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State of Idaho projecting another record budget surplus as Legislature prepares to return

Idaho State Capitol - 2021
Otto Kitsinger
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Rotunda at the Idaho State Capitol building on March 23, 2021. (Otto Kitsinger for Idaho Capital Sun)

The state is projected to end the fiscal year June 30 with a balance of $1.6 billion

Another record-breaking state budget surplus is continuing to build rapidly as the Idaho Legislature prepares to reconvene Jan. 10 at the Statehouse in Boise.

Five months into the current budget year, the state is projecting to end the fiscal year on June 30, 2022, with a surplus of about $1.6 billion.

If a record-breaking budget surplus in Idaho is starting to sound familiar, there is a good reason.
The state ended the 2021 budget year June 30 with a surplus of $889 million, which was a record at the time.

During a Nov. 30 briefing with legislative leaders, Legislative Services Office budget and policy analyst Keith Bybee decided to deviate from traditional budget lingo and jargon to describe just how much money is building up in state coffers.

“There is a boat load, would be, probably, the correct description of the kind of cash we have on hand right now,” Bybee said.

“I think historic is underselling how much money that is in context of what our budget has normally looked like,” he added a minute later.

A big chunk of this year’s projected budget surplus was built by carrying over the $889 million ending balance from last year. Legislators describe this portion of the surplus as “one-time” in nature. But aside from the balance carry over, the state’s three largest revenue sources are also up considerably compared to 2021.

Through November, sales tax collections are up $105.5 million compared to a year ago, according to the Legislative Services Office’s monthly General Fund Budget Monitor Report.

Individual income taxes are up $175.5 million versus a year ago.

And corporate income tax is up $36.4 million above last year.

“The budget will be one of 2022’s big topics because revenues are much greater than anticipated. To me, that’s the starting point,” said Sen. Jim Woodward, R-Sagle. “Every month of the fiscal year, revenues have exceeded what we predicted. I think by the time we hit the session, we’ll be looking at projections of close to $1.6 billion in excess of what we anticipated.”

What are Idaho legislators going to do with the surplus?

The exact details and plans for the surplus funds will be hammered out during the session ahead.

Jaclyn Kettler, an assistant professor of political science at Boise State University whose research has an emphasis in state politics, expects there will be efforts to cut taxes and spend some of the surplus on education and infrastructure investments.

“The state has a large surplus, so one of the key questions is: What do we do with that?” Kettler said. “Taxes will be one of the areas where there will be some attention, including property taxes. Education is going to be a big issue again in 2022 and some would like to see some of that surplus invested in early childhood education.”

Legislators and Gov. Brad Little have also hinted that cutting taxes and investing in education and infrastructure are on the table this year.

When it comes to what to do with the surplus, Woodward said he applies several tests.

“We have to assess where the excess revenue is coming from,” Woodward said. “If more tax revenue is coming in because we have more people in the state, we should be looking at infrastructure. If we’re taxing at a higher rate than necessary, we should be looking at lowering the rate.”

House Minority Leader Ilana Rubel, D-Boise, said the surplus isn’t the good news that it appears.

“There is going to be a big fight over how to allocate the quote un quote ‘surplus,’” Rubel said in a telephone interview. “I get frustrated by the use of the word because I think it’s a function of severe and irresponsible underfunding of vital needs. If you haven’t paid your mortgage and haven’t paid your bills, it might look like you have a lot of money in the checking account. But it’s false to characterize it as a surplus because we haven’t been funding our schools, we haven’t been funding our infrastructure, and I think those should all be first in line.”

Rep. Wendy Horman, an Idaho Falls Republican who sits on the budget-setting Joint Finance Appropriations Committee, said the surplus can make things tricky.

“Certainly the surplus and tax relief are going to be conversations this session,” Horman said. “I heard it said it’s harder to legislate in budget years of abundance than in years of scarcity because everybody thinks they want their piece of the pie. Honestly, as with every year, everybody has good ideas but it’s the job of JFAC and the Legislature to evaluate those to see what has got a good return on investment, what is sustainable and what brings value to the taxpayers of Idaho.”

During a speech at the Associated Taxpayers of Idaho conference Dec. 1, Little teased out details of his new Leading Idaho Plan, which he said would include tax cuts and investments in schools, roads and water. Little will unveil his new budget and policy proposals during the Jan. 10 State of the State address.

What about federal funds?

The state’s projected surplus is separate from and does not include billions of dollars in federal COVID-19 related stimulus funding sent to Idaho and its cities and schools though the CARES Act and other federal stimulus law.

“We already have significant conversations around federal funds,” Horman said. “I think we will see even more pressure on federal funds.”

“As we move to a 45% federally funded state, there are a lot of strings that come with that money,” Horman said. For examples of “strings,” she pointed to the Biden administration’s COVID-19 mandates. She said she has also been talking with a constituent who wants to let Idahoans have first crack at reserving campgrounds in state parks.

COVID-19 stimulus funds are one of many sources of federal funding. Last year, the Idaho House of Representatives voted to reject a $6 million federal grant for early childhood education.

The Idaho House also voted to reject $40 million in federal funds for COVID-19 testing in schools.