Legislators said they will play a role in deciding how the state handles what is projected to be a record-breaking surplus in the state budget. And at this point, it’s anybody’s guess what the state may do with half a billion dollars or more in unexpected money if the surplus pans out.
With less than two months to go until the 2021 session is gaveled in at the Statehouse, legislators are watching with interest as state revenues continue to beat both projections and last year’s collections alike.
As of this month, the state is forecasting a $587 million ending balance when the budget year ends June 30.
Meanwhile, state agencies, including public schools, are subject to a 5 percent holdback in the current budget that Gov. Brad Little announced in May. Little said it was a proactive move to deal with concerns about the coronavirus pandemic leading to revenue shortages.
The holdbacks to public schools and all other state agencies represent $195 million of the projected $587 million surplus.
“Barring any action from the governor between now and January, it will be up to the Legislature to decide what to do about that $195 million, as well as the rest of the funds,” said Rep. Wendy Horman, vice chair of the Joint Finance-Appropriations Committee (JFAC).
“We are in an unusual position nationally in that we not only have a budget surplus and healthy savings accounts, but the governor’s current revenue forecast is for a 2 percent increase, not a decrease, in revenues for this year,” Horman said.
While Little called for the holdbacks proactively before the budget year began, he always anticipated working with the Legislature to make them official.
“In order to fully realize these reductions, I will also be working with our Legislature during the 2021 legislative session to suspend the statutory requirements applicable to the distribution of these funds,” Little wrote in a May 8 memo outlining his school budget reduction plan.
The state did reduce funding for schools when it sent payments out to districts and charter schools on Aug. 15 and Nov. 15, said Alex Adams, administrator of the Division of Financial Management. The state also sent out $99 million in federal CARES Act funding in an attempt to offset those holdbacks.
As of where things stand now, Horman said the budgets the Legislature set earlier this year, including payments for teacher pay under the career ladder and leadership premiums, are law.
Even with a record-breaking surplus potentially coming together, many legislators will still approach the budget conservatively.
Sen. Jim Woodward, R-Sagle, said he views most of the surplus as one-time money, as opposed to an ongoing source of funding that could sustain a new program or ongoing investments.
Woodward said he would consider using a one-time surplus to invest in capital projects like transportation or maybe consider helping districts that are struggling to build new schools.
“I’m always looking for balance,” Woodward said. “We might want to look at it going into investments in our future is what I would say.”
Rep. Paul Amador, R-Coeur d’Alene, said the surplus may not be as simple as it appears when people talk about $500-plus million. Like Woodward, Amador also views it as one-time money rather than an ongoing windfall.
Amador said more than $440 million of the projected surplus is one-time money such as a beginning cash balance, a one-time revision from the Department of Health and Welfare and the 5 percent holdbacks.
“To a certain extent, it is a little bit mysterious how we have a strong economy,” Amador said. “When you start digging into that projected surplus, it’s maybe not as big as it appears.”
Moving forward, Amador wants to make schools whole by restoring the 5 percent holdbacks, unless things take a turn for the worst financially.
During the 2021 session, which convenes Jan. 11, there may be competition for dividing up any surplus. Little has said he is looking at tax cuts and investments in education, transportation and water projects.
Woodward mentioned capital projects.
Horman said the Legislature prioritizes education funding, but that priority may face competition from rising Medicaid costs in the future.
There is also an entire interim committee of legislators looking to address increasing property tax rates.
“When our taxpayers don’t have money in their pockets because the state government and because local government is hanging on to it, it makes it harder to pay their property taxes.” Sen. Grant Burgoyne, D-Boise, said during an interim committee meeting on property taxes and revenue Thursday at the Statehouse.