Idaho poised for another record state budget surplus

BOISE (Idaho Capital Sun) – The state of Idaho is swimming in an ocean of cash and poised to post its second consecutive record state budget surplus.

State budget analysts are projecting that the state ended fiscal year 2022 on Thursday with a surplus of about $1.3 billion, Idaho Division of Financial Management Director Alex Adams told the Idaho Capital Sun on Wednesday. State budget officials will likely know the exact figure on about July 20, after the state closes the books and completes year end transfers and bookkeeping work.

Assuming projections hold, a 2022 surplus of $1.3 billion would break the record for the largest state budget surplus in Idaho history, which was set just one year ago when the state ended fiscal year 2021 with a then-record surplus of about $890 million.

“What is important to think about with the $1.3 billion is that is after all the action this year with record tax relief and record investments in transportation and public schools,” Adams said. “After all of that is accounted for, we are still projected to end the year with an approximately $1.3 billion surplus.”

Idaho runs on a fiscal year calendar that runs from July 1 to June 30 every year. That means the 2023 fiscal year starts today, with new 2023 budgets also kicking in for state departments and agencies.

The simple explanation for the record surplus is that state revenues beat projections, Adams said.

The spike in Idaho’s revenue growth over the past couple of years has been breathtaking.

• For fiscal year 2020, the state brought in $4 billion in revenue.
• In fiscal year 2021, revenues surpassed $5 billion for the first time in state history.
• For fiscal year 2022, the budget year that ended Thursday, revenues were projected to surpass $6 billion for the first time in state history, Adams said.

Earlier this year, Gov. Brad Little and the Idaho Legislature spent fiscal year 2021’s previous record surplus on several programs and initiatives during the 2022 legislative session, as Adams alluded to. They spent $600 million on a tax cut package that reduced individual income and corporate tax rates and provided tax rebate checks to Idahoans. They increased funding for public schools by more than $258 million, increased money for raises for teachers, increased funding for Little’s kindergarten through third grade literacy initiative and set aside money to move school employees onto the state’s insurance plan. They paid down state building debt, invested in infrastructure projects and increased the balance of rainy day savings accounts, such as the budget stabilization fund.

Although most of the decisions on what to do with the surplus will be made by the Idaho Legislature and Gov. Brad Little when the 2023 legislative session begins in January, Adams said Little is already developing priorities and state agency directors are beginning to piece together fiscal year 2024 budget requests, which are due Sept. 1.

“(Gov. Little) is already saying he anticipates additional tax relief and additional investments in education and infrastructure,” Adams said.

Even with a record surplus at hand, Idaho officials call for restraint and cautious budgeting

Even though Adams said the state budget is in great shape with another record budget surplus at hand, Adams and an experienced legislator serving on the budget committee are urging caution. The surplus comes, they warned, as Idahoans are struggling to make ends meet as they face record gas prices, inflation that drives up prices, increases in rent and property tax rates and higher interest rates approved by the feds.

“Notwithstanding that large of a year-end surplus, I think we need to be very aware that families are struggling and that is their money,” Rep. Wendy Horman, R-Idaho Falls, said in a telephone interview.

Horman, who does not face an opponent in this year’s general election, will return to Boise for her sixth legislative session in 2023. She is a veteran member of the Joint Finance-Appropriations Committee that sets the state budgets.

When it comes to budgeting, Horman said she has concerns about how much of the budget surplus will be one-time in nature, versus how much may be ongoing. Horman is also monitoring different financial experts and economic forecasts that predict a new economic recession could begin within two years.

“The question is how do we balance the needs of the state against the needs of Idaho families to retain their own dollars to use during these inflationary times?” Horman said. “I think we need to certainly restrain spending at the state level and do everything we can to keep costs down, starting with the cost of a college education and going on to food and fuel and all expenses that families experience.”

For his part, Adams believes a lot of the $1.3 billion surplus will be one-time in nature as opposed to ongoing money available year after year to sustain funding increases.

“It’s still driven, to a large extent, by a lot of one-time factors I know we have talked about before,” Adams said. “There has been a huge infusion of federal funds into the economy that helped boost consumer spending. Inflation is driving prices higher, and with states that have a sales tax (like Idaho), that drives higher sales tax collections.”

“The big question is how much is sustainable?” Adams said.

State of Idaho withholds most of McGeachin’s final paycheck so her budget will balance

While the state is sitting on an unprecedented pile of cash, not every state office ended the year on such a positive note.

As previously reported by the Sun, the state of Idaho withheld most of Lt. Gov. Janice McGeachin’s final paycheck this week to ensure her office did not run a budget deficit. McGeachin has been working without a paid staff, the state is delaying her pay and paused vendor payments for McGeachin’s office. That’s because McGeachin was ordered by a district judge to pay the Idaho Press Club’s legal fees after a judge found that McGeachin illegally withheld public records related to her 2021 education task force, which the Idaho Press Club filed a lawsuit to obtain. A district judge ordered McGeachin to release the public records and pay the Idaho Press Club $28,973.84, which was going to cause McGeachin to run a budget deficit unless she cut expenses and the state stepped in. McGeachin originally wanted Idaho taxpayers to pick up the tab for the $28,973.84, but the Joint Finance-Appropriations Committee never acted on McGeachin’s $29,000 supplemental funding request.

State records obtained by the Sun earlier this month show that McGeachin’s net pay for her final paycheck of fiscal year 2022 was $20.20 on June 24. The state withheld $1,713.26 from her June 24 check to avoid a budget deficit, according to a June 13 email sent to McGeachin by Chief Deputy State Controller Joshua Whitworth. Even though her paycheck was light last week, state officials plan to make McGeachin whole by paying the withheld portion of her paycheck on Aug. 5, when the fiscal year 2023 budget will be in effect, Whitworth wrote to McGeachin. Deferring a portion of her pay to Aug. 5 will result in a larger than normal gross paycheck of $3,575.02 on Aug. 5, Whitworth wrote.

State public records and Whitworth’s emails show McGeachin’s office was projected to end fiscal year 2022 on Thursday with an ending balance of 72 cents. It is illegal for any state agency or officer to spend money beyond funding that is approved by the Idaho Legislature, which is why the state delayed McGeachin’s pay and she worked without a paid staff for months this year.

McGeachin has not responded to more than a dozen requests for comment the Sun has left over the phone and email for McGeachin since April 4.

The 2023 legislative session is scheduled to begin Jan. 9 at the Idaho State Capitol in Boise.