State revenues now $141 million below Idaho Legislature's projections

Yahoo

3 days ago

The state flags hangs from the rotunda of the Idaho State Capitol Building in Boise on Jan. 7, 2025. (Pat Sutphin for the Idaho Capital Sun)
Idaho state revenues fell short of expectations in May and now run $141.5 million below the projection set by the Idaho Legislature earlier this year, according to a new monthly revenue report released Thursday by the state.
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A month ago, state revenues lagged the Idaho Legislature's projection by $97.7 million, the Idaho Capital Sun reported.
Now, revenues are running $141.5 million below the Idaho Legislature's forecast with less than one month remaining in the fiscal year, according to the May Budget and Revenue Monitor report.
Idaho is still projected to finish the 2025 fiscal year on June 30 with a positive ending balance of $278.2 million, according to the May report.
However, that projected ending balance has shrunk from the approximately $420 million ending balance that the Idaho Legislature planned on when the 2025 legislative session adjourned April 4.
The revenue forecasts and collections are important because the Idaho Legislature built them into the state budget.
Idaho runs on a fiscal year calendar that begins July 1 and ends June 30 every year. That means fiscal year 2025 is about to end, and fiscal year 2026 is about to begin.
Rep. Wendy Horman, an Idaho Falls Republican who serves as co-chair of the Idaho Legislature's Joint Finance-Appropriations Committee, said the new revenue report shows positive strength in Idaho's economy despite the missed forecast.
The Joint Finance-Appropriations Committee, or JFAC, is a powerful legislative committee that sets the budget for every state agency and department.
Compared to last year, revenue collections are up by $145.3 million, or 2.9%, according to the May report.
'I think this gives us good news about Idaho's economy,' Horman said in a phone interview Thursday afternoon. 'Sometimes when you look at numbers against a forecast, it tells us more about the forecast than the revenue.'
The revenue report shows the sales tax distributions were less than last year and a driving factor in the revenue shortfall. Other revenue sources, including individual income tax collections, corporate income tax and miscellaneous revenues, were all up.
Lori Wolff, administrator of the Idaho Division of Financial Management, also expressed confidence in Idaho's economy after the revenue report was released Thursday.
'Gov. Little and the Legislature have consistently prioritized responsible budgeting, which has led to Idaho's tremendous economic success,' Wolff said in a written statement. 'We are still seeing year over year growth in revenue, signaling a strong Idaho economy. We have made investments in critical priorities while leaving a $400 million cushion on the bottom line to hedge against revenue softening. Idaho also has 22% of General Fund revenues in rainy day funds, greater than almost every other state. While we continue to watch revenue closely, we feel good about the strength of the state budget and our economy.'
Senate Minority Leader Melissa Wintrow, D-Boise, said her heart sank when she read the new revenue report. She said the state will still have enough money to pay for programs in the current year's budget, but she worries cuts are forthcoming next year.
'I am deeply concerned that all of the tax cuts and the underestimating of revenue will create an on-ramp for my legislative colleagues to easily and unfortunately cut valuable programs and services that Idahoans need,' Wintrow said in a phone interview Thursday. 'That is really what I have been dreading this whole time.'
During the 2025 legislative session, the Idaho Legislature cut taxes by $400 million and provided an additional $50 million to create a new refundable tax credit for education expenses, including tuition at private, religious schools.
Those actions reduced the amount of state revenue that the state has to spend in its budget by $453 million.
The role of revenue in the budget is extremely important. The Idaho Constitution requires the state to pass a balanced budget each year where expenses don't exceed revenues.
Horman said the newest revenue numbers still demonstrate the Idaho Legislature took a responsible approach to budgeting this year.
'It makes me especially glad we more than doubled the amount we typically leave on the bottom line when we adjourned sine die because it's giving us a cushion to adjust to the decline in sales tax revenue,' Horman said, using the Latin term sine die that legislators use when they adjourn the legislative session for the year.
Horman said it will be important to monitor all revenue sources between now and when the Idaho Legislature convenes the 2026 session in January.
She also said it would be a concern if revenues continued to to fall below the forecast in the coming months and into the forthcoming 2026 fiscal year.
'Looking at the trends with sales tax tells us we made the right decision to have conservative budgeting this year, and we will need to monitor all revenue sources between now and January,' Horman said. 'I do anticipate another year of probably even more conservative budgeting (next year) than we saw this year.'
Horman said the Idaho Legislature has invested $7 billion in infrastructure projects like roads, school facilities, water projects, the permanent building fund and more over the past five years. She said the $1.05 to $1.55 per hour pay increases for state employees approved this year represent the largest salary increase in terms of dollars in state history.
But Horman said next year's budget may be more lean in terms of spending.
'We will need to be cautious about investments we make in the maintenance budgets as well as the budget enhancements moving forward,' Horman said, referencing the new budget procedures where JFAC splits agency budgets into two parts.
Wintrow said she's worried.
'I don't see my colleagues going back on their tax cuts to increase revenue, and my heart sinks wondering about the effects, which are dramatic and potentially harmful,' Wintrow said.
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