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Staff brief: sales‑tax distributions, Tax Relief Fund and earmarks reduce general‑fund share
Summary
Budget staff outlined how statutory sales‑tax distributions — including a Tax Relief Fund and a Techum allocation (percentage plus an $80 million bonding guarantee) — reduce the share of gross sales tax that flows to the general fund, and flagged potential longer‑term implications in a downturn.
Legislative budget staff reviewed sales‑tax collections and the statutory distribution formula and warned that earmarks and programmatic transfers have reduced the portion of sales tax available to Idaho’s general fund.
Keith Bybee told JFAC that gross sales tax collections continue to grow — staff cited about $3.1 billion collected in 2024 with projections of roughly $3.37 billion in 2025 and $3.5 billion in 2026 — but that statutory distributions (revenue sharing, Techum allocations, school modernization, the Tax Relief Fund and other earmarks) reduce what remains for the general fund. "If the next revenue recession happens, those are usually the times where personal income goes down," Bybee said, adding that sales tax is a relatively stable revenue source but that the general fund’s effective share of sales tax has declined from the mid‑80s percentage in earlier decades to an estimated mid‑60s percent under current distributions.
Key points staff highlighted: - Revenue sharing to local governments equals 11.5 percent of net sales‑tax collections under statute. - A designated share (described in the presentation as 4.5 percent of net collections) is used for the Techum program with $80 million earmarked for bonding; any spillover above those earmarked amounts was described as flowing to local transportation districts. - The Tax Relief Fund — driven by sales tax on online retail purchases and distributed under statute — channels substantial receipts to prescribed uses (public schools facilities and public defense and a $236 million earmark to the general fund in the presentation), which increases the portion of sales tax that bypasses direct general‑fund appropriation discretion.
Staffers emphasized there are policy tradeoffs: statutory earmarks make dedicated funding more predictable for certain programs (schools, roads, local government) but reduce the flexible pool JFAC uses in downturns. Members noted that reducing the general fund share can require larger cuts or reversing local distributions in a recession if revenue falls.
Legal references and bills cited in the discussion included Idaho Code section 63‑36 (sales‑tax distribution formula), the Tax Relief Fund distribution language and prior legislation (identified in the presentation as House Bill 521 and House Bill 1) that changed recent distribution commitments.
Bybee concluded with a cautionary point that while sales tax provides stability in recessions, the legislature’s increasing statutory commitments to specific programs lower the general fund’s available discretionary share and can require sharper decisions when revenues decline.
