Idaho is banking on a $1.9B surplus. Here’s a closer look at where the state gets its money.
All three major revenue sources – income, sales and corporate income taxes – are up compared to last year
Idaho’s projected record state budget surplus is the $1.9 billion elephant in the room in seemingly every 2022 Statehouse debate and conversation.
Whether it’s tax cuts, a proposal to increase state funding for teacher pay, investing in early literacy or paying for road and bridge maintenance, the surplus looms large.
“We must be even more vigilant in perceived times of plenty to make decisions that are prudent and will withstand the test of time. We did not spend our way to a surplus, and budget surpluses must never become an excuse for wasteful spending,” Gov. Brad Little said during his State of the State address on the first day of the legislative session.
Given that the surplus is such a factor this year, it makes sense to step back and look at where it came from and where the state gets its money.
There are two big forces fueling the projected $1.9 billion surplus.
- A little more than half of it is due to increased state revenues that are beating projections and beating last year’s actual collections.
- The remainder, $889.5 million, was carried over from last year’s then-record surplus into this year’s budget.
Over the last year, state revenues grew significantly while spending remained low.
Last year, revenues grew by 23% while spending grew by 4%, said Alex Adams, Division of Financial Management administrator, during a Jan. 10 budget briefing with reporters.
Revenues blew past the $4 billion mark and eclipsed $5 billion for the first time in state history.
The state has so much cash on its hands that Keith Bybee, a budget and policy manager with the Legislative Services Office, took to calling it a “boat-load of money” during a recent budget briefing with legislative leaders.
However, House Minority Leader Illana Rubel, D-Boise, said it’s misleading to call it a budget surplus.
Rubel said the huge pile of cash the state is sitting on is a result of years worth of underfunding things like public schools and transportation infrastructure.
“I get frustrated by the use of the word because I think it’s a function of severe and irresponsible underfunding of vital needs,” Rubel said in a telephone interview last month. “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.”
Idaho gets most of its money through the “three-legged stool”
It’s common to hear Idaho politico and budget wonks talk about the “three-legged stool” when they are discussing budgets or tax policy. The stool represents the state’s three largest revenue sources — each representing one leg of the symbolic stool.
For the 2021 fiscal year, the state collected a record $5.01 billion in revenue, according to the Division of Financial Management.
- The state’s largest revenue source is income tax. In 2021, the state brought in $2.446 billion in income tax collections, about 49% of all state revenue for the year. That’s up compared to $1.905 billion compared to the year before in 2020.
- The second largest revenue source is sales tax. In 2021, the state collected $2.004 billion in sales taxes. That’s about 41% of revenue. That’s up from $1.689 billion in 2020.
- The third largest source of revenue is the corporate income tax. In 2021, the state collected $349 million through corporate income taxes. That’s almost 7% of the revenue. That’s up from $243 million in 2020.
There are several other sources of revenue, including product taxes, fees and other miscellaneous revenue.
The state does not collect or spend property taxes, which go to local governments and schools.
For the 2022 fiscal year, all three major revenue sources are up compared to last year. Through December, individual income tax, corporate income tax and sales tax collections have generated $450.6 million more than last year’s collections.
Here’s how much revenue the state collected over the past four years:
- 2021: $5.01 billion.
- 2020: $4.03 billion.
- 2019: $3.73 billion.
- 2018: $3.73 billion.
Idaho operates on a fiscal year calendar that runs from July 1 to June 30 every year, so there are still six months left in the 2022 fiscal year.
The next monthly revenue report is expected to be released by mid February.