Imagine a husband driving home from work and depositing his regular $2,000 paycheck in the bank. The teller says, “What account?”
The husband says, “Put $1,500 into checking and $500 into my fix-the-roof account.”
When his wife asks about the bank report, does the husband honestly say his income is down $500, or does he say his income is the same but he’s transferring some of it to a safe account so he can fix the roof? The honest and right answer is the latter; income didn’t change, but his use of it did.
That’s not how revenue reporting takes place in Idaho. Unfortunately, the transfer process is increasingly being used to spend money. That’s why, in reviewing the latest revenue report for the state, it looks like sales tax collections are down by 24% compared to last year. But in reality, they are flat compared to last year’s tax collections. Don’t be alarmed by exaggerated “tax shortfalls” or “drops in revenue” — It just isn’t so.
Here are the details from Idaho’s budget reports:
For the first five months of Fiscal Year 2024 (FY24), which started on July 1, Idaho's General Fund revenues are down (13.8%) compared to the same period last year. Time for alarm bells, Not quite. The General Fund Revenue Report (GFRR) shows us that on page 2. For the same time period, revenues are down (5%) from the forecast, which is simply a prediction.
But the complete picture is quite a bit more complicated, and it demonstrates that revenues are sufficiently robust for additional tax relief.
You see, when you are comparing the actual revenue changes year over year to understand changes in the underlying economy, you have to examine page 21 of the Economic Outlook and Revenue Assessment Committee’s (EORAC) information packet to get the whole picture. On that page, if you compare FY23 to FY24 for sales tax collections and distributions, you see some big changes for FY24. Namely, $410 million is bled off for education-related transfers and $117.8 million for property tax relief.
So, what is the year-over-year revenue change? It is down 2% on an equivalent basis.
How so?
When you review page 1 of the GFRR , it notes that House Bills 1 and 292 transferred $253 million off of the top from the sales taxes (for public schools, in-demand careers, and property tax relief). These transfers did not occur in 2023. So, to get to a clean comparison you have to add them back. For the year-to-date period through November of last year, the revenues to the General Fund were $2.151 billion. As reported for the same period this year, the amount of revenue is $1.854 billion. But when you add back the $253 million, you get the proper total of $2.107 billion. The decrease from $2.151 billion to $2.107 billion is just 2%.
Now, some will say all of this does not matter because the Legislature has less money to appropriate in any case. That is not entirely correct either. Because as the EORAC information packet shows us on page 21, $410 million of the transfers are not leaving the revenue stream; like money for property tax relief or local roads. Rather they are pre-appropriations, money earmarked for spending on public schools and “in-demand careers,” replacing revenue that would otherwise come from the General Fund bucket.
All this is to say that revenue and budget gimmicks make it harder for legislators to understand the true budget picture. And the governor’s call to utilize sales tax funds to bond for school and transportation infrastructure will further muddle the picture.
