— NOTE: This is a corrected version of the original post. It reflects a $27.4 million transfer to the Budget Stabilization Fund in FY 2014 that was omitted from the original post. Thanks to the Legislative Services Office for pointing out that error. This correction reduces the ending balance shown for FY 2014 to $126.9 million. It does not change the estimate of an additional $162 million in General Fund revenue for FY 2013 and FY2014 (assuming May and June 2013 revenues are on target, and the revenue growth rate for FY 2014 remains unchanged at 5.3%), and it does not change the estimate of a $96.1 million positive ongoing funding gap in FY 2014.
The May 2013 Idaho General Fund Revenue Report opens the possibility Idaho will have $162 million more in revenue on hand (than was expected less than two months ago) when the Legislature convenes in January 2014.
On May 7th, 2013 the Idaho Division of Financial Management (DFM) released April 2013 General Fund revenue results. You can access that report here.
What it shows is overall revenue exceeded the projected amount for the month by $56.4 million (13.2%), and now stands $79.1 million (3.5%) higher than projected for the first ten months of fiscal year 2013. This is a significant departure from the revenue forecasts the FY 2013 and FY 2014 budgets are based on, and it has significant implications for the fiscal condition Idaho’s state budget faces in those two years (and beyond).
Starting with FY 2013, if the months of May 2013 and June 2013 come in exactly on target, FY 2013 will end the year with 5.8% General Fund revenue growth, rather than the 2.7% growth the Executive and Legislative budgets were based on. Assuming there are no unanticipated reversions or rescissions, this will trigger an additional $59.1 million transfer to the Budget Stabilization Fund (per House Bill 345) in FY 2013, a $20 million higher FY 2013 ending balance, and a $27.4 million transfer to the Budget Stabilization Fund in FY 2014 (per Idaho Code 57-814).
These changes can be illustrated using a revised version of the table on page A-26 of the 2013 Legislative Session Budget Activities Summary published by DFM. Instead of comparing the ‘Revised Executive Budget’ and the ‘Legislative Appropriation’ columns, this version compares the ‘Legislative Appropriation’ column (i.e., as of the end of the 2013 Legislative session) and a new ‘Legislative Appropriation With General Fund Revenue Through April 2013’ column. Here’s the revised table:
Because of House Bill 345, the extra $79.1 million in FY 2013 General Fund revenue goes to two places: up to the first $20.0 million of ending balance above the amount provided in the Legislative Appropriation stays in the General Fund and simply increases the ending balance. Any additional amount above $20.0 million is transfered to the Budget Stabilization Fund, in this case $59.1 million.
Shifting to FY 2014, if the forecasted General Fund revenue growth rate of 5.3% that was adopted by both the Executive and Legislative budgets remains unchanged, the resulting amount of General Fund revenue forecast for FY 2014 is $2,882.4 million – an $83.3 million increase over the revenue number that was used in the FY 2014 budget. Also, because FY 2013 General Fund revenue growth is now expected to grow by 5.8%, that triggers a $27.4 million transfer to the Budget Stabilization Fund in FY 2014. When combined with the $20 million higher beginning balance (from FY 2013), this brings the projected FY 2014 ending balance up from $51.0 million to $126.9 million.
These changes can be illustrated using a revised version of the table on page A-30 of the 2013 Legislative Session Budget Activities Summary published by DFM. As above, instead of comparing the ‘Revised Executive Budget’ and the ‘Legislative Appropriation’ columns, this version compare’s the ‘Legislative Appropriation’ column and a new ‘Legislative Appropriation With General Fund Revenue Through April’ column. Here’s the revised table:
The key changes are a higher beginning balance (up $20 million), higher FY 2014 General Fund revenue (up $83.2 million), a $27.4 million transfer to the Budget Stabilization Fund, and a higher ending balance (up $75.9 million). Not shown, because it was transfered to the Budget Stabilization Fund in FY 2013, is the $59.1 million that would have rolled over into the FY 2014 beginning balance were it not for House Bill 345.
The most significant aspect of the April revenue result is its impact on future budget decisions. This can be seen by looking at ongoing revenues versus ongoing expenditures. At the end of the 2013 Legislative session ongoing FY 2014 revenue was expected to be $2,775.3 million: the $2,799.1 base revenue forecast minus $23.8 million in ongoing revenue adjustments (see 2013 Legislative Session Budget Activities Summary page A-17). Most of the revenue adjustments ($20 million) were to pay for new business personal property tax exemptions. Ongoing appropriations were set at $2,762.4 million (see 2013 Legislative Session Budget Activities Summary page A-24), yielding a positive funding gap of $12.9 million. If the base revenue figure increases by an additional $83.2 million, the funding gap grows to $96.1 million. This is an indication of the amount of “surplus” ongoing revenue that could be in play when the legislature returns for the 2014 session in about 8 months.
The April revenue results have profound implications for fiscal decisions that will be made in the next legislative session. While the numbers will change (for example, we don’t yet know actual May and June revenue numbers, and we don’t know what revised forecast growth rate will be used for FY 2014), it is clear there will be substantially more revenue available than policymakers thought less than two months ago. How this additional revenue is utilized will depend on Idaho’s public policy priorities.