Is Idaho Winning A Race To The Economic Bottom? That Depends On Who You Ask

Emilie Ritter Saunders / StateImpact

Mike Ferguson spoke to Boise's City Club on March 13, 2013.

Many of Idaho’s monthly and quarterly economic indicators are good. The state’s unemployment rate has dropped steadily, tax collections are on-par with forecasts, gross state product is growing, and so are incomes.

But economist Mike Ferguson says it’s not that simple. To get a true sense of where Idaho stands economically, Ferguson says, it’s important to look at where Idaho has been, and what’s going on in our neighboring states.

Ferguson directs the Idaho Center for Fiscal Policy. Before that, he was Idaho’s chief economist for 25 years working under six different governors. As StateImpact has reported over the last two years, Ferguson is critical of Gov. C.L. “Butch” Otter’s economic development policies, particularly cutbacks in state funding of public services.

Ferguson packaged his concerns in a speech to Boise’s City Club this week. We’ve posted the full audio of his talk here:

In a nutshell, Ferguson says Idaho’s tax policies have eroded state services, mainly education, and that’s partly to blame for a slow recovery from the recession.

“What many Idahoans don’t realize is that Idaho has gone from being at the top of the charts, the little economic engine that could,” said Ferguson, “to being the nation’s economic caboose.”

Ferguson says the tax cuts that the Idaho Legislature began enacting in 2000 have resulted in a loss of vital revenue that was used to pay for schools, Medicaid, higher education, and other public services. According to Ferguson’s analysis, those tax cuts add up to $350 million in forgone revenue over the last 12 years.

“Shouldn’t we be celebrating these record-low taxes?,” Ferguson asked rhetorically. “Yesterday [Tuesday], I heard the governor’s commerce director say that we need to fully exempt business personal property so that we can ‘drive business operating costs to the lowest point possible’. That apparently is this administration’s economic development policy. It’s not working.”

In response to Ferguson’s critique, Commerce director Jeff Sayer says the Otter administration’s economic policies are working, but results aren’t yet measurable.

“We acknowledge and recognize some of the data being used is negative,” says Sayer. “We feel like there is not only a lot of momentum, but the strategic direction we’re heading will correct a lot of those concerns in time.”

Molly Messick / StateImpact Idaho

Idaho Commerce Director Jeff Sayer.

Sayer points to the million-square-foot Twin Falls Chobani facility that started making Greek yogurt back in December. He says that’s a prime example of Idaho targeting a company that will benefit an entire region and boost agriculture production in the Magic Valley.

Director Sayer says the agency has shifted its strategy on how they’re recruiting and maintaining business in Idaho since he took the helm of the Commerce Department in late 2011.

He says they’re focusing first on existing companies and helping those businesses grow. Sayer says that’s the fastest way the state will add jobs. He says they’re also taking an analytical approach to recruiting new companies to the Gem State, looking first at how a new business would impact Idaho’s overall economy, rather than “just adding jobs for jobs’ sake”.

Ferguson contends the state will have a difficult time recruiting and retaining private business if state government services aren’t reliable. He says lawmakers were frugal during Idaho’s peak-growth years of the 1980s and 90s, but willing to preserve public services. He says that’s changed with the tax cutting of the 2000s.

“Business should constantly strive to lower its costs. So should government,” said Ferguson. “But there’s a difference between prudent cost-cutting and irresponsible hacking of vital systems.”

Sayer says he respects Ferguson’s level of experience as an economist, but believes Ferguson’s analysis is based too heavily on historical data. The commerce director says he’d like to be on a panel with Ferguson to talk through some of Idaho’s challenges and come to a consensus about how to fix parts of the economy that are struggling.

“We have a lot of respect for Mike Ferguson,” says Sayer. “But where his glass is half empty, ours is overflowing.”