Lawmakers create exit strategy to fend off budget shortfall

Lawmakers create exit strategy to fend off budget shortfall

by
Idaho Freedom Foundation staff
March 25, 2010
Idaho Freedom Foundation staff
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March 25, 2010

Idaho lawmakers say low tax revenues could lead to a $45 million hole in the current state budget, and have set up a contingency plan to cover that shortfall.  The Joint Finance-Appropriations Committee (JFAC) Thursday introduced a plan giving Gov. Butch Otter the power to be frugal in spending state money, and to draw down three reserve funds that could fill a deficit of up to $107 million.

“This is the worst case scenario,” said Rep. Maxine Bell, R-Jerome, one of the chairs of JFAC.

“We have to consider what tools we can give the governor as we go into the year’s end,” said Cathy Holland-Smith, the chief budget analyst for JFAC.  “There’s only so much money in the pot.”

State tax revenues are on pace to be down 9.5 percent from last year, but the $2.28 billion total that lawmakers are budgeting to is only a 7.5 percent decrease.  If that gap holds, the governor would be allowed to spend down from the Budget Stabilization Fund, Economic Recovery Reserve Fund, and Permanent Building Fund to make up the difference.  JFAC is also telling the governor to keep track of spending by state agencies for products or services that haven’t been received.  Agencies would be discouraged from paying for something in June, which is in the current budget year, if they don’t expect to need it until July, which is in the next budget year.

Holland-Smith said the exit plan for lawmakers is crucial.  “The alternatives if the revenues are seemingly disappointing in April would be to have a special session,” she said.  Holland-Smith said the last few months of the current budget, which ends in June,  will require communication to make sure that state spending matches tax collections.  “It’s going to be quite intense to manage this fiscal process.”

The reserves in the Budget Stabilization Fund and Economic Recovery Reserve Fund are already scheduled to be spent in the next state budget, which starts in July.  If those reserves are spent on the current budget, Bell said she expects the governor to issue another holdback to state agencies to reduce spending, which could last until June 2011.

“I think this is the appropriate step for us at this stage,” said Sen. Dean Cameron, R-Rupert, the other chair of JFAC.  He said there’s some risk in the plan, but that the governor needs some ability to make sure the state doesn’t run a deficit for the current budget.  “This is a contingency plan to give him the tools to act in case April’s (tax) numbers and June’s numbers don’t meet expectations.”

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