Idaho Faces Potential $1 Billion Budget Gap in 2027
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The state of Idaho may need to come up with an additional $600 million to $1 billion for the upcoming fiscal year 2027 state budget, according to Idaho’s top budget official and a legislative lobbyist.This comes as Idaho is already facing a projected state budget deficit of $58.3 million for the current fiscal year 2026.
The projected deficit for fiscal year 2027 could be more than 10 times that amount, depending on state revenues and whether the Idaho Legislature chooses to conform with all tax changes from the federal One Big Beautiful Bill Act signed into law by President Donald Trump.
Lori Wolff, administrator for the Idaho Division of Financial Management, confirmed the potential $600 million to $1 billion need for the fiscal year 2027 budget. “We try to keep $200 million on the bottom line when we budget, so you can quickly get to a billion dollars in terms of what we need to do to account for revenue projections coming in for FY 27,” Wolff said.
Challenges the Idaho state budget may face
The potential budget gap is broken down as follows:
* $555.2 million: Projected fiscal year 2027 budget deficit presented to the Idaho Legislature’s Joint Finance-Appropriations Committee on Nov. 4. This includes the 3% holdbacks implemented by Gov. Brad Little, which have been permanently extended to all state agencies accept the K-12 public school system.
* $200 million to $284.4 million: Estimated cost of complying with all tax changes from the One Big Beautiful Bill Act. The Idaho Legislature must decide whether to adopt these changes,which include eliminating taxes on workers’ tips and overtime pay,car loan interest,and expanding deductions for senior citizens.
* $200 million: Estimated goal for a positive cash balance, or budget cushion, at the end of fiscal year 2027 to account for budget uncertainty.
State budget officials expect to release a new revenue projection when the 2026 legislative session begins in January.
Idaho Legislature’s top budget writer says there will be no budget deficit
Rep. wendy Horman, the Idaho Falls Republican who co-chairs the Idaho Legislature’s Joint Finance-Appropriations Committee (JFAC), emphasized that the budget deficit is only a projection at this point and the Idaho Legislature has options.
In an interview Tuesday, Horman said the Idaho Legislature’s decision on whether and how to comply with the tax changes from the One Big Beautiful Bill is a huge variable in the overall budget picture.
“This year conformity could have a vrey high price tag,” Horman told the Sun on Tuesday. “Normally we just conform with the federal policies. This year will be different as of the Big Beautiful Bill – there is no tax on tips, there is no tax on overtime, but there are also substantial tax cuts for buisness. in my opinion,it makes no sense to set a revenue number (for the budget) until we know what the conformity policy is going to look like. As you know,JFAC does not set revenue policy – the tax committees set the policies that will determine the amount of eligible revenue to appropriate. so this is a unique year in that conformity could have a price tag in the hundreds of millions of dollars and there will be critically important policy decisions that need to be made outside of JFAC before we will really know how much revenue will be on the table for appropriation.”
Earlier this month Horman vowed that the idaho Legislature will intervene, and Idaho’s state budget will not end in a deficit.
“We will set a balanced budget,” Horman told the Sun in an interview earlier this month. “The constitution requires it. I am personally committed to it. And I anticipate we will leave as large of a cash balance as we can to carry over into next year to guard against unforeseen circumstances.”
It is possible that state revenues could rebound and come in higher than expected before either the fiscal year 2026 or fiscal year 2027 end.
Even if revenues do not rebound, the state has other options to avoid a budget shortfall. Because the Republican supermajority in the Idaho Legislature has been committed to cutting taxes, not increasing taxes, the most likely options to address the projected state budget shortfall include additional cuts to state programs and/or dipping into some of the $1.7 billion in state savings accounts and cash reserves Idaho has accumulated.
JFAC is a powerful legislative committee that sets all of the state budgets for every state agency and department.
During meetings earlier this month at the Idaho State Capitol in Boise,Horman said JFAC is preparing to enter a new era of budgeting where the budget committee will
Idaho Faces Budget Challenges Despite Tax Cuts
Idaho is grappling with potential budget shortfalls,even after significant income tax cuts. This situation creates a tension between lawmakers wanting to reduce taxes and the need to fund essential government services.
According to a recent interview with Idaho political analyst, jim Sullivan, the state could face tough choices. “You’re going to have a situation where folks are saying, ‘fine, we cut it down to zero and go home,'” Sullivan explained. “But there’s still government services that need to be performed, and so there’s going to be that rift going on.”
Sullivan is the founder and owner partner of the Boise-based firm Sullivan & Reberger. He has over 35 years of experience advising elected officials and businesses,as detailed on the firm’s website.
Idaho’s recent financial history
A recent report from the Idaho Center For Fiscal Policy highlights the state’s struggle to fully recover from past budget cuts. While funding has improved as the 2008 recession, per-pupil K-12 public school spending hasn’t reached pre-2001 recession levels when adjusted for inflation.
New report shows 5 years of Idaho income tax cuts have reduced state revenue by $4 billion. https://twitter.com/IdahoFiscal/status/1734999999999999999
the report also indicates that five years of idaho income tax cuts have resulted in a $4 billion reduction in state revenue. This loss of revenue adds to the pressure on the state budget and could lead to further difficult decisions regarding funding for public services.