and the Republican-controlled Legislature’s budget setting, which used tax revenue totals before projections from Idaho state economist Mike Ferguson and other analysts, including the Associate Taxpayers of Idaho and public university economists. Lawmakers set the current budget at $2.28 billion in revenue, and the next budget increases slightly to $2.29 billion in revenue. After setting the revenue target, lawmakers then wrote the next state budget, which included spending reductions for public schools and most state agencies.
Allred maintained that next year’s budget target is still too low. “Unfortunately, it's Idaho's school kids who will bear the brunt of this mistake,” he said. “Because of Otter's irrational pessimism, we cut funding for educating our kids for the first time in Idaho history.”
The governor has said that he didn’t want to reduce funding for public schools, but that he supported lawmakers’ budgets for the current and next fiscal year. The current shortfall in state tax revenues expanded with the early April numbers to $13 million below the budget target lawmakers set. If that gap holds, the governor has authority to spend from three reserve funds, the Budget Stabilization Fund, Economic Recovery Reserve Fund, and Permanent Building Fund, to balance the current budget. All the money in the Budget Stabilization Fund and Economic Recovery Reserve Fund is planned on being spent in the next state budget, so any shortfalls in the current budget would cause more spending reductions in the next budget.
