BOISE, Idaho -- A coming revenue forecast could affect how much money gets set aside for tax relief this session, but looming federal budget cuts may play a role as well.
Gov. C.L. (Butch) Otter allocated $45 million for general tax relief in his fiscal 2013 budget proposal. He also recommended $60 million for savings and $41 million for employee raises, based on a 5.8 percent, $148 million increase in revenue next year.
The Legislature's Economic Outlook and Revenue Assessment Committee won't adopt its revenue forecast until next Tuesday, but preliminary figures suggest it could be $60 million to $70 million lower than the governor's.
Sen. Dean Cameron, R-Rupert, the co-chairman of the joint budget committee, said that would "blow out of the water" any opportunity for tax cuts this year.
"If we go any lower on revenue than the governor, I think we have to put the money into state agencies," he said. "There are agency needs and statutory requirements we have to take care of. I want to do tax relief, but we need to take care of those other two things first."
Although many lawmakers share Cameron's views, others aren't so quick to sideline tax relief. Given the ailing economy, they think reducing Idaho's tax burden should be the Legislature's top priority.
"If our number is lower than the governor's, I think it puts the highest pressure on (the $60 million) for reserves," said House Majority Leader Ken Roberts, R-Donnelly, a member of the economic outlook committee.
For example, Otter wants to put $29 million in savings into the public schools reserve account and another $5 million into the higher education fund.
"Maybe we don't do either of those things, since we're already funding (higher education) enrollment growth and we're fully funding Students Come First," Roberts said.
There could also be some revenue enhancement opportunities, he said. For example, a coalition of health care organizations has proposed raising Idaho's cigarette tax by $1 to $1.25 per pack, which would raise an estimated $50 million per year.
"That could offset expenses in the Health and Welfare budget and free up more dollars for tax relief," Roberts said. "We're trying to target some of the state's most onerous taxes -- the ones that hinder existing businesses and businesses that want to move to Idaho. The end result would be a tax policy that's better suited for Idaho business."
Ultimately, the debate over how much to put in reserves versus how much to allocate for tax relief may come down to how seriously lawmakers view the mandatory federal budget cuts slated to take effect next January.
The cuts, which would come right in the middle of fiscal 2013, could range from 8 percent to 9 percent. It isn't clear how individual programs would fare, but overall funding could drop by $40 million or more. The bulk of that would likely be in public school support.
Rep. Maxine Bell of Jerome, budget committee co-chairwoman, said that might sway the debate on tax relief.
"We can see everything else, but (the federal cuts) is the unknown. It's the one thing that's still hanging," Bell said. "We never get early or convenient numbers from the feds, but I believe we will have better numbers prior to the time we set the budgets."
Cameron said there are two ways to handle the uncertainty over federal funding levels: Be cautious about spending and put more money into reserves.
Both approaches argue against doing much for tax relief. Not doing anything, though, probably isn't an option in an election year.
Rep. Marv Hagedorn, R-Meridian, has been trying to reduce Idaho's corporate and individual income tax rates for several years. His latest proposal would put a trigger mechanism in state code that steers money toward tax relief whenever annual revenue growth exceeds a certain number. A similar trigger already exists for state reserves.
"The objective is to balance collections with your tax rate," Hagedorn said. "When revenues outstrip your forecast, your rates are too high. You're collecting too much."
Unless Idaho receives more specific numbers regarding the magnitude of the federal cuts, he said, it probably won't affect the tax relief debate.
Visit the Lewiston Tribune (Lewiston, Idaho) at www.lmtribune.com
Distributed by MCT Information Services
Comments