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Sales tax diversions have shrunk amount reaching Idaho general fund; staff warns of tradeoffs in downturns
Summary
Legislative budget staff outlined how statutory sales tax distributions and new earmarks reduce the share of sales tax that flows to the general fund, noting the effect on the state's ability to respond in future revenue downturns and discussing the proposed expansion of funds for transportation bonding.
Budget policy staff told the Joint Finance Appropriations Committee that Idaho now directs a smaller share of gross sales tax collections to the general fund than in past decades, and explained how statutory distributions and new earmarks affect the state's fiscal flexibility.
Keith Bybee and his team reviewed sales tax collections and the distribution formula in Idaho Code 63-3638, showing gross sales tax growth but larger statutory outflows to revenue sharing, the Tax Relief Fund and other earmarks. Bybee noted that while total sales tax collections have increased, a growing statutory set of distributions reduces the portion that is available for the general fund and appropriation by JFAC.
Why it matters: Bybee warned that because a larger share of sales tax receipts is statutorily earmarked, the general fund relies on a smaller share of this relatively stable revenue source. "What you do during the good years matters," he said, adding, "If the next revenue recession happens, those are usually the times where personal income goes down...and so we're not collecting as much from income tax." The implication, he said, is that with less sales tax available, the legislature may face larger cuts during a downturn or have to alter local distributions.
Key figures presented: The governor's recommended general fund projections were listed as roughly $5.948 billion for FY2025 and a pessimistic FY2026 forecast of $6.262 billion; the EROC committee recommended different figures (the EROC recommendation and acceptance are covered in a separate article). The presentation broke down collections by tax type and highlighted growth in corporate income tax and online sales tax distributions to the Tax Relief Fund; the report said sales tax collections in 2024 were about $3.1 billion and projected to grow toward $3.4 billion in 2025.
Techum/TEChum bond funding: Members discussed a proposed expansion of the transportation bonding setaside tied to sales tax distributions. Bybee summarized existing language earmarking $80 million for school modernization bond payments and 4.5% of net sales tax for a tech/transportation program; he said proposals discussed would identify an additional roughly $50 million for bonding if adopted, and that how the change is drafted (percentage versus fixed dollar) affects whether the general fund must make up the difference in lean years.
The committee received a "general fund daily update" green sheet tracking current balances and pending legislative items that will affect general fund availability going into budget decisions. Staff said they will update the committee weekly or biweekly while the legislature is in deliberations and more frequently when appropriation decisions are active.
Committee members noted the implications for local governments and for balancing state reserves and statutory distributions; several urged attention to long‑term stability and to providing committee members the data needed in advance of votes.
