After they picked out their seats using a sort of musical-chairs-by-seniority, in the fine meeting room gloriously restored to when it was the Idaho Supreme Court, and after everyone figured out who the pages were and where to plug in their laptops, members of the Joint Finance-Appropriations Committee (JFAC) worked to put the sea of numbers, projections, shortfalls, and recissions into more concrete terms.
“We would be in the hole by $480 million without using the reserves,” said JFAC co-chair Senator Dean Cameron (R-Rupert). “Once you use those reserves, even if you used every drop, we’re still in the hole $220 million.” As a rule of thumb, every 1 percent of the budget is around $23 or $24 million, so the budget would still need to be reduced by 8 to 10 percent even if all the reserves were used, he said.
This isn’t because Idaho was profligate, said budget and policy analysis division manager Cathy Holland-Smith. “We came into this with unequal resources compared to other states.” Idaho had $250 million in the bank, and 11 percent of its general fund in stabilization funds. Moreover, the Idaho legislature began to cut budgets as far back as fiscal year 2009.
The problem is that revenue projections — even Idaho’s conservative ones — have, by and large, consistently overestimated the amount of revenue that’s actually come in for the past two years, Holland-Smith said — a problem that is not unique to Idaho. For example, last year, instead of having an $18 million balance, as projected, there ended up being a $95 million shortfall. With a couple of exceptions, that continued through the first half of fiscal 2010, which is why Governor C.L. “Butch” Otter called on the Legislature yesterday to implement an additional 1.6 percent holdback. Estimated numbers for December show an additional $13 million shortfall.
Consequently, the revenue figure for 2011 Otter used is some $83 million lower than current projections, just in case — though if the economy rebounds faster than expected, it could leave the state with a surplus, which typically raises calls for a tax cut.
To exacerbate the problem, there are a number of agencies where the state is constitutionally or legally required to pay their expenses even if they are higher than budgeted — which happened this year. For example, Medicaid had an even higher caseload than it had projected; the catastrophic fund that pays for the medical care of indigents (after the first $11,000, which counties pay) is due to run out of money at the end of the month, Corrections had an increased prison population — it all adds up to $27 million in additional requests for fiscal year 2010 before they can even address 2011.
“We’ve gone from looking under rocks (for money) to looking under pebbles,” said Cameron.
JFAC also heard from Wayne Hammon, administrator of the division of financial management, the Governor’s equivalent to the Legislature’s Holland-Smith, giving an overview of the Governor’s budget recommendation.
The 4 percent holdback the Governor requested last fall will be ongoing — in other words, the 2011 budget will be based on that lower number — but the 1.6 percent holdback the Governor requested yesterday is one-time, meaning that future budget requests won’t start from that smaller number. Also, Hammon explained that the percentages and figures were based upon the number of full-time equivalent (FTE) employees each department had — which is why the holdback announced yesterday will hit schools so hard: because so much of its budget is based on salaries.
“What we calculated was one furlough day for every general fund employee per month for the remainder of the fiscal year,” including public schools, Hammon said. He went on to say that the Governor wasn’t advocating for furlough days necessarily — just that that was a way to arrive at a figure, and that agencies may choose to keep positions vacant or have other money set aside to use instead.
There was also some additional details. For example, higher education has been cut enough over the past couple of years that Idaho was in jeopardy of losing some of its American Recovery and Reinvestment Act (ARRA) funding, also known as stimulus funding. As part of the funding guidelines, states were required to keep their education budgets no lower than 2006 levels, and currently higher education is $4 million under that baseline. However, because education as a whole is still over the baseline, and higher education has a higher percentage of the general fund even though the actual amount is smaller, Idaho is eligible for a waiver from the restrictions, for which the state has already applied, Hammon said. Incidentally, $6 million remaining in education stimulus funding is being given to higher education, though he acknowledged it didn’t compare to the $19 million that was cut from higher education in 2010.
Medicaid funding is another unknown, and $71 million from the Millennium Fund and Budget Stabilization Fund is put aside to be used in case the Federal Medical Assistance Percentage (FMAP) changes. Part of the stimulus funding included a reduction in the share that states have to pay for Medicaid, and that $71 million will be used if the share goes back to its previous level. Alternatively, as part of the federal health care legislation — which Otter has said he would fight in court — the reduction is supposed to be extended — which would mean that, conceivably, that $71 million could be allocated somewhere else.
The Governor’s budget recommendation also saves $30 million in employee benefit costs by slightly increasing the state’s risk — from 5 percent to 10 percent — of having to use a reserve fund required by the state’s benefit provider, Hammon said. The state also expects to raise $5 million by selling the Parks and Recreation Department’s building on Warm Springs Avenue.
Regarding the four-year phaseout of several state commissions, Hammon said the Governor was recommending that they move in together, along with the Commission on Aging, in the JR Williams building, in space vacated by DFM when it moves to the Borah building. This will save them money in lease expenses as well as enabling them to share resources such as receptionists and office equipment. This move alone could save the money cut from their budgets in the first year, he said.
But with the various stabilization funds being drained to a projected $32 million, Idaho could be hosed if the recession lasts much longer. “There is very little room for error,” Hammon said. “If the error is significant, we’re going to have a problem.”