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A Seat in the House

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Fiscal year 2002 headed into the red

Since we are entering into a new Idaho fiscal year, I thought it would be of interest to summarize our state’s financial situation, where we are and where we expect to be in future months.

Based on the latest information I have received from members of the Joint Finance and Appropriations Committee and the Division of Financial Management’s May 31 report, it appears that fiscal year 2002 will end up about 56 million dollars in the red.  Our General Fund revenue was $5.6 million lower than expected in May.  The majority of the shortfall was due to lower collections in individual income taxes.  Additional weaknesses were observed in the areas of Corporate Income Tax, Sales Tax and miscellaneous revenues.

Individual Income Tax gross collections were about $4.5 million lower than expected, but this was tempered to some degree by refund obligations that were about $800 thousand lower than expected. 

Corporate Income Tax revenue was $900 thousand lower than expected in May, resulting in a year-to-date shortfall of about $8.7 million.

Sales Tax collections were only about $100 thousand lower than expected in May, resulting in a year-to-date sales tax shortfall of about $1.1 million.

The miscellaneous collections were about $1.1 million below target in May, primarily because of a decrease in interest earnings on funds invested by the state.   

On a year-to-date basis, our General Fund revenue at the end of May was about $105.9 million below our anticipated amount.

The legislature anticipated shortfalls in our FY2002 revenues and compensated by moving funds from the Budget Stabilization Fund (Rainy Day Fund), the Tobacco Fund and the Permanent Building Fund.  This transfer of funds, in combination with the holdbacks announced by the Governor last summer and upheld by the legislature this last session, allows us to end FY 2002 with a balanced budget.

There were those that wanted the legislature during the last session to take more from these funds to avoid the holdbacks announced by the Governor, especially the K-12 appropriation.  But as we end FY 2002 and enter into FY 2003, it is becoming apparent that the actions we took last session have enabled Idaho to be in a far better fiscal situation then many other states suffering from our nationwide recession.  We are beginning to see also that the contingency plan we put into place in the event revenues continued to come in under projections will be significant in meeting our FY 2003 budget.

So what about our FY 2003 budget given that our revenues are still falling below projections because of our state and nation’s economic condition?

Even though there was considerable pressure to use all, or most of the money, in the Rainy Day Fund, the Tobacco Fund, and the Permanent Building Fund to offset the FY 2002 holdbacks, the contingency plan adopted by the Legislature last session retained additional money in the three accounts to provide for potential revenue shortfalls in FY 2003.

As it happens, this is the position we see now see ourselves as we enter FY 2003.  Assuming a 3.9% growth (which is optimistic), we could be more than $109 million short of meeting our budget for 2003.  But to avoid further holdbacks or an increase in taxes, especially the sales tax, it is planned to dip into the Budget Stabilization Fund for about $47 million, the Permanent Building Fund for about $30 million, use the 2003 Tobacco Payment (about 27 million) and if we need to, to utilize the Tobacco Millennium Fund to meet potential revenue shortfalls.  The problem with doing this is that we will be using “one time money”, which effectively means that we will have depleted all of our savings accounts-so to speak.

The hope is, of course, that economic recovery will be occurring over the next year and our FY 2004 situation will not be as negative as FY 2002 and FY 2003.  

In summary, other states have found themselves in such an adverse economic condition that the only way out for them has been to call a special session to transfer funds, cut budgets, or in some instances, to find ways to raise taxes.  Idaho is finishing the year with a balanced budget without special sessions or tax increases.  And knowing that the forecasts for a national economic recovery are mixed, the Governor and the Legislature have a plan in place to meet our needs for the upcoming year.  

Again, thanks for reading and as always feel free to contact me anytime.  My home phone is (208) 265-0123 and my mailing address is P.O. Box 112, Dover, 83825. You can also reach me on “E” mail at infocntr(at)lso.state.us.

Thanks for reading! George

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Rep. George Eskridge Rep. George Eskridge the Republican Representative for District 1 in Idaho’s House, George Eskridge can be reached at 208-265-0123 or write PO Box 112, Dover, ID 83825

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Politics, budget, Idaho Legislature

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