Journal editorial: State holds on to extra tax
Idaho is apparently still climbing out of the economic recession that washed over the nation in 2008. For the second year in a row, income projections used to set the state budget were below actual revenue collected by the state. As Idaho closed its books for the 2012 fiscal year June 30, it had $35 million more than it estimated.
It brought total state tax revenue to $2.587 billion – 5.9 percent more than the previous fiscal year.
Gov. Butch Otter was quick to say the additional revenue does not represent a surplus going into the next fiscal year. The $35 million will be quickly funneled into the state’s “rainy day” accounts which will grow to about $75.5 million.
“I’m grateful that Idaho’s economy continues to improve and that more Idahoans are finding work,” Governor Otter said. “I am also pleased that we have been able to set aside almost $75.5 million for future rainy days.”
Idaho Code automatically channels money into the rainy day account known as the Budget Stabilization Fund anytime annual revenue growth exceeds four percent. This fund has a current balance of about $23.8 million that will get a $25.8 million infusion. The second largest rainy day account is the Public Education Stabilization Fund which has about $40 million right now.
The governor and Republican legislators are proud of growing the state’s savings accounts and are quick to call it wise money management. But that ignores the fact the state already salted away $35 million from last year’s $105 million surplus that arrived because revenue projects were low in 2011. State spending for services to its citizens was based on the lower projection.
The Republican-led legislature split that $105 million three ways with a third going to tax breaks for Idaho’s wealthiest citizens. One third went into savings and the last third will be spread over five years to restore teacher salaries that would have been reduced by Idaho Superintendent Tom Luna’s “Students Come First” education reforms.
Again some state budget items were left unfunded because the governor and legislature embraced low ball revenue projections for fiscal 2012. When $35 million more arrived, it was simply moved into the state piggy bank.
There’s nothing wrong with conservative fiscal policy. Idaho’s Constitution requires the state to balance its budget each year so no political party can claim victory for simply following the law. And Idaho tends to ride out national recessions better than many states.
The problem is Idaho’s recovery from the Great Recession is lagging behind many other states. The dominant political party will argue that this is because taxes need to be lowered even more and regulatory agencies need to be eliminated. Democrats will suggest its because the state is timid about making investments in its universities and K-12 education system or improving infrastructure.
Rainy day funds may provide an emergency buffer, but they don’t generate jobs.
And savings don’t pay for health services for the state’s poorest residents.
Fortunately, after cutting the funding for preventative dental care and many mental health services the pervious year, the Idaho Legislature did boost its share of Medicare funding by $100 million this year to bring them back. Since 70 percent of the state’s Medicaid budget comes from the federal government in the form of matching funds, that $100 million went a long way.
We believe it is important for the state’s leadership to refrain from grinning too much about a growing savings account if it doesn’t understand the value of money well spent. Savings are good, but sometimes investments pay better dividends.
Even a rich man will starve to death if he doesn’t buy groceries.