JFAC hears program-maintenance plan and sales-tax distribution analysis; staff flags reduced general-fund share

Budget staff briefed the Joint Finance-Appropriations Committee on the committees program maintenance approach, the sequencing of hearings, and a detailed breakdown of sales-tax distributions that have reduced the share of gross sales tax dollars flowing to the general fund.

Keith Bybee, Division Manager of Budget Policy Analysis, explained that the program maintenance work is organized into 10 functional appropriation bills covering major areas of state government. Bybee said program maintenance will include the base budget plus four common building blocks: benefit cost adjustments (including CEC and health insurance), contract inflation, statewide cost allocation (SWCAP), and other adjustments. Bybee told members the intent is to include all CEC-related changes in the program maintenance bills this year rather than in a separate bill.

Bybee described the split between program maintenance bills and enhancement bills. Enhancement bills will include replacements (regular and IT), population-forecast adjustments (formerly called "non-discretionary"), general inflation requests, and other new spending. He said separating these pieces gives JFAC more opportunity to evaluate forecast-driven growth (for example, Medicaid and public school support) rather than automatically rolling them into base budgets.

Bybee outlined the schedule: members will have a hearing and walk-through of adjustments, then Friday decision-making on program maintenance bills; earlier hearings on four focused items would be treated the Thursday before the maintenance decisions to allow ample discussion. He also said replacement items are split into separate decision units for regular replacement and IT replacement to give more transparency on cyber-security and technology refresh needs.

On the potential scale of program maintenance, Bybee presented an illustrative total: if the legislature followed the governors plan exactly, the 10 program maintenance bills could total about $12,859,224,200 for the 2026 program maintenance cycle. He cautioned that the illustration was hypothetical and that the committee can add to or subtract from those totals during deliberations.

Bybee also presented a detailed review of how gross sales-tax collections are distributed under existing statute (Idaho Code 63-36) and other formulas. He summarized the trend: decades ago the general fund received roughly 85286% of gross sales tax; under current statutory earmarks and distributions the general funds share is projected at about 65% in fiscal year 2025. Several dedicated distributions were noted: revenue sharing (11.5% of net collections) to local governments, a 4.5% earmark (with $80 million identified for bonding) that supports transportation projects (referred to in testimony as the Techum program), and a transfer to the Tax Relief Fund that in 2025 is projected to route hundreds of millions with a $236 million earmark to the general fund in the current plan. Bybee warned that shrinking the share of sales tax available to the general fund reduces fiscal flexibility in downturns and may require larger cuts or changes in local distributions when revenues decline.

Members asked clarifying questions about where particular items will be discussed in the schedule, how replacement and IT requests will be organized, and specifics of the Techum distribution. Bybee said a proposed Techum bond carve-out has been discussed (an additional $50 million on top of an $80 million bonding earmark was described as a possible proposal) but that he had not seen formal legislation on that item yet. Representative Petzke asked how a percentage-based earmark interacts with a fixed bond payment; Bybee said statute includes a guarantee of at least the $80 million earmark for bonding and that additional proposals would need explicit drafting.

Why it matters: The organization of program maintenance affects how the Legislature evaluates ongoing costs and separates growth from maintenance. The sales-tax distribution changes described by staff reduce the general funds flexibility and will factor into decisions about reserves, transfers, and cuts if revenues soften.

Next steps: JFAC scheduled walk-through hearings followed by decision sessions on the program maintenance bills next week; budget staff will provide the committee with bill language and comparative tables showing agency, governor, and hypothetical program-maintenance figures.