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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.

Idaho in a Pickle: Expenses Up, Revenues Down

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.”

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10 comments

  1. Americans are spending about 40 billion dollars annually to buy illegal drugs south of the border. Additionally, billions of dollars are being spent on fighting drug related crime and incarceration of non-violent drug offenders. Most Americans don’t realize that Americans are funding the drug terrorists in Mexico and Columbia. When are we going to come to our senses and decriminalize, tax and regulate pot, opiates, and cocaine just like our other two legal drugs, alcohol and nicotine? Idaho could plug a lot of holes in its budget gap if enough people noticed that recreational drug prohibition doesn’t work in a democratic society which claims that individual liberty and a balanced budget are core values.

  2. Good reporting job, Sharon. I suggest you send it to David Irwin at AARP.

  3. Mickey, it’s an interesting concept and the argument could be made on a financial basis, but I don’t think that in an election year legislators will do anything that leads constituents to perceive them as being soft on drugs.

    thanks, Bill!

  4. I realize that rational arguments rarely sway politicians because they’re not the best and brightest of Homo Sapiens, rather the lowest possible common popular denominator. But sooner or later a critical mass of the public will realize the fiscal and human folly of slogans, like “soft on drugs” and “soft on crime” including the hypocrisy of claiming “individual liberty” as a core value. And the politicians will follow.

  5. Mickeys idea would be a godsend to lawyers. Just think of all those who suffer from drug addiction getting a lawyer and suing the new drug companies for damages and their drug addiction. Complain to your local dealer will get you whacked. Going to court like cigarette smokers and collecting damages for their addiction would stimulate the econmy and advertising agencies. New and improved crack cocaine dont leave home without it I can see it now or Menthol METH. Lets put Charlie Sheen, Morton Downey Jr all back in rehab and create more John Belushis,John Candy,cris Farleys with our blessings. Holland is lovely this time of the year with all the drug addicts nodding off in public places or falling in the Tulips. The only problem is where are all the addicts going to get the money to pay those taxes OH I know we will call it necessary for an ailment and healthcare pick it up.Just smoke your dope Mickey and leave the rest of us alone who are struggling to rehabilitate those who are already damaged by drugs and rebuilding their lives.

  6. Assuming that people who argue for more personal freedom and against recreational drug prohibition are dope smokers reveals a flaw in your reasoning ability. I don’t believe that anyone can prove that there were fewer alcoholics per capita during prohibition than now. Anyway, its kind of dumb to keep doing something that doesn’t work and doesn’t reduce drug use and cost the taxpayer in blood and treasure and independence. Perhaps you would enjoy having Mexican Narco Terrorists kill your entire family because you spoke out against them or serving in an army that has to chase them through the jungle.

  7. Just to add another twist — 60% Of Afghanistan’s revenues/GDP come from the opium crop. The lion’s share of their opium crop is bought to feed the addictions of US citizens.

    Our addictions are far reaching! I would guess that’s one knotty policy problem for our government and military and may be why we turn a blind eye to it (and come up with a good bust within one year of each national-level election in the US).

    Another reason might be that a lot of legitimate US bankers and venture capitalists just can’t live on their paltry multi-million dollar salaries, options, and investments, and are investing in the international drug trade– and it is entirely acceptable and less risky than a $60 billion Ponzi scheme.

  8. Until we do enough research to be able to block addiction pathways in the brain with pharmaceuticals, the demand for recreational drugs will continue to find suppliers to meet the demand. The question is, do we want that U.S. money supporting global narco-terrorists who tend to destabilize and corrupt legitimate goverments , or circulating legally within our own economy?

  9. Meanwhile, back at el Rancho Idaho, the drop in economic activity somehow always seems NOT to lower prices in Government. Your house is worth 60% of what it was, and there are x fewer jobs, but public employment and expenses will be up. Go figure.

    The Idaho Legislature really has a simple job. Match revenues with income. The tough part is that all the public employee unions will try to derail any efforts to cut expenses, which are mostly salaries and benefits.

    Unions eat their young. It is time for them to feed. LIFO your salaries until you reach stasis with income, and then you have balanced the budget.

    There are a lot of Federal mandates and matching funds that cannot be serviced. Don’t. Tell ObamaNation that you don’t have the dough and no thank you. Just because there is money there from the Feds that you have to match does not make it a worthwhile program when you balance the whole of your economy and budget. The Feds play by different rules, and money from them just exacerbates the whole problem of affordable government.

    Or, do like Oregon. Take the Sooper Majority High Road: shove tax raises down the electorates throat. Or in the case of Congress, use the Haiti Crisis time to hide the Democrats on the conference committee and hammer out a deal with not one Republican on site. That is Obama’s promised “transparency in government” and letting the sun shine on the legislative process. Actually, we just sit back quietly and let the lie transpire. Rahm Emanuel is not letting the Haitian Crisis go to waste. It is good cover, and the media is out of town. Cynical as hell, but not unexpected. We have Chicago Style governance, and back room dealing is the substance of that kind of rule.

    At the least, make the Idaho Legislature do it all out in the open. Demand they balance the budget in day light, for all to see. The electorate is tough. They are taking it on the chin and still have hope for a better future. When they can see the options, the choices made, they are better voters, better citizens.

  10. One of the things to look at in Medicaid are the Medicaid dollars tied up in long-term skilled nursing home care. Since Medicare doesn’t pay for long-term care, in most states Medicaid pays for 70% of all nursing home patients. Some have no money to pay, and others shift their assets over to other family members so that the person requiring long-term care qualifies.

    These are the fastest rising part of Medicaid costs in most states. Michigan is being crippled by them. The federal health reform legislation has a process in it for addressing the need for affordable long-term care insurance for people who don’t qualify for Medicaid. This is the first attempt at dealing with this problem. Right now private long-term care insurance is very expensive and cuts off early.

    I go into this here to head off some angry people who might think that “Medicaid people” are somehow easy to recognize. I worked in nursing homes and cared for the parents of quite-wealthy adults who had taken over the houses and assets of their parents so that they could qualify, who seldom visited, and would not want to pay for eyeglasses when their parents’ vision changed.

    These days, a lot of us are sliding down towards Medicaid eligibility so we should stop and think before we knock others who really do qualify.