Legislative committee recommends lower budget figure than governor’s

While the Economic Outlook and Revenue Assessment Committee concurred with Gov. Brad Little on his revenue assessment for the current fiscal year, it cut $23 million from his estimate for next year, citing concerns of a possible recession.

The committee respected the governor’s recommendation, but wanted to err on the side of caution due to uncertainty in the coming year, said Sen. C. Scott Grow, R-Eagle, during the Jan. 9 meeting at the Idaho Statehouse.

The bipartisan, bicameral EORAC meets before the legislative session officially starts to hear from industry representatives and recommends what it believes the total state budget figure should be for fiscal year 2021, which starts July 1. The Joint Finance-Appropriations Committee (JFAC) then finalizes the number, which is often but not always the same as the EORAC recommendation.

Some members of the committee appeared to be influence by a new method the governor’s office used this year, which included not only a baseline prediction, with a 55% probability, but also a “pessimistic” prediction, with a 35% probability, and an “optimistic” prediction, with a 10% probability. Only the pessimistic prediction included the possibility that a recession would start in fiscal year 2021, though it would only last for three quarters and be “very mild” compared with the last decade’s recession, said Derek Santos, chief economist for the Division of Financial Management.

In addition, Santos discussed a “weighted average” of the three predictions, which was lower than the baseline prediction due to the inclusion of the pessimistic prediction.

Several legislators noted that the weighted average number was just $3 million off from the number they proposed. That figure, in turn, was the average the committee members had made based on hearings last week from economists and other financial experts.

Rep. Mark Nye, D-Pocatello, seconded by Sen. Grant Burgoyne, D-Boise, moved to use the governor’s forecast for 2020 of $3.9613 billion. A substitute motion by Rep. Steven Harris, R-Meridian, seconded by Sen.  Dean Mortimer, R-Idaho Falls, proposed $3.9357 billion for fiscal year 2020, but that motion was defeated 11-6. Nye’s original motion passed, 14-3.

Nye then moved to accept the governor’s forecast for 2021 of $4.1486 billion, seconded by Sen. Kelly Anthon, R-Burley. Mortimer made a substitute motion of $4.1255 billion, seconded by committee co-chair Rep. Wendy Horman, R-Idaho Falls. That motion passed, 11-6 on a largely party-line vote. It notably included Anthon, even though he had seconded the original motion with the larger figure.

Some committee members said they were concerned about a possible recession, while others said they were basing their vote on the committee’s work.

“A more conservative approach, even though it’s minor, should be respecting the average, and that’s why I recommended that number,” Horman said.

“None of the testimony indicated a recession in the next fiscal year,” countered Burgoyne, though he agreed that the governor’s recommendation was higher than his. “The risk strikes me as minor. I am comfortable that the governor’s recommendation is sufficiently strong that we should accept the governor’s recommendation.”

Little’s figure included approximately $60 million left over at the end of the year, meaning the Legislature will either have to accept about $37 million left over or will have to cut Little’s recommendations.

If revenues come in higher, or expenses come in lower, the budget will have a surplus. In previous years, the Legislature voted to have a “surplus eliminator,” which put some of the surplus into the state’s rainy-day funds and appropriated some of it toward transportation projects. However, Little said he didn’t want to take that approach this year, in the interests of transparency, and the surplus eliminator sunsetted last year without being continued by the Legislature. Any surplus will remain in the state’s coffers until the next fiscal year, unless the Legislature takes some other action this session.

Last year’s EORAC recommendation was $93 million less than the governor’s figure.