Idaho state budget director anticipates improved economic growth and 'maintenance only' budgets

A recent report from Idaho’s Division of Financial Management is projecting improved economic growth this fiscal year.

Expectations for economic growth in the start are anticipated to be particularly strong. Current forecasts project the state’s general fund revenue to improve to $5.93 billion, a 4.5% improvement over the last fiscal year, according to an August report from the Division of Financial Management (DFM).

A separate report from Idaho’s Legislative Services Office noted the improvement in the revenue forecast by $291.1 million was 5.2% higher than the revenue target set by the legislature. If collections continue as forecast, the year would conclude with an “ending balance of $619.5 million.”

Taken as a whole, revenue collections for July, the first month of the 2027 fiscal year, were $361.8 million, $13.7 million higher than projected but $5.6 million lower than last year.

The improvement over the forecast was largely due to miscellaneous revenues — mainly the Attorney General’s Office consumer protection fund and interest earnings from the State Treasurer’s Office — being $15.1 million ahead of the forecast, according to the DFM report.

This anticipated growth is markedly more optimistic compared to the DFM report issued this time last year, which forecasted a general fund revenue increase of 0.1% after accounting for the more than $400 million in income tax cuts and improved tax rebates for food purchases and property tax relief, each of which passed in the 2025 legislative session.

Though last year saw executive agency holdbacks ordered by Gov. Brad Little in August, DFM Administrator and State Budget Director Lori Wolff said in a Wednesday interview this was not the result of weakness in the Idaho economy, rather it was the aforementioned purposeful reductions in revenue that prompted broad spending reductions.

Serving to inform the growth projections, a recent DFM economic forecast for the state through 2031 was issued last month, incorporating national projections from Moody’s Analytics, a financial services company, historical data from the Idaho Department of Labor and publications from the Federal Reserve Bank of San Francisco, which covers Idaho.

According to this report, national gross domestic product (GDP) improvements are largely attributed to improved artificial intelligence investment. Unemployment insurance-covered job gains (a measure of the number of payroll jobs) were anticipated to be weak nationally — hovering between a growth rate of 0.3% to 0.6% between 2026 and 2030 — but more growth is expected in Idaho. From 2026 through 2030, job growth is expected to improve 2% or more each year.

“All of the things that tell us the health of our economy like unemployment and job growth and wage growth and housing starts in Idaho is still looking really strong,” Wolff said in reference to the report.

This month’s revenue report provides an early snapshot of expectations through November of this year, with a revised revenue forecast to be prepared in the closing months of the year and released alongside the governor’s budget proposals at the onset of the legislative session in January.

Though yet to be finalized, it will inform agency budget requests that are due on Sept. 1 and expected to have limited room for growth from the prior year.

“I think it’s important to know that even with these strong numbers, our budgets are still going to be pretty tight,” Wolff said.

In a memo issued by DFM to agency directors in May, Wolff said the state will remain in “maintenance only budget cycles,” to focus on “non-discretionary spending and growth” including increased health insurance costs, fire suppression, public safety and education costs and change in employee compensation (CEC).

The memo directs state agencies to include a 1% CEC placeholder, an improvement from the prior budget cycle that saw agencies directed to exclude CEC from budget requests. Wolff said those constraints have placed pressure on staffing and personnel as agencies grapple with recruitment and retention and seek to remain competitive with private sector counterparts.

This year’s legislative session also saw agencies instructed to “clear out” general fund requests for replacement items, leading to deferred maintenance for computers, vehicles and other infrastructure upgrades that are typically scheduled at least a year in advance, Wolff said.

The end result will be future legislative sessions being pressured to respond to increasing replacement needs as deferred maintenance grows, but the aim in the near-term is to save “as much as we possibly can” so state employees know improved compensation will come their way this session, Wolff said.

“Basic replacement items, like just to keep the lights on and keep operating, is what we’re talking about,” Wolff said of the soon-to-be-submitted budget requests. “There’s no growth in programs, no new spending, no new ideas. It’s just basic, keep it running.”