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State
Officials Paint Bleaker Tax Outlook
Idahoans Can Expect Deeper Spending Cuts
Bob Fick of the Associated Press
BOISE -- The Kempthorne administration announced Friday that the eroding state economy
will force a further reduction in projected tax collections, increasing prospects for even
deeper cuts in the state's current budget and dramatically lower spending in the next
budget year.
That announcement came as the Legislature's top budget analyst said meeting legal
commitments in the next budget will require not only making the $55 million cut in the
current budget permanent but cutting another $75 million. That assumes state employees get
no pay raises and no extra money is included for inflation in utility or other rates or to
replace worn out equipment.
State agencies have already begun developing proposals to change laws so spending can be
cut. The Health and Welfare Department is preparing legislation to reduce what is already
one of the nation's lowest welfare eligibility standards, curtail services and lower
reimbursement rates for service providers.
While the agencies do not know exactly what their 2002-2003 budgets will be, Kempthorne
budget chief Brian Whitlock told lawmakers that "we've been talking to them about
structural changes, targeted programs. They're aware of what's happening."
The only alternative for dealing with the severest state financial crisis in almost two
decades would be raising taxes or rolling back last year's record $114 million tax cut --
something the nation's most Republican Legislature has shown no stomach for.
"This is going to be budget driven, and it's going to be a very difficult
session," House Speaker Bruce Newcomb told legislative leaders meeting in the Capitol
in preparation for the next month's start of the election-year session.
Gov. Dirk Kempthorne has already told state managers that their new budgets could be cut
11 percent on average from spending limits originally approved this year. Legislative
Budget Director Jeff Youtz predicted a reduction in the basic state budget of up to 8
percent.
"State agency budgets, including public schools -- a lot of sacred cows we're used to
putting our support behind -- will see lower budgets," Youtz said.
The administration's decision to further reduce the revenue estimate followed finalized
November tax collections that were $9.3 million short of the month's target. Earlier in
the week, it appeared the shortfall would be just $7.7 million.
That left the state nearly $27 million short of the cash projection that had already been
scaled back just over $60 million last summer because of the faltering state economy.
Including another $27 million would reduce the original estimate for the current 2001-2002
budget year by 5 percent, dropping it $35 million below total collections during the
previous fiscal year that ended last June 30.
"The governor's going to have the first challenge in providing a blueprint for
balancing the budget," Youtz said.
Whitlock said the administration is in the final stages of formalizing its budget
proposal, which will be released Jan. 9.
The latest decline in tax receipts was primarily due to sluggish personal income tax
collections, which account for half of all general tax revenue.
The main reason was paycheck withholding, a key indicator of the economy's underlying job
strength. It was another $5 million below expectations last month and almost 10 percent
off since June.
And while sales tax collections were on target for the month, analysts said that was only
because of a boost retail activity got from record sales of automobiles with zero-percent
financing.
That activity, chief economist Michael Ferguson said, "should have yielded an upward
spike in sales tax collections. Just meeting the predicted level for the month is actually
disappointing.
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