SEPTEMBER MONTHLY REPORT
“Sooner or later, everyone sits down to a banquet of consequences.” So said Robert Louis Stevenson, author of Treasure Island and other novels, back in the 1880s. What makes his hot take on cause and effect interesting today is its relevance to the fiscal realities looming for state lawmakers in the run-up to the 2026 legislative session. It’s also a unique opportunity to look back on 2025 and forecast what’s to come next year.
We’ve referenced the state revenue shortfall in previous reports. The political media and blogosphere continue to write about it. Gov. Little, seeking to mitigate the impact of a projected double-digit deficit, has asked state agencies to cut budgets by 3 percent – at first temporarily, then later permanently. The Department of Health and Welfare authorized a 4 percent payment reduction to its vast network of providers.
While the cuts in budgets and programming appear for now to be putting the general fund back on track, the gravitational pull of revenue forecasts and balancing budgets continues to get stronger. Evidence of this fact is the lengthy presentation and discussion during the Idaho Legislative Council meeting on Friday.
Keith Bybee, Manager for Budget and Policy with the Legislative Services Office, gave an hour-long presentation on the budget and incoming revenue. He started with some table setting, including the fact the Legislature approved $450 million in historic level tax cuts earlier this year, reducing the $6.4 billion in revenue once projected for the general fund to $5.9 billion. But other factors are in play. Bybee cited a slowing in population growth, slight reductions in personal income, lower than expected job growth as reasons for the decline in revenue. “The economy is still growing, just not as robust as it was back in January,” he said.
Lawmakers maintain there is no cause for panic. Rep. Wendy Horman and Sen. Scott Grow, co-chairs of the Joint Finance Appropriations Committee, point out that there are 10 months left in the fiscal year. Senate Pro Tem Kelly Anthon argued all signs show the state economy is healthy and annual contributions to the state savings account have created safeguards against a more significant economic downturn.
It’s with this backdrop that BB&A is developing our strategy for the 2026 session. Here’s some of what we’re expecting and planning. First, we’re fully anticipating another round of tax cuts to provide legislators with bragging points heading into the 2026 May Primary election. This means we’re taking a protection-minded posture for programs and spending on existing programs. We are also anticipating supplemental funds for programs, and budgets may get a bigger haircut this session.
We also see a potential showdown between GOP lawmakers who want to be cautious with budgets and revenue and those willing to seize a unique opportunity to significantly scale back government. We have no doubt it’s going to be an interesting legislative session. Concern about this dynamic is playing out in the form of agency directors forgoing additional budget requests, with some going so far as not proposing any agency legislation. The chilling effect appears to be having an impact on legislators, who may be emboldened to advance an agenda that would establish the Legislature as the primary policy and budget-setting branch of government.
Now, on to some other news and developments. There is a new eastern Idaho legislator in the House. Gov. Little last week appointed Michael Veile, a businessman from Soda Springs, and someone our very own Benn Brocksome has served with on a past state agency working group. Rep. Veile will fill the seat vacated by Kevin Andrus, who President Trump appointed to serve as state director for the Farm Service Agency. Our team looks forward to working with Rep. Veile and helping him better understand all the issues important to our clients. We also wish outgoing Rep. Andrus, Director Alex Adams, Mike Boren, and Tom Schultz the very best in their respective roles in the new administration
