On July 20 of last year, Idaho Governor Brad Little reported on the state revenue that had gushed in over the last year, and it was a lot more than had been expected.
The state received more than $5 billion, the first time it ever hit that mark, but as significant was the almost $900 million above what was expected, an immense amount far beyond any surpluses the state had seen before. As one news report said, Little and his staff “have hinted that some of the money is likely to be returned via tax cuts and some will likely be invested in Idaho’s K-12 public school system, along with other one-time capital and infrastructure projects.” Generally that would happen, but those decisions would have to wait until the next legislative session in January.
Nothing unusual there. The amount of the surplus was abnormal, but this is normal budgeting.
This year, something unusual happened. It wasn’t the size of this year’s surplus, which was even larger than 2021’s (enormous in fact) at $1.4 billion. It was this: In mid-August, Little decided that it had to be dealt with right away. And more unusual yet was that the Idaho Legislature, despite the timing (just weeks from expiration of its members’ terms), jumped on board.
Little’s contention, in his call of August 23, was that, “We’re calling an extraordinary session to address the crushing impacts of historic inflation on Idaho families and schools.”
First, inflation has been underway in something like the present range all year; when the legislature adjourned its regular session in March inflation was about where it is now, and in fact it’s been modestly declining in the last three months. (Check your local gas pump prices.) It was considerably higher a few months ago.
Second, the legislature knew about the inflation situation last winter – and accounted for it in its budgeting – and Little has known since at least early summer at least in rough terms how big the surplus would be. Why wait to call the session on the last day of August?
Third, inflation can be fed by large, sudden dumps of money into the economy, or even the expectation of it happening soon, which is the basis of Republican criticism of the Biden Administration’s spending policies. The $1.4 billion of (mostly) tax cuts and school spending realistically won’t balloon inflation measurably, but it won’t slow it either. Nor will most Idahoans pocket enough directly to let them better combat inflation.
Here’s one way to square the circle.
On July 22, an activist group called Reclaim Idaho got formal approval for a ballot initiative to appear on the November ballot. The measure to be put before Idaho voters provided for a state income tax increase for upper-income taxpayers, with the revenue – estimated at somewhat over $300 million – to be used to increase funding for public schools. It was the subject of a massive organization effort.
The special session of the legislature nearly did the initiative’s job for it by designating $400 million in additional education funding, and setting it up as an ongoing funding stream. (We’ll see how long that survives future legislative action.) Education advocates were, of course, delighted, and Reclaim Idaho responded by moving to pull its initiative from the November ballot: The financing laid out in the surplus legislation did much of what the initiative had sought to do.
An organizer also noted, “The most important fact is the special session law would repeal our initiative just two days after it goes into effect, so voters going to the ballot box on Election Day would know that even if they vote ‘yes’ their vote won’t have an effect.”
There was that, and the avoidance of the income tax raise for higher-income people and businesses.
The exact mix of motivations that led to the special session and its action may be a little blurry for some time to come. You can make a reasonable argument that the end result was a good one.
But it’s hard not to think the freshly-minted ballot initiative didn’t have something to do with it.