All eyes were on Congress over the past week as, yet again, at the 11th hour, Congress funded the federal government for several months and averted a shutdown. It’s a good thing Idaho doesn’t approach appropriations bills this way and that we have a drama-free budget every year.
Or is it?
As U.S. Representative Chip Roy thundered, “I am absolutely sickened by a party that campaigns on fiscal responsibility and has the temerity to go forward to the American people and say you think this is fiscally responsible. It is absolutely ridiculous.”
You see, while Idaho avoids the D.C. drama, our state spending still grows just as federal spending grows in D.C.
Let’s review some data.
The graphic below shows Idaho state spending growth, including General and Dedicated funds, over the past five years. Keep in mind: federal dollars are not included in these numbers!
What we see is that state spending, excluding federal dollars, has increased 53% over five years at a compound annual growth rate (CAGR) of 8.8%.
Now let’s look at the federal dollars (all federal spending, not just federal dollars for Idaho) for the last five years — note that a one-year offset is used because of differences in fiscal years and the fact that COVID spending first washed through the federal government before hitting the states.
What we see is that federal spending is up 56%, and the CAGR is 9.3%. This means that Idaho is growing spending virtually as fast as the profligate federal government. Who would have thought this?
Yes, it is true that Idaho balances its budget, and the federal government does not. But as we have pointed out before, Idaho balances its budget on the back of borrowed federal funds. For example, Idaho could not operate the Medicaid program without federal funding, i.e., debt-financed spending.
Back to the D.C. drama on the continuing resolution. 34 House Republicans voted no on the final resolution because it added about $110 billion to the debt, which was on top of the $200 billion added due to the Social Security Fairness Act. So, since winning in November, Republicans have continued the Biden spending and added over $300 billion in debt. A tip of the hat to Representative Russ Fulcher for voting no on these increases. The lesson for Idaho is that merely voting along the party line — or with a majority, in the case of Idaho — won’t get us back to limited government.
Idaho is at a fiscal crossroads. After growing state spending by over 50% over the past five years, is it possible to return to fiscal restraint? More importantly, how do we define it?
Well, for years, progressives have called for the government to grow at a rate equal to the sum of population changes plus inflation. For the last five years in Idaho, this would have been close to 33%. Remember, this model assumes zero productivity gains in government. The problem is that Idaho has grown state spending about 60% faster than the “progressive” model.
What will work and what won’t work?
Legislative leadership needs to set both state and federal (all funds) spending limits so that overall spending does not grow at all in the coming year, meaning a 0% increase in all funds appropriations from Fiscal Year 2025 to Fiscal Year 2026. Is this reasonable? Absolutely!
Because one-time spending, based on requests from agencies, is projected to decline (39.1%) with the winding down of COVID monies. Therefore, if ongoing spending is held to a 3.5% increase, the overall spending from FY25 to FY26 will be flat — from $13.89 billion to $13.84 billion. This is a plan that would work, but it will require tackling Medicaid’s massive growth and a reduction of the $551 million Medicaid increase request, for starters.
The new budget process should not lull legislators into a false sense of fiscal security. Separating spending into agency maintenance budgets and separate budgets for the enhancements improves the process. However, political will is still required to enforce spending discipline.
What about the Legislature developing an alternative budget to the governor's? The problem is this would require a tremendous amount of resources to develop a line-item budget for every agency. This would push the legislative process beyond three months. Better for the Legislature to set a spending cap, and then the debate would center around which agency gets what monies—an easier debate to manage because the cap is a hard stop.
Finally, the use of Performance Based Budgeting isn’t a guarantee of anything, especially fiscal restraint. It will simply lead to a debate over metrics and the staffing up of the Legislative Services Office as the Legislature and the Executive engage in a lengthy debate over what constitutes success as opposed to simply reducing spending. Let me offer you proof: According to the National Association of State Budget Officers, about 24 states were using performance measures in their budget requests. Among the states are some of the biggest spenders: New Jersey, Connecticut, Illinois, and Minnesota. And the total included more fiscally responsible states like Texas and Florida. The bottom line is the partisan nature of the state matters more than the process.
Idaho is at a crossroads. Which fork in the road will the Legislature choose: the path to fiscal restraint or the continuation of big spending? One of the central reasons we opposed the 22% pay raise for legislators is that we believe that accepting such a raise will make it harder for legislators to restrain state spending — by not leading by example!
The limited government goal for FY26 should be holding overall spending flat to the current fiscal year, FY25; it's that simple!
One more thing: Citizens must start demanding fewer services from government and stop looking to the federal government as Idaho's piggy bank.
When citizens insist on LESS government and fewer frills, legislators will have fewer "customers" and (possibly) consider scaling back.
Wishful thinking? Perhaps. But all citizens must be careful what we wish for.