Budget staff outline program-maintenance bills, sales tax distributions and caution on falling general-fund share

Keith Bybee, division manager for budget policy analysis, briefed the Joint Finance-Appropriations Committee on the structure of program-maintenance appropriation bills and presented sales tax distribution data showing a shrinking share of gross sales tax moving to the general fund.

Bybee said program-maintenance bills are organized into 10 functional areas (for example, general government, judicial, public safety, public school support, health and human services, natural resources and economic development) and will include the base budget plus adjustments that fall between two budgetary benchmarks: personnel/benefit cost adjustments (including CEC outcomes and health insurance), contract inflation, statewide cost allocation and other maintenance adjustments.

Replacement items, population forecast adjustments (formerly called nondiscretionary), general inflation and other enhancement requests will be considered in separate enhancement bills. Bybee said the distinction is intended to give the legislature more transparency and more time to weigh growth-driven spending such as population-driven Medicaid or school-support adjustments.

As an example, Bybee showed a hypothetical total program-maintenance number of about $12.86 billion if the governor's recommendations were followed exactly. He also used a natural-resources example to illustrate how base appropriation, benefit cost adjustments and other maintenance items accumulate to a program-maintenance total and noted that program maintenance does not preclude subsequent additions or subtractions by the committee.

On sales tax, Bybee walked through distributions and noted that gross sales-tax collections are projected to increase (about $3.10 billion in 2024 to $3.37 billion projected in 2025 in the budget book), but statutory distributions reduce the share available to the general fund. He explained that revenue sharing (11.5% of net collections) and other statutory earmarks ' including a 4.5% allocation for the Techum program (with $80 million already earmarked for bonding) and a new Tax Relief Fund transfer tied to online sales ' reduce the percent of sales tax that becomes general fund revenue. Bybee said the general fund's share of sales tax has fallen from about 85-86% during the Great Recession era to roughly 65% in recent projections.

Committee members asked about the Techum allocation and the proposal discussed to earmark an additional $50 million for Techum-related bonds; Bybee said whether that change is implemented as a percentage carve-out or as a fixed dollar amount will determine whether the additional funding reduces general-fund resources. Representative Petzke asked how a percentage-based carve-out would behave in a downturn; Bybee noted statutory language currently guarantees at least $80 million of the Techum allocation for bonding.

Members emphasized the implications of reduced general-fund share for future downturns, and several offered to help new committee members review the legislative budget book and agency-level detail before program-maintenance hearings. Bybee also distributed the committee's daily general-fund update and said the office will provide corrected tables where minor transcription errors existed in the printout.

The committee used unanimous consent earlier to reorder the agenda so that maintenance-budget presentations were heard before other items.

Bybee concluded the presentation and said program-maintenance hearings and decisions are scheduled for the coming week.