How Will Idaho Legislators Make Big Budget Cuts?

By Sharon Fisher, 10-19-09

In Idaho, just about everywhere you look these days are legislators and legislative staff muttering dire warnings about how much next year’s state budget is going to have to be cut when the legislators go back into session in January (in their shiny newly renovated Statehouse, though that came from a different budget).

“Idaho’s Medicaid program could see a shortfall so extreme it’d have to eliminate 23 percent of the health benefits it provides to the state’s poor and disabled,” says Betsy Russell in the Spokesman-Review.

“The Legislature’s budget chief says Idaho’s grave financial picture may require major reforms in state programs, including additional austerity measures and possible fee increases at universities and state parks,” says the Associated Press‘ John Miller.

“A budget analyst, Cathy Holland-Smith, said lawmakers will likely consider wholesale changes to meet their constitutional duty to write a balanced budget,” says Dan Popkey in the Idaho Statesman.

“I believe this legislative session you will see a major restructuring of how government services are delivered,” the Division of Financial Management’s Wayne Hammon reportedly told the Idaho Lodging and Restaurant Association.

Okay, we get it.

The question is, how, logistically, is this going to happen? What is the process going to be? Where are the legislators going to get the information they need to be able to make the cuts?

There have been times—as recently as September, when Governor C.L. “Butch” Otter ordered holdbacks, or budget reductions in the current fiscal year, for a majority of state agencies—when legislators or the Governor simply give the agencies a dollar or percentage figure and tells them it’s their job to figure out how to do it.

And, you know, there’s something to be said for that method. Who knows better than the agency heads where cuts can and can’t be made? Is it the legislators’ job to be making this sort of day-by-day decision on what the agencies should be doing? So maybe agencies will get a number, and be told to make it happen.

On the other hand, one of the other suggestions going around is consolidating state agencies, which is something that agency heads wouldn’t be able to do on their own. Otter is also telegraphing that he’d be okay with this method.

After all, it worked so well when then-Governor Dirk Kempthorne consolidated Commerce and Labor in 2004—which Otter undid in 2007, amid the belief that the agencies never really came together.

There’s also been discussion of killing some agencies and departments wholesale. However, Otter found out for himself in 2007—when he proposed eliminating the Department of Administration—just how hard that is to do. In fact, Admin—now run by Otter’s good buddy Mike Gwartney—actually asked for more money this year, noting how the department was helping the state save money in the long run by consolidating technology.

Certainly the Governor’s Zero Based Budgeting Initiative will have some effect. In its first year, Otter proposed cuts of up to 55.83 percent to agencies such as Parks and Recreation, Public Broadcasting, and Agriculture, by working with the agencies to find what they were doing that was not required by statute. According to the calendar, agencies scheduled for the ZBB process for the next legislative session are:
• Idaho Department of Commerce
• Idaho Department of Labor
• Idaho Industrial Commission
• Idaho Commission on Aging
• Idaho State Liquor Dispensary
• Idaho Department of Administration
• Capital Budget
• Idaho Department of Health and Welfare (Medical Assistance)
• Idaho Department of Fish and Game
• Idaho Department of Water Resources
• Idaho Department of Correction (Management Services)
• Idaho State Police
• Idaho Division of Building Safety

There are some pretty high-ticket agencies there—Medicaid, Corrections—and it’s possible to see some significant savings, though for some reason the ZBB process hasn’t been coming up in legislative or executive discussions thus far.

If legislators are going to be cutting individual programmatic functions in other agencies, though, it’s going to be interesting to see how they do it. Currently, the Legislative Budget Book used by the Joint Finance-Appropriations Committee JFAC) uses an “incremental” way of describing the budget for the new fiscal year. In other words, it starts with the amount the agency received the previous year, then makes various adjustments to that figure to produce a “maintenance” figure—which would allow the agency to continue doing what it’s been doing—then adds new programs and requests.

Another way to say it: the programs that have been approved in previous years aren’t listed in detail in the budget book, at least as it currently exists. So it’s not clear how members of JFAC would receive program-specific information in order to cut existing programs. Certainly the budget development manual provided by DFM to the agencies doesn’t look any different.

Currently, agencies were supposed to have delivered their budgets by September 1, while the Legislative Services Office and DFM each work with the agencies in order to produce the budget book, which will come out in January after Otter makes his “state of the state” message, according to the usual budgeting schedule.

How the process is defined for this year will reveal a great deal about how the Governor and Legislature plan to cut the budget.