New forecast: Idaho should end 2011 with more revenue on strength of slow, steady recovery

Forecast: Idaho should end 2011 with more revenue

BOISE, Idaho — The state’s modest economic recovery should help Idaho finish the fiscal year with $80 million more tax revenue than the 2010 Legislature predicted, if a new forecast holds true.

Gov. C.L. “Butch” Otter’s chief economist, Mike Ferguson, issued his new outlook this week for the year ending June 30, 2011.

He said Idaho should take in nearly $2.37 billion by then, or $80 million more than the revenue estimates the 2010 Legislature used to set its spending plan. With the books closed on one month of this fiscal year, Idaho is about $4.5 million ahead of Ferguson’s latest revenue projections.

Idaho appears to be just beginning what should be two years of modest recovery. Positive signs are emerging: Micron Technology Inc. has posted three consecutive quarters of profit, finances at wind turbine and solar panel makers in eastern Idaho are stabilizing, and a train manufacturer in Boise — Wabtec Corp.’s Motive Power unit — just won a $115 million deal to supply 20 new commuter locomotives to Boston.

“If the economy continues to have modest improvement, I feel very good about this forecast,” Ferguson told The Associated Press on Wednesday. “If the economy goes into a double dip (recession) … we’re probably looking at something more like the legislative number.”

Ferguson said concerns linger.

Idaho’s unemployment rate remained at 8.8 percent in July.

What’s more, concern in Washington, D.C., over the budget deficit could mean stimulus spending that propped up the economy over the last 18 months could come to an abrupt halt.

And just Wednesday, the U.S. Department of Commerce indicated the economic recovery nationwide appears to be stalling as companies in July trimmed investments in equipment and machines and Americans bought new homes at the weakest pace in decades.

“Those are all short term risks that, if they converge into a downturn, will have very serious negative ramifications for the state’s finances,” Ferguson said.

Even bright spots are tempered by reality: In Twin Falls, for instance, a call center run by Florida-based C3 is hiring many of the more than 600 workers laid off when computer maker Dell Inc. abandoned its own center in February. C3 is occupying the building Dell left vacant.

But state officials point out C3’s wages are $9 to $10 per hour, not the $12 to $14 an hour Dell had been paying.

“While people are going back to work, you’re seeing underemployment, and wages are still are low,” said Division of Financial Management administrator Wayne Hammon. “The takeaway from Ferguson’s numbers is … we’re excited to see some growth in the economy, but we still need to be cautious.”

Just how Idaho tax revenue fares in coming months will weigh heavily on next year’s budget.

Idaho agencies are due to send their proposed fiscal year 2012 spending plans into Hammon by Sept. 2; after that, he’ll meet with legislators about just what’s feasible. Hammon told the AP he’s been warning department heads again to focus on the essential and pare programs that could be put off.

After all, Ferguson could be forced to revise his revenue estimates down — as he’s done for two years — if the recovery fizzles.

And any extra revenue that’s not spoken for already in the 2011 budget could come in handy in January.

That’s when the 2011 Legislature returns to Boise and debates how to fill glaring holes that have emerged in the current year’s spending plan. For instance, the Medicaid health insurance program is going to need more money, as will prisons, to the tune of about $4 million to fund programs including a new drug-treatment facility. A fund that helps pick up the medical bills of indigent people is also perpetually short.

Rep. Maxine Bell, R-Jerome and co-chair of the Legislature’s budget writing committee, said it’s far too early for elation over Ferguson’s forecast.

“We’re only two months into this budget year,” Bell said. “Frankly, his number isn’t there yet. The money isn’t there yet.”