{"id":3555,"date":"2012-01-10T10:57:36","date_gmt":"2012-01-10T17:57:36","guid":{"rendered":"http:\/\/stateimpact.npr.org\/idaho\/?p=3555"},"modified":"2012-04-18T11:51:24","modified_gmt":"2012-04-18T17:51:24","slug":"idahos-former-chief-economist-critical-of-govs-budget-proposal","status":"publish","type":"post","link":"https:\/\/stateimpact.npr.org\/idaho\/2012\/01\/10\/idahos-former-chief-economist-critical-of-govs-budget-proposal\/","title":{"rendered":"Idaho’s Former Chief Economist Critical of Gov’s Budget Proposal"},"content":{"rendered":"
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State of Idaho<\/p>

Mike Ferguson heads the Idaho Center for Fiscal Policy.<\/p><\/div>\n

Mike Ferguson was Idaho’s chief economist for 26 years.\u00a0 He left the post in 2010, and heads the new Idaho Center for Fiscal Policy, a non-profit that analyzes state tax and budget policy.\u00a0 StateImpact asked Ferguson to review the governor’s budget proposal, and the policy priorities it contains.<\/em><\/p>\n

<\/strong>Q: <\/span>This seems like a different budget than those we\u2019ve seen in recent years.\u00a0 Do you agree?<\/p>\n

A: <\/span>Well, it has the beginning of a recovery. Instead of dealing with an ever-declining revenue stream, we\u2019re seeing revenues recover.\u00a0 I think one could potentially question how the resources are allocated within that budget.<\/p>\n

Q:\u00a0 <\/span>Right.\u00a0 We start to see what the governor\u2019s spending priorities are now that there\u2019s money to allocate, right? <\/p>\n

A: <\/span>\u00a0Correct.<\/p>\n

Q: <\/span>The $45 million set aside for tax cuts is arguably the biggest news out of the address.\u00a0 The governor isn\u2019t putting forward a plan for those cuts, but there is talk of bringing the top income tax rate down from 7.8 percent to 7.6 percent.\u00a0 As I understand it, that top rate is only paid by people who make $100 thousand or more in annual taxable income.\u00a0\u00a0 If the aim is job creation, how would this accomplish it?<\/p>\n

A: <\/span>That\u2019s a very good question, and I\u2019m not sure I have an answer for you.\u00a0 What I can do is point to some past experience here in Idaho.\u00a0 In the decade of the 80s, we raised the corporate income tax, the individual income tax, the sales tax.\u00a0 Corporate went from, I believe, 6.5 percent to 8 percent over that decade.\u00a0 Individual went from a top rate of 7.5 to 8.2 and the sales tax went from 3 to 5 percent. \u00a0Now, one would think that tax increases of that kind would undermine our economic performance.\u00a0 Yet, in the following decade when those higher taxes were in place, we had some of the best economic performance of the state\u2019s history. Those taxes that were collected didn\u2019t go into a black hole.\u00a0 They were raised, basically, to fund education.\u00a0 Education kept pace.\u00a0 And I think it\u2019s really hard to overstate the importance of education in terms of its role in economic development.\u00a0 When companies are looking to locate, they\u2019re concerned about their families, their employees\u2019 families, and having a good education system is really important.<\/p>\n

Q: <\/span>Well, I think the governor would say \u2013 his budget allocates more than $30 million to fully fund the mandates from last session.\u00a0 That\u2019s not, I guess, satisfactory?<\/p>\n

A: <\/span>I don\u2019t know what is satisfactory, but I\u2019ve been looking at the amount of money that\u2019s been going to education in Idaho, and you can\u2019t look at the raw dollar amounts.\u00a0 You have to look at it in relative terms.\u00a0 Again, if we go back to the period in the \u201880s and the \u201890s, we basically saw education growing in keeping with the overall budget.\u00a0 We saw some tax adjustments that were made to keep the funding levels for education up.\u00a0 And I\u2019m talking about the total amount of spending, not just the general fund.\u00a0 Over that period, the total amount of money that Idaho was committing to education was about 4.5 percent of Idaho\u2019s personal income.\u00a0 This is K-12.\u00a0 That\u2019s the amount we were investing in our children.<\/p>\n

Since 2000, we\u2019ve seen that amount drop by over 20 percent.\u00a0 It has gone from 4.4 percent, on average, from the ’80s and ’90s to 3.5 percent in today\u2019s terms.\u00a0 And if you look at the current executive budget, while there\u2019s a 2.5 percent increase in education funding from the general fund, overall funding is down .9 percent.<\/p>\n

Q: <\/span>Basically you\u2019re saying we can\u2019t look at this and say, “Okay, tax cuts will bring jobs, there\u2019s more money in education, that\u2019s a good thing.”<\/p>\n

A: <\/span>We have to look at what the tax dollars are collected for.\u00a0 People and businesses expect good quality public services.\u00a0 Good education for their children.\u00a0 Good training for their employees.\u00a0 We\u2019ve historically done that, and the data would seem to suggest that we\u2019re basically losing ground.<\/p>\n

Q:<\/span> I want to get back to the tax cuts, because I do think for a lot of people, that\u2019s going to be the big headline today.\u00a0 It\u2019s important to think, when you think about tax cuts, what else might be done with that foregone revenue.<\/p>\n

A:\u00a0<\/span> I think everybody is in agreement that the state needs economic development.\u00a0 Idaho had\u00a0been basically outperforming most states for much of the past several decades.\u00a0 That continued up until just before the Great Recession.\u00a0 Idaho went into it earlier than most states, declined farther than most states, and has been slower coming out of the recession than most states.\u00a0 That\u2019s not an economic ranking that we\u2019re accustomed to in Idaho.\u00a0 So the perception that we \u2013 we being collectively the state of Idaho \u2013 need to do something to try to help turn that around goes without saying.\u00a0 How you go about that is where, I think, the issues lie.<\/p>\n

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