Otter orders 1 percent holdback on state spending 

Gov. C.L. “Butch” Otter signed an executive order this afternoon that orders state agencies to reduce their spending immediately by 1 percent, in response to a significant revenue shortfall projection just a few months into the new fiscal year.

The governor additionally instructed state agency directors and administrators to set aside 1.5 percent of their budgets to be held in reserve in case further cutbacks become necessary, he said at a press conference in the Borah post office building today.

The holdback means that state spending will be reduced by $27.2 million, though $14 million in public school spending will be covered by the state’s $118 million public education stabilization fund.

Otter said he had decided not to turn to the state’s “rainy day” budget stabilization fund, which has $140.6 million in it, or economic recovery fund, which holds $118 million, because it’s still unclear what the national economy will look like months from now. He said he wouldn’t dip into those funds until “we get to the point where we have to get to cutting essential services.”

“We’re doing the same thing every household in Idaho has to do when they have a revenue shortfall,” he said. “They don’t run to their savings immediately.”

Otter’s decision to order a holdback is a response to an August revenue outlook by the state Division of Financial Management that projected revenue this fiscal year will be $174 million, or 6 percent, lower than expected, shrinking from $2.94 billion to $2.77 billion.

“What we’ve seen is a tremendous amount of turmoil in the financial markets,” said state economist Mike Ferguson. “Given the economy, things are moving much more rapidly than they normally do.”

Otter would not provide any details on the impact of the spending cuts other than to say they won’t affect essential state services and that they may eliminate pay raises for some state workers, including money set aside for bonuses to reward good performance.

The three agencies and departments that could feel the largest effects are the Department of Health and Welfare, which must cut $5.4 million, the state colleges and universities, which have to forego $2.7 million, and the Department of Correction, which will lose $1 million.

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