Staff outlines program-maintenance process; sales tax distributions highlighted as shrinking share for general fund

Budget staff and committee members discussed the structure and timing of program maintenance bills, the decision units that compose them, and how statutory sales tax distributions reduce the portion of sales tax available to the general fund.

Keith Bybee, Division Manager of Budget Policy Analysis, explained why program maintenance appropriations are organized into 10 functional areas (for example, separate appropriations for public school support and state Board of Education agencies) and what is included in program maintenance: the fiscal “building blocks” between the base budget and maintenance benchmark (personnel benefit cost adjustments including CEC items, contract inflation, statewide cost allocation and the CEC adjustments themselves). He said the goal is to include CEC items in program maintenance this year to standardize decision-making.

Bybee noted that program maintenance is distinct from enhancement bills, which will include replacement items, IT replacement requests, population forecast adjustments (formerly called nondiscretionary), and other growth items such as Medicaid caseload changes. He and other members explained the intent is to provide the legislature more opportunity to scrutinize forecast-driven growth requests rather than treat them as automatic.

Bybee presented an illustrative statewide program-maintenance total nearing $12.86 billion if one followed the governor’s plan; he stressed this was an example rather than a recommendation. He also showed a comparative example for Natural Resources to demonstrate the building-block approach: start from the prior appropriation, remove one-time items to determine the ongoing base, then add benefit adjustments and contract inflation to reach the program-maintenance level.

On sales tax distributions, Bybee summarized the statutory formula (Idaho Code §63-36 referenced in the legislative budget book) and showed that over time the general fund’s share of gross sales tax collections has declined: where about 85–86% of sales tax went to the general fund before the Great Recession, Bybee said about 65% of sales tax collections are available to the general fund in the current projection once statutory distributions are applied. Those statutory distributions include revenue sharing to local governments (11.5% of net collections), a 4.5% allocation for the “Techum” program (with $80 million earmarked for bonding and any overflow to local transportation districts), and the tax relief fund (revenues from online retailer sales tax flows) which is earmarked to schools and other funds and reduces the net sales tax to the general fund.

Committee members raised questions about the Techum allocation and how a fixed-dollar bond commitment interacts with percentage-based statutory allocations. Bybee said the current statute contains both the percentage calculation and a guarantee (the $80 million identified in code) and that proposed changes (for example, adding another $50 million to bond programs) would need to be drafted in legislation; depending on how a proposal is written, the additional amount could come from within existing distributions or reduce the general fund.

Several members emphasized the policy implication: as more statutory earmarks are added to the sales tax distribution formula, a smaller portion of sales tax is available to this committee for general fund appropriations, which reduces the legislature's flexibility in a future downturn. Bybee and other members said the committee will receive program-maintenance hearing materials in advance and will decide program-maintenance adjustments and enhancements in upcoming hearings.