Fiscal Sustainability: The Gem State’s Puzzle

Speech to the Reagan Republicans by Art Macomber

August 13, 2015. Good afternoon. My name is Art Macomber and I am a local attorney. The title of my speech today is Fiscal Sustainability: The Gem State’s Puzzle. I am interested in fiscal sustainability, because I have two children. Fiscal sustainability implies the survivability of Idaho’s Republic for my children, so this is important to me. The reason I call it a puzzle is because our Republican platform calls for shrinking government, lowering taxes, and otherwise expanding the realm of truly noble and compassionate private action, but when I looked into the actual appropriations by the legislature I was very puzzled. I will address the puzzle in a moment.

I have been on the public policy committee of the Coeur d’Alene Chamber of Commerce for approximately four years, and every year we have telephonic conference calls with members of the North Idaho contingent of the legislature. There are reasonable concerns that the federal debt will soon require Idaho to forgo the receipt of federal funds. There has been quite a bit of discussion in the past few years about taking back federal lands so that we can pay for our schools and other state budgetary needs. I am not confident in the success of that path in any realistic timeframe.

With public policy, there are structural issues to consider. Our federalist system requires the federal government to only create laws and appropriate money to exercise powers enumerated in the federal Constitution. Our Idaho Republican platform calls for a repeal of the 17th amendment. A repeal would restore the original constitutional design, so that the several State legislatures could once again make appointments to the federal Senate in order to control it. This in turn would restore State legislative power to protect our liberty by placing State legislatures as a check on the federal power. The Republic of Idaho is not designed to be a mere extension or a department of the federal government, and it is time to become serious about Idaho’s place in our federalist structure.

I have become concerned that Idaho is too dependent on federal funds for its state operations. Some say 30% to 45% of Idaho’s state budget expenditures are actually federal funds. I decided to try to figure out Idaho’s dependency on the federal government. First, I had to consult the structure and organization of State government. We know American Republics have three branches: Legislative, Executive, and Judicial, and their powers are outlined in each State constitution.

In 1972, the people of the State of Idaho added Article 4 Section 20 to the Idaho Constitution, limiting the number of Executive Branch departments to twenty. The Legislature and the Governor responded by passing Idaho Code section 67-2402 which listed those departments. This is where the bulk of the money is spent.

A couple of years ago, Gov. Otter issued an executive order mandating each state agency show precisely how many dollars and what percent of its budget is federal funds. Last spring, the Idaho Legislature passed and Governor Otter signed into law Senate Bill number 1152 amending five Idaho code sections in Title 67. Whereas Governor Otter’s Executive Order could be canceled by the next executive, it will be much more difficult to uproot these new statutes.

According to these amended statutes, State agencies that receive federal funds must provide reports on the use of such funds as part of their annual budget request, delineate the federal funds received, the federal funds utilized, identify contracts that may be impacted by federal funds, and calculate the percentage of federal funds to the total appropriation for that state agency for the fiscal year. There is also a requirement that the agency provide a plan for operating if there is a reduction of 10% or more in the federal funds that the State agency receives.

The beginning of the budgetary puzzle starts at Article 7 Section 1 of the Idaho Constitution that states, “the fiscal year shall commence on the second Monday of January in each year, unless otherwise provided by law.” However, Article 3 Section 22 of the Idaho Constitution states, in part, “no act shall take effect until 60 days from the end of the legislative session . . . except in case of emergency.” Barring emergency, new laws that appropriate money are effective July 1 following the legislative session, and not the second Monday of January. How is an ordinary citizen to actually figure out fiscal year appropriations or expenditures when the appropriating law becomes effective in the middle of the calendar year, and the monies designated are to be expended from July 1 of a given year through July 30 of the following year?

If you know the answer, please enlighten me after lunch.

But the structural question is whether these amended statutes are constitutional. Remember, the Idaho Constitution is a limitation on legislative power. In 1890, Article 7 Section 11 of that Constitution was formulated and remains today to state:

No appropriation shall be made, nor any expenditure authorized by the legislature, whereby the expenditure of the state during any fiscal year shall exceed the total tax then provided for by law, and applicable to such appropriation or expenditure, unless the legislature making such appropriation shall provide for levying a sufficient tax, not exceeding the rates allowed in section nine of this article, to pay such appropriation or expenditure within such fiscal year.

Note: Does not apply during times of war or insurrection.

Please notice first that this constitutional limitation controls the legislative power to appropriate monies and expenditures. It bars the legislature from authorizing appropriations or expenditures, unless the legislature authorizes a sufficient tax to cover them within that fiscal year. Today is not the day when I will address the argument made about this constitutional provision by Judge Ailshie of the Idaho State Supreme Court in the 1904 case of Stein v. Morrison, 75 P. 246, 9 Idaho 426 (1904). However, suffice it to say I believe there is an unsettled legal question as to whether Idaho is even allowed to accept federal funds given the limitations in the Gem State Constitution.

For now, let us go back to the amended statutes enacted with the Governor’s signature of Senate Bill number 1152 in the 2015 Regular Legislative Session. Those statutes require the standing committees in the House and the Senate in charge of appropriation measures receive those reports no later than January 15 of each year.

This is good news! The question is what the legislature does with those reports. Today, I would like to give you a sneak preview of what you may see this year, and then make a couple of suggestions. My spreadsheets have been distributed to you.

My research began with combing through the 2014 and 2015 Idaho Legislative Service pamphlets that show all the laws enacted during those legislative sessions. I found all the money. I took those figures and created the spreadsheet you now have in front of you. The spreadsheet includes the appropriations authorized for the 20 executive departments. Please note that these departments do not include any of the more than three dozen commissions, boards, and temporary agencies found administered through the Governor’s office, see footnote 2. The bold type in that footnote shows which of those entities depend on federal funds.

Keeping to my structural approach, but outside of the spreadsheet, I found that the Governor’s office itself, the State elected officials, except for the Atty. General, and the Idaho Legislature do not utilize federal funds for their operations. This is also good news. However, and perhaps a topic for another day, the Idaho State Supreme Court through which funding flows for our judicial system takes a very significant dose of federal funds. Looking at our State Constitutional Republic, my fear is that one of its three branches may be tainted, or even permanently compromised to the federal power by its dependence on federal funds. That is bad news.

Viewing the rest of the spreadsheet, you can see the total appropriations for each department’s budget for July 2014 through June 2015, and July 2015 through June 2016. I show the actual federal funds included in each total appropriation amount, and the percentage of the total appropriation amount that is federal funds. For example, if we look at the Department of Administration, we see less than 2% federal funding. This looks good to me, although given federal debt levels I cannot tell you it is sustainable. When you look at the Departments of Commerce, Environmental Quality, Health and Welfare, and Transportation you start to see the numbers above 40%. This does not look sustainable to me.

I want to be clear: I am not a numbers guy. I hope some of you, my fellow citizens love these numbers and can dig in to figure out how we can pay our own way. However, my arithmetic shows that the State of Idaho may not be running a sustainable budget. A sustainable budget is one that could conceivably be run in the same manner straight through the next generation — and if you really like your Republic, for several generations after that. I don’t see sustainability in this budget. What I do see is a puzzle that should be vigorously addressed. It may not be necessary or even possible to erase federal funds from Idaho budgets, but the puzzle of our dependence requires resolution.

When you look at the spreadsheet, you will notice there are eight departments taking less than 10% of their budget in federal funds. Idaho should shrink this dependence to zero within one or two years. There are four departments taking more than 10% but less than 20% of their budget in federal funds. Strong progress toward a sustainable budget would be shown if Idaho’s public policy was to lower the dependence on federal funds in these four departments within five years. These targets may seem aggressive, but I do not see them as unreachable, especially when balanced with the value of an independent Idaho.

I don’t have all the answers today, but I can tell you that with the high levels of dependence on federal funds we are seeing in the other eight departments, sustainability today appears unreachable.

The question I leave you with is whether Idaho has the guts, the vision, and the noble compassion to solve this daunting puzzle, so we are able to sustain our Republic for our grandchildren and beyond. Our State motto is “Esto perpetua,” which means “Let it be perpetual.” This is in the form of a plea or a prayer, but lacking independent and noble citizens, whose God will listen?

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