Why Idaho’s Lowered Revenue Forecast Is A Solid Economic Indicator

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Bundles of newly printed 20 dollar bills prepare for distribution.

If fewer Idahoans have jobs, that means the state doesn’t collect as much revenue.  That in turn can determine how much money is available for schools, road repair and health services.

So we took notice last week when the governor’s budget office revised down its estimate of revenue coming into the state’s bank accounts.

The Division of Financial Management typically evaluates its forecast for the coming fiscal year in August and again in January.

In past years, a downward revision in August has meant hold-backs — that’s when the state cuts agency budgets midway through the fiscal year.  But legislative budget and policy analyst Keith Bybee doesn’t anticipate hold-backs this time around.

“We carried over close to $100 million from [fiscal year] 2012 to 2013,” says Bybee.  “We’ve got plenty of reserves to cover the ’13 budget, what will be interesting is the 2014 budget.”

Bybee says if the state doesn’t see significant economic growth between now and then, the state may not have the cash to cover structural imbalances in the budget.  “All bets are off as far as are we cutting or growing the budget [in 2014],” Bybee says.

One of the main reasons DFM revised the budget forecast down is because the Legislature approved a tax cut for Idaho’s top earners.  That means about $30 million automatically disappears from Idaho’s annual balance sheet.

Bybee believes another reason for that forecast change is because Idaho’s jobless rate isn’t steadily improving.  After nine straight months of a declining unemployment rate, that measure of economic health ticked up in May.  It dropped slightly in June.  On Friday we’ll see how July fared.

While these incremental changes to the state’s revenue forecast may not carry much weight for the average person, it’s a significant measure of how Idaho’s economy is faring.