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A Seat in the House

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Even with contingency funding, '03 looks to be in the red.

The state budget still remains a real concern as new revenue information continues to arrive. The Idaho Association of Commerce and Industry, in their latest newsletter, provided a good summary of the current situation. The following is taken from that newsletter to provide River Journal readers the latest information on our revenue situation.
Because of revenue shortfalls, next year’s legislature will have to adjust the current (FY03) budget before doing FY04. In order to understand the difficulty in addressing FY04 we need to examine what happened to FY02 and FY03. The original revenue projection for FY02 was $1,935.8 billion. Unfortunately the economy (beginning in spring of 2001) “fell-apart” and actual '02 revenue collections staggered in at $1,690.3 billion-a $245 million shortfall!" Cutting spending and dipping into one-time reserves eliminated that deficit. The spending cuts included reducing the public school increase above FY01 from 6.5% to 4.0 %, reducing the increase for higher education by 3.0% and reducing all other state agencies 4%. Additional measures included using the $64 million left unspent by the 2001 legislature and diverting monies from other projects.
Then came FY03! The legislature developed an FY03 budget of $1,967,895,400, projecting that revenues would grow at 5% over actual FY02 collections. To that the legislature added $26.7 million from the Budget Reserve Fund (leaving $27.4 million). The legislature also used the $7 million remaining from the Permanent Building Fund and all that was left in the Capitol Endowment Fund, plus additional funds from other smaller programs. These actions still left the FY03 budget $108.4 million in the red.
Governor Kempthorne and the legislature provided a contingency plan to eliminate any FY03 deficit by using as much of the remaining one-time funds as needed to meet the shortfall. The contingency plan included additional money from the Budget Reserve Fund, the last remaining $11.9 million in the Permanent Building Fund, the rest of the FY03 tobacco settlement payments and most of the most of the money remaining in the Millennium Fund.
It appears now that even with the contingency plan funding, the ’03 budget will still be in the red by $8.5 million. This deficit still assumes a 5% growth in revenues over the prior year, which is not expected by most in business or government.
Now we come to the FY04 budget to be determined by the 2003 legislature, plus the need to confirm adjustments to the 03 budget. 
Two years’ worth of painful budget cuts, combined with the almost complete elimination of the state’s one-time financial reserves, leave few options to work with in the next session.
We can assume that there will be an intense effort to find remaining areas where some budgets can be cut, but the options are limited. The only areas of major dollar savings are in the big budgets of public education, higher education and health and welfare which, from a practical and political perspective, are difficult to pursue.
As difficult as our situation is, we need to recognize Idaho is not alone in this financial difficulty. Forty-five of the 50 states face actual or potential shortfalls. The National Conference of State Legislatures reports that in FY03, 26 states cut budgets, 12 states tapped their budget reserve accounts, 16 states dipped into their tobacco settlement money, 23 states delved into a variety of reserve funds-while 16 states raised taxes and 10 states raised various fees. In 02 and 03, Idaho has used all of these measures except raising taxes and fees! Close to home, Oregon faces a $1.3 billion gap between revenues and expenditures for its 03/05 budget cycle; Washington already has laid off 419 state employees and targeted 1,400 state jobs for elimination. Utah had to cut nearly $400 million from its FY02 budget, and already has cut $173 million from its FY03 spending.
In the meantime in his continuing attempt to keep ahead of Idaho’s problem, Governor Kempthorne just ordered an immediate 3.5% holdback for general fund agencies excluding public schools and higher education.
But adversity oftentimes produces opportunity! Our financial situation indicates a need and an opportunity to re-evaluate Idaho’s taxing structures (including tax exemptions), programs and revenue requirements. Governor Kempthorne apparently recognizes this as well and has just announced establishment of a “blue-ribbon committee” to examine all facets of state government. Governor Kempthorne stated, “I want this panel, to be made up of prominent Idahoans and experts from different fields, to take a hard and critical look at how we do business.”
The panel’s initial recommendation is due December 1st of this year and I think their findings will be significant as the 2003 legislature seeks to solve Idaho’s fiscal dilemma.
Again, I acknowledge and appreciate the information provided by the Idaho Association of Commerce and Industry in their latest report that I utilized (with their permission) in writing this column. 
Thanks for reading and feel free to contact me any time. My home phone is (208) 265-0123 and my mailing address is P.O. Box 112, Dover, Idaho 83825. You can also reach me on “E” mail at [email protected] 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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budget, Idaho Legislature, revenue, shortfalls

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