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Revenue forecast may not be what it seems

Murf Raquet
January 17, 2013
Moscow-Pullman Daily News

Last week, Idaho lawmakers decided Gov. C.L. "Butch" Otter's revenue forecast was one with which they could work when developing the next budget. And the ground beneath Boise didn't open and swallow the statehouse.

We didn't see that coming.

The usual process is the governor comes out with a figure based on what his economic advisors tell him, the Legislature does the same and they meet somewhere near the middle. Lately, lawmakers have been more conservative in their forecast and that's reflected in the eventual budget.

Otter and state officials believe $2.8 billion is a fine figure for the 2014 budget. That's about 5 percent more than the current year.

It will be interesting to watch how this develops especially in light of the anticipated partial or total repeal of the state's personal property tax, which accounts for $140 million in revenue.

Otter has offered to cushion a total repeal by dangling a $20 million carrot to soften revenue shortfalls in taxing districts heavily reliant on the tax.

This is where it could get fuzzy.

Lawmakers could repeal the tax based on the $133 million increase in the revenue forecast, since they are fairly close in value. That would seem to be a logical switch of revenue sources. And optimistic legislators would be happy to act on the repeal as one of their first pieces of real business. Otter would surely sign it and everyone would be happy, including the Idaho Association of Commerce and Industry, which for years has been lobbying hard for the repeal.

But what if the forecast is a bit optimistic and the extra revenue isn't near as close to the amount no longer collected on personal property?

Well, too bad, the deal will have been done, and cities, schools, cemeteries and counties will be left to tighten their belts a bit more and get ready to again reduce budgets.

Predicting revenue is a crapshoot at best. Too many variables are involved to go all-in when the outlook is rosy.

We would prefer Otter and his GOP pals bank a bit and build that looted rainy-day fund. With that as a safety net, we would have a bit more confidence in their budgetary decisions than the ones made like a child in a candy store with a newly found dollar.

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