Gov. Butch Otter announced Monday that even though state revenues are expected to grow by more than 5 percent in fiscal 2013, he does not plan on returning funds that were cut from state agencies last year.
"What we had to do will become our new normal going forward," Otter told state legislators during his State of the State address. "Idaho, having been tested by the great recession, is now emerging leaner."
Otter submitted his $2.66 billion budget recommendations to the Legislature on Monday, a figure that reflects an assumption that state revenues will grow by about $126.5 million over the next year.
Kevin Richert, political reporter for the Idaho Statesman, told Idaho Public Television on Monday that he thinks this figure is unrealistic, considering revenues this year grew by just over 4 percent.
"That [5 percent 2013 projection] is fairly robust growth," he said.
Rep. Donna Pence, D-Gooding, said she worried about that figure as well.
"I don't think we grew that much [this year]," she said. "I'd like to think we would reach that goal, but I'm not sure I'm comfortable with that number."
However, Wayne Hammon of the state Division of Financial Management told Idaho Public Television on Monday that the goal is not unrealistic. The revenue projections place revenue at 2006 levels, he said, which is far from "overly optimistic."
"It's not expansive growth," he said. "We're trying to find a balance. It's nice that after so many years, we're not talking about [budget] cuts."
Instead of funding cuts, Otter said the Legislature should be looking at tax cuts this year—$45 million in "tax relief." He declined to offer more specifics about where those cuts would come, merely stating that the money would go "where it will do our people and our communities the most good."
"There are plenty of ideas and just as many ways to crunch the numbers," he added.
The governor has previously suggested cutting corporate tax rates in an attempt to promote business in the state. But Rep. Wendy Jaquet, D-Ketchum, said she wasn't convinced that cutting corporate tax rates would bring more jobs to Idaho.
"I want to know how unattractive corporate taxes really are for business recruitment," she said Tuesday morning. "[Otter] has not made that case to me yet."
Some of the excess revenue—about $41 million—will go toward bonuses for those whom Otter called the "most deserving" state employees. Hammon said the one-time bonuses would be split into two payments, the total of which would be roughly 3 percent of an employee's salary. Employees would only receive the bonuses if revenues match projected levels.
Jaquet and Pence said they both thought that giving state employees additional income was a good use of funding, though Jaquet took issue with the way the money would be parceled out.
"I think the employee raises are really disingenuous," Jaquet said, as they are one-time bonuses rather than a raise in base pay that employees can count on in the future. "That's not the proper way to treat the people who work for the state of Idaho."
Pence said the bonuses would help make up for the pay cuts that state employees have taken, but she wishes more of the additional revenues had gone to restoring agency funding.
State Medicaid funding took a major hit last year, as legislators cut $83 million from the program. As a result, the program also lost federal funding, meaning Medicaid is $103 million short of fiscal 2011 funding levels.
"One of my concerns is the mental health things we cut," Pence said. "If you look at the long-term implications, some money needs to be put back. I don't think it's right to charge [the agency] with taking care of public health and then we don't give them the money to do it."
But Hammon said he was hesitant to put any money back into agency funding, in case revenues don't meet projections.
"It's better we guard that growth carefully," he said, adding that tax relief and state employees' bonuses will only be carried out if the money is in state coffers.
"If revenues don't come in, there are off-ramps," he said.
The governor's recommended budget also calls for putting $60 million back into capital reserves, an attempt to begin to replace the $381 million Otter said has been taken from reserves over the past four budget years.
Otter said the money helped the state function relatively normally during the recession, but now it's time to return the funds.
"Those funds were essential in helping Idaho weather the tough times," he said. "That money helped us keep our credit rating high and our debt level low ... [but] keeping our head above water in difficult times is not enough for us. We need to try to get ahead."
Katherine Wutz: firstname.lastname@example.org