Legislative budget staff presented a new overview of sales tax collections and statutory distributions, showing that total sales tax collections are growing but that statutory earmarks and transfers reduce the portion available to the general fund.

Staff told the committee sales tax gross collections were projected to rise from about $3.1 billion in 2024 to $3.37 billion in 2025 and roughly $3.5 billion in 2026. After refunds and transfers (including the statutory transfer to the tax relief fund for online sales), net collections available for distribution were lower. The statutory distribution formula (Idaho Code §63-3638) directs portions of net sales tax to revenue sharing (11.5% of net collections), Techum (4.5% of net collections), school modernization ($125 million earmark), and the tax relief fund (which in turn sends dollars to several purposes and earmarks $236 million for the General Fund in the projection described to the committee). The effect is a smaller share of gross sales tax dollars flowing into the general fund: staff showed general-fund receipts as roughly 65% of gross sales-tax collections in the FY2025 projection.

Staff cautioned that as more sales-tax dollars are earmarked by statute, the legislature has less flexible revenue in the general fund to address recessions. A chart presented compared historical shares and showed a fall from a much larger general-fund share in earlier decades to the present share. Staff advised that during downturns, personal-income and corporate-tax volatility increases and a reduced general-fund share of sales tax can require harder cuts or taking funds back from other statutorily directed recipients.

Committee members questioned how Techum distributions operate. Staff explained Techum receives 4.5% of net collections; code currently identifies $80 million for bonding and any additional revenue can flow to local transportation districts. Members asked whether a proposed additional $50 million for Techum bonding would be carved from the existing 4.5% structure or added on top of it. Staff said no bill had been seen yet; if the additional $50 million were added to the distribution formula it would reduce the general-fund remainder. If the earmark were defined by a fixed dollar amount or layered over existing percentages, the fiscal effect would differ and would need to be specified in bill language.

Representative Petzke asked about the choice of percentage versus fixed dollar earmark; staff said the current structure reflects past legislative choices when revenue levels differed and that the statutory design combined percentage calculation with an $80 million guaranteed bond amount for Techum. Representative Handy and others noted that local governments benefit from spillover when the Techum threshold is exceeded.

—Ending—