Federalism

Financial Ready Idaho

States are increasing their dependence on federal funds at a time when the federal government is facing difficult fiscal challenges. According to the nonpartisan fiscal watchdog group, State Budget Solutions, state governments (combined) received 31.6 percent of their revenue from the federal government in 2012. Additionally, Census Bureau data shows that the percentage of revenue dollars from the federal government increased in 41 states between 2001 and 2012. The crucial question then becomes, how can states prepare to absorb fiscal stress from Washington? To answer that question, take a look at Idaho’s new fiscal preparedness initiative.

Governor Butch Otter established Idaho’s new fiscal preparedness initiative through an executive order. The executive order requires state agencies to submit a yearly report to the Division of Financial Management. Among agency requirements in the yearly report are the following: a detailed amount of federal funds received for the preceding fiscal year, the federal funds to be utilized for the current and upcoming fiscal year, and an identification of any agency obligations, agreements, and joint exercise of powers agreements that may be impacted by federal or state decisions regarding federal receipts. The executive order also requires calculations on the amount of federal funds to the total appropriation of an agency, along with documentation from the Division of Financial Management that describes the agency’s plan for operating if there is a reduction of 10 percent or more in federal funds that the state receives.

Idaho’s economic future will benefit from fiscal preparedness. According to a study by the Idaho Freedom Foundation and the Sutherland Institute’s Center for Self-Government in the West, Idaho’s reliance on federal funds has grown more than 80 percent in the past decade. At the very least, the information will now be available to assess federal funding and make more informed decisions regarding many of the federal grants, which often come with strings attached. By developing a contingency plan to operate agencies in the event federal funds are decreased, Idaho can have a better fiscal outlook.

A recent poll demonstrates that Idaho taxpayers are concerned about how Washington’s fiscal challenges could impact their state. For example, 90 percent agree that the state government should conduct an annual inventory of federal funds coming into Idaho. More than two-thirds of Idaho taxpayers want to see the state’s dependence on federal funds reduced. Finally, more than 80 percent agree that Idaho should have a contingency plan for operating state agencies in the event that federal funding is reduced. “This poll clearly shows that Idahoans understand that as our dependence increases, so does our vulnerability to the chaotic forces of Washington, D.C. And they understand that none of those dollars come without some strings attached,” said Wayne Hoffman, executive director of the Idaho Freedom Foundation.

Fiscal preparedness can also help to strengthen state credit ratings. For example, Utah passed The Federal Receipts Reporting Requirements Act which requires all state agencies to disclose total federal receipts, including the percentage of their respective budget, and also to disclose their specific contingency plan in case federal funds are diminished. The state’s robust fiscal management record has earned Utah strong AAA ratings from Fitch, Standard & Poor’s, and Moody’s Investors Services. With Utah and Idaho leading the way in fiscal readiness, legislators across the country can learn how to successfully prepare for an uncertain economic future.


In Depth: Federalism

Genuine accountability to hardworking taxpayers results when state and local legislators work with members of the community to determine a plan of action that is right for each individual state, city or town. Real solutions to America’s challenges can be found in the states – America’s fifty laboratories of democracy …

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