Budget cuts Medicaid, but not Idaho schools

BOISE - Gov. Butch Otter called for a leaner, stronger state government Monday while recommending more than $35 million in cuts to state agencies to help balance Idaho's budget next year.

The Republican delivered his State of the State speech to open the 2011 Legislature and released his budget recommendation for the next fiscal year that starts July 1.

Otter does not favor tax increases to boost state revenue as the Idaho economy continues its fragile recovery.

"It's the people's money, and I encourage you to leave as much of it as possible in the hands that earned it," he said in his 40-minute speech.

Otter based his budget for the next fiscal year on an anticipated 3 percent growth of state revenue, a figure well below the 6.9 percent projected by the governor's budget chief.

By adopting the lower forecast, Otter had about $91 million less to factor into his spending plan to be presented to the Idaho Legislature's Joint Finance-Appropriations Committee on Tuesday.

"The governor believes it's better to be prudent, it's better to be cautious," said Division of Financial Management administrator Wayne Hammon.

Otter was likely reacting to the conservative state Legislature and picking a number even the most pessimistic lawmakers could accept, said House Minority Leader John Rusche.

"He is recognizing what he can do with the Legislature," Rusche, D-Lewiston, said.

Otter has recommended carving $35.5 million in spending from state agencies, with the bulk coming from adult Medicaid services for the poor and disabled. He refrained from recommending further cuts to public education.

Idaho's public schools took a $128 million hit this year, amid widespread criticism from educators. Otter recommended a slight increase in state general funds allocated to K-12 public schools, along with directing money to specific initiatives such as the Idaho Education Network.

The governor called on lawmakers to summon all the "energy and civic virtue" that prompted them to seek office as they face a session that could be one of the most challenging in recent history.

Lawmakers will start the next fiscal year without roughly $190 million in reserves and federal stimulus money that they used to buttress the state budget for this fiscal year, Otter said. The anticipated growth in Idaho revenue for the next fiscal year won't cover that kind of hit, the governor cautioned.

As a result, most state agencies would see their budgets reduced by more than 2 percent under Otter's recommendation.

Lawmakers had been expected to address a $340 million shortfall this session while budgeting for next year, but Otter's budget chief reported Monday that bigger-than-expected state revenue and a variety of other budget maneuvers had helped shrink the expected deficit.

State agencies have also identified nearly $78 million in savings that can be funneled back into the state's general fund to help shore up Idaho's budget during the next fiscal year, Otter said.

The remaining shortfall for next year is still about $50 million, Hammon said.

Otter recommended cutting $25 million from Medicaid and another $10 million from other state agencies while waiting a year to implement a grocery tax credit for Idaho families.

The proposed cuts to Medicaid are appropriate but painful, said Sen. Russ Fulcher, R-Meridian. The other option for lawmakers would be a tax increase, but "that's not going to happen," Fulcher said.

Any proposals to hike taxes were expected to face a tough fight after the conservative turn of the Idaho Legislature during the November election.

"In my view, the governor's speech echoed what voters said in November," Fulcher said.