A new report suggests Idaho stands on sound footing financially, but big spending increases by legislators could impair the state’s ability to quickly deal with financial difficulties.
According to the Mercatus Center, a think tank at George Mason University, Idaho performs better than most states as concerns its finances, and has a comparatively well-run pension system.
The Mercatus study, released Wednesday, ranked Idaho no. 12 for fiscal health among the 50 states and Puerto Rico. The center said Idaho performed well on long-run solvency, or meeting its obligations in the long-term, as well as budget solvency, the state’s ability to pay bills without using debt.
Idaho was rated “average” on cash solvency for the state’s ability to cover short-term expenses. Idaho also scored “average” on trust-fund solvency, a metric that covers pension system management and obligations.
Idaho’s two pension programs -- one for judges and another for most other state and local government workers -- continue to run deficits. Though nothing to cheer about, according to Mercatus, other states’ systems perform much worse.
The Gem State lags the state average on service-level solvency, which, Mercatus scholar Adam Millsap said, reveals the ratio of taxes-to-personal incomes of residents. The report, written by Eileen Norcross, describes this metric as, “how much fiscal ‘slack’ a state has to increase spending should citizens demand more services.”
Millsap told IdahoReporter.com the Gem State boasts a “pretty high level of taxation for the amount of personal income,” but said Idaho’s ranking in this category isn’t “overly concerning.”
Idaho legislators continue to approve budgets that grow faster than the economy, which Millsap said could threaten the state’s ability to respond to constituent demands.
Millsap asserted, “If the [Idaho] budget is growing faster than incomes, that will make it worse.”
In that light, Idaho is heading in the wrong direction. Earlier this year legislators approved a steep 8 percent spending hike, while government analysts predict tax revenues will grow by only about 4.9 percent.
In years prior, Idaho lawmakers have outpaced most other states in growing government spending. Idaho Freedom Foundation Vice President Fred Birnbaum has highlighted this point.
Two weeks ago Birnbaum wrote, “Idaho with its supposedly conservative legislature and conservative budget panel has come out of the recession with bigger spending increases than the 50-state average.”
Millsap warned against such budgeting practices.
“It’s probably not wise and it’s not sustainable,” he said.
Over all, three states that border Idaho -- Utah, Montana and Wyoming -- scored higher than Idaho in the center’s study. The two other bordering states -- Washington and Oregon -- ranked worse.
Alaska grabbed the study’s top spot for fiscal health, thanks in part to its cash-on-hand from natural resource revenues.
Puerto Rico, which may soon come under federal management due to the territory’s debt crisis, ranked last.