Gov. Brad Little recently touted his grade on the libertarian-leaning Cato Institute’s Fiscal Policy Report Card. His score as governor is the fourth highest in the nation — but there is a lot more to the story. The report card is graded based on each governor’s tax and spending records — sort of.
Does Little merit an A grade that only five governors received nationally? We think not.
Little’s ranking on tax policy largely rests on reducing the top tax rates in steps from 6.93% to a 5.8% flat rate over the last several years. Let’s give the Governor his due on pushing income tax relief, but also note that General Fund revenues have increased from $4.03 billion in Fiscal Year 2020 (FY20) to $6.2 billion in FY22, an increase of more than 53% over two years.
Cutting taxes was a no-brainer, though many Idahoans would have preferred property tax relief prioritized over income tax cuts.
But let’s turn to the spending side of the equation. Frankly, we are in an era where nobody ever talks about cutting spending. Now people largely argue about how large increases should be. This is a truism for virtually every public entity everywhere.
It’s a bit of a challenge to compare the fiscal policies of all 50 states because states budget different items in different ways. A true apples-to-apples spending comparison is a bit tricky. The Cato report relied on National Association of State Budget Officer (NASBO) reporting data, and it only reviews 46 states because four governors have only just assumed office.
NASBO collects and reports fiscal data from all 50 states. Through no fault of NASBO or Cato methodology, states classify state spending differently. NASBO does request that states report spending in a format that makes it easier to compare than it would if you simply went to each state’s fiscal website. However, spending that is classified as General Fund spending in one state may not align with spending categories in another state.
NASBO does have an expenditure report that captures all state spending and not just General Fund spending, but there is a two-year data lag for it. The Cato comparison is based on General Fund spending for things like schools, public safety, and the criminal justice system. Schools, however, are also the recipients of dedicated funds.
For example, Idaho’s public schools receive funds from our state endowment land fund. Not all states have this arrangement. These dedicated funds are not counted as General Funds. The Cato comparison also adjusts spending for a state’s population growth so when comparing a fast growing state to a slow growing state, the population growth doesn’t distort the picture.
The bottom line: Idaho’s other state spending has grown much faster than General Fund spending because hundreds of millions of dollars have been transferred from the General Fund to dedicated funds. This makes the growth of the General Fund look smaller by comparison.
When we compare the NASBO data for the top states, Idaho’s General Fund spending growth far surpasses three of the top five rated states. These are annual changes compared to prior years. (Numbers in brackets are decreases.)
FY21 FY22 FY23
Idaho’s increases 6.1% 1.9% 8.1%
Iowa’s increases (.2%) 4.0% .9%
Nebraska’s increases .6% 6.4% 3.3%
New Hampshire (4.9%) (.5%) 2.2%
Arizona 20.5% (3.4%) 8.6%
However, the above figures don’t take into account other spending, such as dedicated state funds and federal funds. Idaho’s all funds actual spending grew 29.1% from FY19 to FY22, or nearly 10% per year, based on the state’s own data.
Since the infusion of federal funds due to Covid, Idaho has added a huge number of supplemental spending bills and increased the actual total expenditures. For example, the increase in actual all funds spending from FY19 to FY20 was 7.3%, but it was 16.9% from FY20 to FY21. The FY22 actual spending increased slightly from FY21, and Idaho has not returned to pre-Covid spending levels and it won’t in FY23 or FY24. It may be that spending has been reset to a new, higher level.
The reality is that with the influx of federal Covid funds, Idaho, along with virtually every other state, is dramatically increasing its spending.