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Posts published in “Day: April 4, 2019”

Keeping it neat


The Idaho legislature has a tradition of protecting funding sources. Sometimes this is done in statute; an agency gets funding from a specific fee. For instance, Idaho Fish and Game is funded through designated Federal tax sources and the fees they charge and collect. This makes it a “Dedicated Fund” agency. F&G does not get money from the Idaho General Fund.

Traditionally, highway funding in Idaho has been in this category. The old-fashioned thinking was that revenue for road maintenance was supposed to come from state gas tax and vehicle registration fees, along with Federal gas tax revenue. This aligned with the principle that highways should be funded like a “user fee”; the folks who use roads should pay the costs. There is nothing in the Constitution requiring this, it has just been tradition.

Highway funding is and will be a big cost. The annual budget totals about $1B, 60% from state sources, 40% from federal gas tax. Compare that to a total Law and Justice (courts, prisons, parole etc.) of $500M. Still, it’s only a third of the Education or Health and Welfare totals, almost $3B each. But it’s big.

There has been a creeping erosion of the “user fee” tradition ever since the gas tax bill of 2015. Raising the gas tax 7 cents a gallon stuck in the craw of many (especially House leadership) and the back-door compromise was a late session bill that directed that any budget “surplus” would be split between the rainy-day funds and the highway department. This was called the “Surplus Eliminator”. Thanks to steady economic growth and conservative revenue estimates, Idaho has been running a $100M budget surpluses for 6 years now. The reserve funds now hold over $500M. It has a statutory cap at 10% of the annual general fund expenses.

The compromise of the Surplus Eliminator had a sunset, saying it would only last for a couple years. This made it more acceptable to budget hawks, who abhorred giving any general fund money to highways. This sunset was extended in 2017 and more money was siphoned from the general fund to pay for highways.

So, is the old-fashioned way of thinking about “user fee” highway funding dying? Was it worth keeping anyway? Why not just throw all the money in one big bucket and spend until it’s gone? Here’s why: stability and planning for uncertainty.

Tax revenues will fluctuate just as our economy does. It took Idaho less than 12 months to burn through $250M in reserves in 2009. Don’t forget the painful cuts to public education, Health and Welfare that had to be done in those years. Some say we have still not fully recovered from those public education cuts. When the next downturn hits, our current reserves will go just as fast.

But more, think of it as responsible budgeting. If roads need more money, who should pay: drivers or all taxpayers? And can we trust our legislature (remember, they could all be replaced every two years), to keep their eye on Idaho’s long-term economic strength? Or will they just react to the crisis at hand?

Another question begs answering: what is the function of reserve funds and just how big should they be? It gives me no comfort to know 58% of Americans have less than $1000 in savings. Most families couldn’t replace a blown transmission without a loan.

If you haven’t learned this about me yet, I’m a fiscal conservative, and I value having some reserves. Is 10% of annual expenditures the right number? We should have a solid goal and aim for it instead of siphoning it off to pay for road maintenance. The budget should be a clear statement of our values. Using the “surplus eliminator” for road maintenance is a messy, indirect, maybe even dishonest process that lets legislators skip the difficult process of expressing their values.

The Idaho legislature is slowly going the way of the US Congress; they’ve given up on budgets. Expect more from our state representatives. Keep highway funding neat.