State leaders are nearly two months into the legislative session, and much of the noise still surrounds the state’s budget deficit.

Cuts are happening. School leaders and parents are watching.

So what’s on the chopping block and what’s not? What factors shape the debate?

And what about that big rainy day fund some people keep mentioning? 

Here’s a rundown of where things stand — and five takeaways to help clear the smoke.

1. Yes, Idaho faces a deficit

There’s a roughly $40 million gap this fiscal year. 

Projections peg next fiscal year’s imbalance at $555 million. 

So … 

2. Lawmakers are cutting spending

The Legislature last week approved a bill to cut $131 million from the current state budget. 

Most of the cuts came from a 3% reduction Gov. Brad Little ordered last summer. But lawmakers added another $15.3 million in new cuts beyond the governor’s order. 

The cuts affect this fiscal year, which ends June 30.

K-12’s brick-and-mortar schools have been largely spared, and budget-writers have reversed cuts for community colleges and career-technical programs.

Still, Idaho’s four-year colleges and universities are poised to face a disproportionate share of the pain.  

3. Idaho has a big reserve fund

State leaders have built up around $1.3 billion (yes, with a “b”) in savings since the Great Recession. 

That’s about 23% of the state’s general fund spending, and puts the state in a strong position for “rainy day” situations. 

4. So, isn’t it raining? 

Depends on who you ask.

Lawmakers have had three options heading into a tough financial year: 

• Cut spending 
• Tap rainy-day funds
• Increase revenue by raising taxes

Raising taxes is politically unlikely after multiple tax cuts in recent years.

So the debate has swirled around the other options: cutting spending or using reserve funds. 

Some lawmakers say it is raining — and the right time to tap funds. 

Others say the funds should be used only during a major economic downturn. 

For now, lawmakers appear inclined to keep reserve funds intact. But as they finalize next year’s budget, the question lingers: How long can Idaho keep cutting spending while sitting on more than a billion dollars?

5. School leaders are watching closely

K-12 is mostly exempt from the current round of cuts. Funding for these schools remains flat heading into the new year. 

Around 87% of Idaho’s public school funding comes from the state. So flat funding feels more like a cut as costs rise, some local leaders say.  

Public schools will be forced to cut budgets even if state funding remains flat. One of East Idaho’s largest districts is already weighing staff cuts and upping its request for local funds to boost depleted savings and address its budget crunch.