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Idaho’s fiscal process – An interview with the Division of Financial Management

Updated: Aug 10, 2023

We are currently reviewing the fiscal process in the Mountain States to provide a resource comparing Idaho, Montana, Washington, and Wyoming. To help with this project, MSPC reached out to the budget office for each state. Here is my interview with Alex Adams, Administrator for Idaho’s Division of Financial Management (DFM), on Idaho’s fiscal process. The questions we posed are in italics.

Spending/tax limitsDoes the state have a constitutional or statutory spending and/or tax limitation (i.e., supermajority requirement to raise taxes)?

Mr. Adams: “Spending is constrained by the state’s constitutional balanced budget requirement, and Idaho consistently ranks among the most conservative states in terms of spending per capita. Governor Little has upheld this track record while providing Idahoans and local communities with historic investments in critical infrastructure, further promoting a strong state economy into the future.”

Balanced budget requirements Does the state have a constitutional or statutory balanced budget requirement?

Mr. Adams: “Yes, a balanced budget is enshrined in Article VII of the constitution, and the state also strives to avoid gimmicks and ensure structural balance where ongoing expenses are kept in line with forecasted ongoing revenue.”

Restricted/protected reservesDoes the state have a constitutional or statutory requirement for restricted/protected reserves? If yes, is a certain percentage of revenues required to be automatically allocated to reserves?

Mr. Adams: “Idaho Code has automatic transfers to reserve funds if certain revenue targets are met. There are caps on the total amount allowed in some reserve funds. Idaho is currently projecting $1.2 billion in reserve funds, which equates to about 21% of the state’s general fund revenue. This percentage aligns with a national stress test of how much the state should have in reserve to weather the next recession, protecting Idahoans and our state economy.”

Non-partisan revenue forecastDoes the state have a non-partisan revenue forecast process? If not, how are revenue forecasts handled?

Mr. Adams: “Forecasting originates with the economic analysis bureau at DFM. The DFM forecast is presented annually to the bipartisan Economic Outlook and Revenue Assessment Committee (EORAC). EORAC also receives economic information from academic and industry partners before making a final recommendation on revenue targets to the budget committee.”

Budget outlook Does the state have a standing budget outlook process? If yes, how long of a time horizon does it cover?

Mr. Adams: “DFM’s revenue forecasting covers a 5-year period, which helps to ensure the budget will remain balanced over time and continues the state’s strong economic trajectory.”

Line-item veto/discretionary spending reduction authorityDoes the governor have line-item veto authority and/or the authority to reduce agency spending if a deficit occurs?

Mr. Adams: “Yes. In upgrading Idaho to a AAA status, Fitch noted the state’s willingness to make spending cuts when necessary to make mid-year adjustments that benefit the long-term fiscal strength of our state.”

Tax structureWhat are the main tax sources (and rates) for general fund spending?

Mr. Adams: “Idaho’s general fund primarily comes from income and sales tax. Under Governor Little, Idaho adopted a flat income tax rate of 5.8%, which will save taxpayers at least $160 million annually.”

AuditsDoes the state have an independent process for fiscal, compliance, and performance audits of state spending? What entity is responsible for the state’s federal single audit and ACFR?

Mr. Adams: “Yes – Legislative Services Office audit division conducts audits and follow-up reports. The State Controller also operates the outstanding Transparent Idaho website, which tracks all state spending and has targeted reports.”

Performance-based budgetingDoes the state place high-level performance outcomes directly into the budget?

Mr. Adams: “Yes – every agency must submit a Performance Measurement Report with their budget. Performance measures tie to each agency’s strategic plan, and budget requests tie to both documents.”

Credit ratingsWhat are the current credit ratings for the state?

Mr. Adams: “Idaho was recently upgraded to AAA status by both Moody’s and Fitch, the first time the state has achieved this status. This upgrade under Governor Little’s leadership signifies the strength of our economy and ultimately saves taxpayer dollars.”

Thank you, Mr. Adams, for your time answering these questions and your service to Idaho.

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