State budget: Plenty for business people to watch 

“Chef Lou” is almost as comfortable talking about Ida­ho’s budget as he is great food.

Lou Aaron, active in leadership with the National Federation of Independent Business Idaho chapter, has been talking about the state budget just about every day lately. The Boise chef and drive-in owner brings it up in conversations with vendors, customers, friends and board volunteers.

When he asks a specific question about the Idaho budget, 9 out of 10 people don’t know the answer or give canned, hearsay responses, he said.

“The thing that frustrates me most is people don’t follow our state budget,” Aaron said. “They are well-intentioned but not well-informed. I like to engage in conversations about it.”

Idaho’s budget debate, revisited the first few months of each year when the Legislature convenes, affects businesses in many ways. Some owners and managers focus on different aspects.

“It directly affects my business, and how my business operates,” Aaron said.

One aspect is unemployment insurance tax, which went up three-fold in 18 months and forced him to raise prices, he said. He wonders where the state unemployment fund’s fairly recent surplus went, and if officials could have planned differently.

Idaho posts online budget information dating back decades. He urges business people and consumers to pay closer attention to the state’s fiscal past and present.

“If we did that, it would open peoples’ eyes and get things moving a lot quicker, and in the right direction,” Aaron said.

Another aspect is education spending, which can benefit businesses by developing workers but takes a much larger portion of the Idaho budget than many people realize, he said. State spending on education increased by a larger percentage than student population over the most recent decade, he said.

Mike Ferguson, retired former budget director for Idaho Gov. C.L. “Butch” Otter, said K-12 and higher education spending accounts for about two-thirds of the state’s general fund budget.

Aaron said many people don’t understand personal property tax that counties collect on business equipment. Restaurants can have high personal property tax because many have expensive equipment and fixtures, he said.

The Idaho Legislature in 2008 granted relief triggered by a state revenue threshold, which was never met as the economy sank.

Idaho Association of Commerce and Industry President Alex LaBeau said there is plenty worth following, from the business person’s viewpoint, in the legislative budget process. Education and transportation take large portions of the budget and are important to commerce – producing trained workers and getting them to and from work, he said. Budget and policy moves related to workers’ compensation and unemployment insurance also are important, he said.

“In order to have government, you have to have some sort of funding source,” he said. “The issue is always what is an appropriate level of taxation and what size government should be. There is always the debate on how much we should be spending and where those revenues should come from.”

Business site selectors look into a state’s budget practices and situation in deciding where to move or expand a facility, Boise Valley Economic Partnership Executive Director Clark Krause said.

“Inevitably, it will affect them,” he said. A state’s budget situation will affect the new enterprise’s employees as well as its long-term return on investment and bottom line.

“I’ve never walked into a meeting with a small, medium-sized or large company, or a consultant that did not ask what does it look like,” Krause said.

Idaho and most states now struggle with budget shortfalls – Idaho’s is a reported $185 million – but Idaho has an advantage in the way its Legislature must set the budget, he said.

“One of the good things about the Idaho model is they can’t spend more than they’ve got,” Krause said. “That’s a good way to run a business and a good way to run a state.”

Businesses like incentives for their long-term investment, but they also like stability, he said.

“It’s not, ‘Give me a bunch of breaks you can’t support in the long term,” Krause said.

Otter takes a limited-government stance.

“We’ve got to live within the peoples’ means because if we don’t, we over-extend ourselves much like our federal government has,” Otter spokesman Jon Hanian said. Overextending would burden citizens and the businesses that hire them, he said.

“He believes if government is committed to its proper role, our progress will more than offset and pay for the services people indicated they need and want,” Hanian said.

Otter is encouraging businesses to move to Idaho and has supported a bill that would cut income tax rates, in part to spur business growth.

Budget process over decades sheds light

Looking at Idaho’s budget over the decades sheds light on Idaho’s economic cycles even though the state Legislature is conservative in its spending, said Michael Ferguson, the governor’s chief economist from 1984 to September 2010.

“It’s difficult to overstate the importance of business in terms of our economic well-being, but that doesn’t mean we do everything from a standpoint of turning the keys to the kingdom over to the business community,” he said. “You have to have intelligent public policy to balance the interest of business on one hand with those things provided by the public sector on the other.”

The recession and high interest rates of the early 1980s hit Idaho hard because the state relied on many resource-based, capital-intensive industries, Ferguson said. By the late 1980s, the technology sector contributed largely to the growth that got Idaho through the early 1990s recession with only a slight downturn.

Idaho consistently grew faster than most states through the 1990s, but the early 2000s stock market drop and recession dried up collection of state income tax on capital gains, he said. Homes replaced stocks as the favored investment, powering a jump in consumer spending and contributing to an economic rise and fall seen earlier, longer and more acutely than much of the U.S., he said.

The peak was higher in Idaho in part because Albertsons brought many of its grocery suppliers to Boise, before the company put itself up for sale, and because Tamarack Resort home sales boomed, he said. The fall was made worse by downturns in lumber and high-technology manufacturing along with the housing plunge and Tamarack failure, he said.

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