Despite the volatile stock market and fears of a recession, industry representatives told the Idaho Legislature’s Economic Outlook and Revenue Assessment Committee (EORAC) that jobs and revenue outlook for their respective sectors was good, though the rate of growth might slow.
“I just don’t see a recession in the next few years,” said Derek Santos, chief economist for the Division of Financial Management, during the Jan. 3 meeting. He added that he thinks the economy might slow.
“Main Street optimism is at a historic high,” Suzanne Budge, Idaho state director for the National Federation of Independent Business, told the committee.
The bipartisan, bicameral EORAC meets before the legislative session officially starts to hear from industry representatives and recommends what they believe the total state budget should be for fiscal year 2020, 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.
EORAC has a tougher decision than usual to make this year because personal income tax receipts – though not corporate or sales tax receipts – have been down for several months. It’s believed to be an artifact of under-withholding after last year’s tax cut, Ken Roberts, chairman of the Idaho Tax Commission, told the committee, but that won’t be definite until individuals file tax returns in April, long after EORAC has made its decision and likely after the Legislature adjourns for the session.
“It’s a cash flow issue, and it will true up by the end of the year,” he predicted. Santos concurred.
In addition, if many people owe money to the state, they might end up on payment plans, which could push that revenue into the next fiscal year, Roberts said. The Tax Commission projects a 5.27 percent increase in general funds for fiscal year 2020.
Other groups forecast similar numbers. The Associated Taxpayers of Idaho project 6 percent growth for 2020, Miguel Legarreta, president of the Boise-based nonprofit, said. Idaho universities project a 6.9 percent increase in general fund revenues for 2020, said Don Holley, emeritus faculty, economics, of Boise State University.
Credit unions also show growth in most areas, said Ryan Fitzgerald, vice president of legislative affairs for Idaho at the Northwest Credit Union Association. Retailers in most areas are expecting increases of 3 to 4 percent, with some up to 5 percent, said Pam Eaton, president and CEO of the Idaho Association of Retailers. In fact, retail revenue would be growing more quickly except the low unemployment rate makes it harder for businesses to find good workers, she said.
Robert Spendlove, senior vice president and economic and public policy officer for Zions Bank, was less sanguine, noting that while the most recent national jobs growth rate was much higher than expected, that level of growth was not sustainable. In addition, while spending was up, he noted that spending was similarly up in 2007, just before the previous recession.
“My recommendation is the same to everyone: Save more, spend less, and get out of debt,” he said.
Ultimately, EORAC could choose a lower rate of growth to avoid the possibility of having to cut budgets later in the year. On the other hand, if personal income tax receipts catch up, that could mean a large budget surplus, as well as cuts to agency budgets that wouldn’t have had to be made.
Right now, the Legislature has a “surplus eliminator” that sends some surplus to rainy-day accounts and some to pay for transportation maintenance. The transportation surplus eliminator is scheduled to expire this year, though the current Legislature could vote to extend it.
Alternatively, because the state does have rainy-day accounts, legislators could choose to borrow money from them until personal income tax receipts catch up, and then pay them back using a surplus eliminator, said EORAC member Sen. Grant Burgoyne, D-Boise.
EORAC is scheduled to make its decision on Jan. 10, and JFAC then decides on the final figure soon after that.