Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the State Sales Tax topic
No spam. Unsubscribe anytime.
Staff outlines sales-tax distributions, Tax Relief Fund and Techum bond carve-outs; members warn of shrinking general-fund share
Summary
Budget staff explained statutory sales-tax distribution mechanics, the growing Tax Relief Fund share from online sales, and how Techum funding and other earmarks have reduced the portion of sales tax flowing to Idaho's general fund from historical norms; members warned this leaves less flexible revenue if a downturn occurs.
Division of Budget Policy Analysis staff briefed the Joint Finance-Appropriations Committee on statutory sales-tax distributions and how recent earmarks and the growth of the Tax Relief Fund have reduced the share of gross sales tax that flows to the general fund.
Why it matters: Sales tax is Idaho's most stable revenue source, but statutory distributions (revenue sharing, Techum allocations, school modernization, tax relief fund transfers and other earmarks) mean a smaller share of collections is available for the state's general-purpose budget. That leaves the Legislature with less discretionary revenue to manage downturns.
What staff said: Keith Bybee explained the distribution formula (referencing Idaho Code section 63-36), noting that gross sales-tax collections have grown but multiple statutory distributions reduce the amount available to the general fund. He said net distributions to the general fund in the 2025 projection represent roughly 65 percent of sales-tax collections, down from about 86 percent before the Great Recession.
Bybee explained components that reduce the general-fund share: statutory revenue sharing to cities, counties and special districts (11.5 percent of net), the Techum allocation (a 4.5 percent statutory share of net collections, with $80 million currently identified for bonding), a school modernization fund ($125 million earmark), and a Tax Relief Fund that receives revenue from online retail sales and is programmed to distribute $236 million to the general fund in the current planning horizon. The Tax Relief Fund also directs money to specific programs and local distributions before remitting a set amount to the general fund.
Techum bond question: Committee members asked how a proposed additional Techum carve-out would work. Bybee said he had not seen draft legislation but explained two ways an additional $50 million could be constructed: (1) identify $130 million total for Techum bonds within existing percentage calculations (which would require only a modest adjustment if revenue growth supports it), or (2) treat the $50 million as an additional carve-out above the statutory percentage, in which case the dollars would effectively come from the general fund.
Member concerns: Several committee members warned that the combination of earmarks and new transfers could leave the general fund more vulnerable in a downturn. Cochair Horman and others noted the state has sizable reserves but that the smaller share of sales tax flowing into the general fund reduces flexibility and could force deeper cuts to programs or require reductions in funding to local governments during a recession.
Context: Bybee said sales tax remains a relatively stable revenue source during recessions compared with income and corporate taxes, but the legislature's prior decisions to direct portions of sales tax to specific purposes turn a common pool of revenue into a set of restricted streams, reducing JFAC's ability to respond to shocks.
Next steps: Staff will update written tables in the Legislative Budget Book and provide corrected charts; members said they will continue to evaluate statutory distributions and any bills that would alter the sales-tax carve-outs.
