Idaho's budget hole just got a lot worse
Big requests = big problems this year, and even bigger ones in FY27
Gov. Brad Little and state lawmakers are now facing an even bigger hole in the current year’s budget than anticipated. The Idaho Department of Health and Welfare says it needs another $60 million in support from state taxpayers during the fiscal year that ends June 30, while the Idaho Department of Correction is asking for an extra $11 million.
And those figures already have the governor’s midyear emergency spending cuts factored in.
The new information comes from IDHW’s IDHW's and IDOC's filings with the governor’s budget office, the Division of Financial Management.
Much of the IDHW’s increase, according to the agency, is due to increases in Medicaid utilization and federal requirements for managing the state-federal program that used to be exclusively for the very poor and disabled.
The state prison system says it needs the additional funds to cover costs for its contract medical provider and for additional county and out-of-state prisoner placements.
Combined with state tax revenues coming in $39 million below forecast for July and the expected impact of the Trump administration’s tax cuts, if fully implemented, the agencies’ requests for more money would push the state’s budget deficit to between $250 million to $300 million.
The Little administration has already demanded agencies — excluding public schools — cut spending, right now, by 3% spending. That action would have closed the gap (minus implementing the Trump tax cuts), but now it’s not enough money to cover the new hole from these two agencies and their emergency spending requests. This latest information means:
The governor could increase the size of the spending cut now or push the job onto lawmakers when they arrive in Boise come January.
Little or the Legislature could rescind the decision to spare cuts to public schools, requiring schools to conform to a 3% holdback or some other amount.
The Legislature might choose to opt out of giving Idahoans the benefit of the Trump tax cuts by conforming to just some or none of the new federal tax code’s provisions.
The Legislature could require the agencies to come up with the funds out of their existing budgets, but this would probably require statutory changes to programs the agencies manage.
One thing is increasingly apparent, however, and that is that even without adopting the Trump tax cuts, the state government finds itself in an increasingly large deficit situation for this year, a trend that doesn’t seem on the verge of reversing, at least for now.
More problematic for the state, however, is how the government will deal with the next budget year, the one that starts July 1 and runs through June 30, 2026. Medicaid itself is expected to add another $200 million in costs for state taxpayers.
The Department of Health and Welfare, led for now by the highly capable Alex Adams — he’s awaiting U.S. Senate confirmation to work for the Trump administration — seems to have been trying to head of a disaster in slow motion by cutting provider payments, but the issues in both agencies are more systematic.
The Medicaid problem is not new. It has been going on for 25 years. And so far, almost nothing has been done to really bring spending under control because such would require big decisions that lawmakers and governors previously have been unwilling to make.