The Idaho Spending Index examines appropriation bills on several fronts to add important context to lawmakers’ discussions as they are considered on the floor of the House and Senate. Among the issues we look at in drawing a conclusion about a budget:
Does the agency requesting these funds serve a proper role of government? Has wasteful or duplicative spending been identified within the agency, and if so, has that spending been eliminated or corrected? Does the budget examine existing spending to look for opportunities to contain spending, e.g., through a base reduction? If there is a maintenance budget, is that maintenance budget appropriate? Are the line items appropriate in type and size, and are they absolutely necessary for serving the public? Does the budget contemplate the addition of new employees or programs? Does the appropriation increase dependency on the federal government?
Our analysis is intended to provide lawmakers and their constituents with a frame of reference for conservative budgeting, by summarizing whether appropriation measures contain items that are sincerely objectionable or sincerely supportable.
This bill does not increase any appropriation, but it is still problematic. This bill allows the Board of Examiners the authority to direct the state controller to transfer up to $140.6 million from the Budget Stabilization Fund to the General Fund. The amount is limited to $140.6 million or what the shortfall is, whichever is less. The Budget Stabilization Fund is projected to have a balance of $413.9 million on June 30, 2019, so this transfer, should it occur, would be up to 34 percent of the entire Budget Stabilization Fund.
The transfer would address a potential revenue shortfall. Fiscal year-to-date March 2019, revenues are $75.8 million below forecast. The notion is that if this shortfall continues, revenues may not be sufficient to cover Fiscal Year 2019 appropriations, leaving a negative ending balance.
The major objection to this bill is that Idaho is enjoying personal income growth of just over 5 percent but the state increased the General Fund appropriation for FY19 by 5.9 percent, plus $108.3 million in 2018 and 2019 General Fund transfers to other funds, plus $46 million in FY19 General Fund supplemental spending and $2.8 million in FY19 reappropriation and carryover spending. It does not make sense to dip into the Budget Stabilization Fund during times of prosperity to sustain spending that is higher than personal income growth.
As of April 4, 2019, based on legislative action, the FY19 estimated ending balance will be a negative $700,000, if the current revenue shortfall (to forecast) is not reversed after the April tax filing.
Should revenues yield a negative projected ending balance, Section 57-814A of Idaho Code already allows for the transfer of up to $18.3 million by the State Board of Examiners, without additional legislative action.
If the $18.3 million is not deemed sufficient in the coming months, rather than giving the Board of Examiners the authority to transfer up to $140.6 million, the governor should call a special session to review ways to reduce spending. The way to address revenue shortfalls is to reduce spending growth, not dip into the Budget Stabilization Fund.