Gov. Brad Little’s budget chief struck a cautionary tone Tuesday during his annual budget presentation to the Legislature’s Joint Finance-Appropriation Committee. 

Idaho in recent years has benefitted from big budget surpluses — typically around $1 billion or more — thanks to higher-than-expected tax revenue and an influx of federal stimulus during the COVID-19 pandemic.

“That’s no longer the case,” Alex Adams told the budget committee.

Adams dug into the details of Little’s “Idaho Works” spending plan, which he teased Monday during a multimedia State of the State address. While state revenue and expenses remain balanced, Little’s budget hedges against uncertain forecasts, Adams said. State revenues have normalized and tax relief programs, like House Bill 292 from last session, have trimmed the bygone surpluses.

Little’s budget limits general fund growth to 2.2% and bolsters rainy day funds to their statutory maximum. It also maintains ending balance cushions above $265 million through the next two fiscal years.

The budget maintains “fiscal prudence” while investing in matters “most pressing for Idahoans,” Little said Monday. That includes major investments in education, such as $75 million for Idaho Launch, $32 million for university facilities and $40 million for K-12 outcome-based funding. 

Most of the discussion during Tuesday’s budget presentation centered on Little’s blockbuster proposal to invest $200 million in school facilities each year for the next decade, and Adams shared new details. 

The first $125 million would come from sales tax revenue dedicated to a new School Modernization Trust Fund. The fund would be leveraged into a $1 billion bond that helps schools fund construction. 

The other $75 million would come from increasing school maintenance spending. State law requires school districts to spend 2% of their building replacement value on maintenance. Little’s plan would increase it to 4%, with state matching funds following.

The National Council on School Facilities recommends putting 7% of building replacement value toward maintenance each year, according to a 2022 report on school buildings from the Idaho Office of Performance Evaluations. That report influenced the governor’s plan, Adams said.

Lawmakers’ reactions to the $2 billion proposal have ranged from strongly supportive to frankly uneasy.

Rep. Rod Furniss, R-Rigby, said the plan would improve the success rate of school bond elections by lowering the threshold needed to fund construction locally. Furniss’ legislative district includes Salmon, a district that has tried and failed to pass a bond 12 times since 2006.

Sen. C. Scott Grow, who co-chairs JFAC, cautioned that future lawmakers would be obligated to pay off the $1 billion debt. “Those are some pretty big bonds,” said Grow, R-Eagle.

JFAC co-chair Wendy Horman, R-Idaho Falls, questioned whether the state would be responsible for the interest rate on bonds. The state would cover the 3% to 4% interest rate, Adams said. 

The governor’s budget presentation kicks off a months-long process for lawmakers to scrutinize spending requests from state agencies and departments. One looming budget debate involves a familiar issue: the K-12 funding formula. 

During the pandemic, school support units — essentially the cost to operate a classroom — were funded based on school enrollment. But that temporary rule expired last year, and schools this year are again funded based on average daily attendance, which generates less money for most school districts. 

Attendance data from December showed a potential $162 million dip in school funding after the formula reversion, Idaho Education News previously reported. 

State superintendent Debbie Critchfield hopes to fill that gap with a supplemental appropriation this year. And Little’s budget supports that recommendation, Adams told EdNews Tuesday. But the governor’s request is based on forthcoming attendance data, so the exact amount won’t be clear until next month. 

Ultimately, JFAC will decide whether schools are compensated for the lost funds or whether the state sticks to what the attendance-based formula produced this year. On Tuesday, Horman signaled her feelings: “We must distribute school funding according to the law, and the law, right now, is average daily attendance,” she said.

Senior reporter and blogger Kevin Richert contributed to this story.