The Idaho Legislature may face a challenge in setting its budget in January because revenues for the fiscal year are currently falling below projections and experts aren’t sure why.
For the 2019 fiscal year, year-to-date collections have come in about $12.7 million less than anticipated. Since July 1, $568.3 million in revenue has been received, less than the projected $581 million, the Idaho State Division of Financial Management (DFM) said in a report issued Sept. 10. All of the shortfall is due to lower individual income tax revenue, wrote Jani Revier, Gov. C.L. “Butch” Otter’s budget chief, in the report – $17.8 million in July and $24.5 million in August.
While this could presage a downturn, Rep. Mike Moyle, R-Star, House majority leader, said he wasn’t concerned because the state was only two months into the fiscal year, and it is still over projections, he told the Southwest Idaho Legislative Business Summit on Sept. 19.
DFM said the shortfall could be attributed to either an Idaho tax change signed into law earlier this year by the governor that reduced individual state income tax rates, or Idahoans receiving pay that is “under-withheld” under the new federal tax law. According to a report released in July by the federal Government Accountability Office, roughly 30 million workers received pay that was “under-withheld.” If that is the case, then the revenues will be made up by April as people fill out their tax forms, learn that they were under-withheld, and make up the difference.
“Under this scenario, individual income taxes would be postponed but not lost,” Revier wrote. “Lower-than-expected monthly withholding payments would then be offset by higher-than-expected filing payments and lower-than-anticipated refunds in the spring of 2019 when taxpayers file their 2018 Idaho tax returns.”
The problem with that scenario is that the Legislature’s Economic Outlook and Revenue Assessment Committee has to decide in January on its revenue target for the 2020 fiscal year, which starts on July 1. And if they don’t know whether the revenues will catch up in April, they will likely play it safe by choosing a lower figure. That could mean budget cuts for the following year – and tough decisions for the newly elected governor and legislators.
It wouldn’t be the first time, said Otter, who will be governor until the candidate elected in November takes office on Jan. 7. When he took office in 2007, Idaho had a $3.2 billion budget ready to go, and he had to cut it based on economic conditions at the time, he said. While he is creating a budget now on the usual schedule for release in January, whoever takes over as governor will be able to modify it, he said.
In such a case, newly elected legislators and newly appointed committee chairs would have a lot of work to do. Up to 30 percent of legislative seats could turn over in the election, Sen. Maryanne Jordan, D-Boise, said at the panel. In addition, a number of committee chairs are likely to change due to retirements and primary losses. In particular, both the Senate and House chairmanships of the Joint Finance-Appropriations Committee, which handles the budget, will be open.
The gubernatorial candidates are Republican Lt. Gov. Brad Little and Democrat Rep. Paulette Jordan.