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Sales‑tax earmarks shrink Idaho general fund’s share; staff warns of larger cuts in future downturns
Summary
Budget staff outlined how statutory sales‑tax distributions and new earmarks have reduced the share available to Idaho’s general fund from historic levels, increasing the potential need for deeper cuts during a revenue downturn.
Keith Bybee, division manager of budget policy analysis, presented new charts showing how statutory earmarks and distribution formulas reduce the portion of gross sales tax that reaches the general fund.
"You can count on sales tax to help you through the recession," Bybee said, but he warned the legislature has rerouted a growing portion of sales‑tax receipts to other statutory uses, reducing the percentage available for general‑fund appropriation.
Bybee showed historical comparisons indicating the general fund’s share of sales tax receipts declined from roughly 85% during the Great Recession era to about 65% in the fiscal‑year‑2025 projection after accounting for revenue sharing, a tax relief fund, school modernization and other statutory distributions. He pointed to growth in the tax relief fund (money routed from online retailer sales tax collections) as a major driver of the shift.
The presentation included discussion of an existing statutory allocation that directs 4.5% of net sales tax to a program described in the staff materials (discussed in the meeting as the Tech‑program line). The statute referenced for the sales‑tax distribution formula was Idaho Code 63‑3638 (as cited in the presentation materials).
Committee members asked how additional earmarks for bonding would affect the general fund. Bybee responded that if an additional $50,000,000 were carved out for bonding in the same statutory framework, the effect could be to reduce amounts flowing to the general fund unless offset by other changes.
Representative Petzke asked why some statutory allocations are expressed as percentages rather than fixed dollar amounts; staff said the percentage approach was carried forward from earlier policy decisions and that some statutes contain secondary guarantees (for example an $80,000,000 guarantee for certain bonds) to address variability.
Committee members cautioned that, because so much sales tax is now distributed before JFAC sets the budget, future recessions might force deeper cuts or require the legislature to reclaim portions of those distributions to meet core obligations. Bybee summarized: "It's not the bad years that get you, it's what you do during the good years that get you," urging members to consider long‑term effects of permanent earmarks.
Why it matters: Sales tax is Idaho’s most stable major revenue source; statutory earmarks and new programs that divert receipts reduce the pool JFAC can use in downturns. The presentation framed policy tradeoffs between local and targeted programs and flexibility for the state general fund.
What was not decided: No statutory changes were proposed or voted on in the meeting; staff presented information to frame future debates about earmarks and bonding.
