ERIP Saves money

The potential loss of the Early Retirement Incentive Program (ERIP) is especially disheartening to educators who are planning to apply for early retirement this spring. Because of the way the state budgeting process works, the money in the FY09 budget was spent on those teachers who took early retirement at the end of the 2007-2008 school year. Some officials, including Superintendent Luna believe cutting this program would save $4 million in the FY10 budget.

You may have heard the expression, “Never tear down a fence until you know why it was there in the first place.” Let’s take a minute to understand why we have an ERIP. The Legislature created this program in the mid ’90s with the goal of saving the state money by allowing experienced teachers to retire with a bonus payment and being replaced by a less experienced (and less expensive) teacher. Since the implementation of ERIP in FY96, the state has saved approximately $90 million in salary and benefit allocations for the teachers who have chosen to retire early. This savings is above the implementation cost of the program. That’s a huge savings to the state.

How did this savings occur? The average age of ERIP participants has been 58, while the average retirement age for Idaho teachers in general has been at least 60. If each group of retiring teachers had continued to work until they reached the age of 60, they would have continued to make the same or greater salary during those years, depending upon whether the Legislature increased the calculating base salary. Instead, they were replaced by newer teachers and Idaho saved thousands of dollars.

Although the savings haven’t been quite as high over the last few years, projections show that the state will continue to at least triple their investment in this program.

Rep. Fred Wood (R-Burley) raised an important consideration during the JFAC hearing yesterday. He noted that under Superintendent Luna’s proposal, the state will be asking school districts to absorb a $15 million reduction in the salary allocation formula, perhaps by not filling vacated positions. Funding ERIP might encourage more teachers to retire, thus making attrition the least painful way to absorb the $15 million loss.

Budget cuts hit some Idaho agencies harder - Idaho Statesman

By Kathleen Kreller

While the governor called for 7.3% less spending overall, 4 departments face reductions ranging from 31% to 56%.

Four of Idaho's agencies and institutions could have their budgets pared by more than 30 percent next fiscal year, and if the recommendations by Gov. Butch Otter are approved by the Legislature, Treasure Valley residents could feel the pinch.

Repair and maintenance projects at state parks, like Lucky Peak, could be delayed. If you live in the Boise Front or parts of Emmett, you may not get a digital television signal from Idaho Public Television. If you sell or apply chemicals, you may lose work from the Department of Agriculture. Rural areas won't likely see any grants to improve infrastructure and attract new businesses.

Otter proposed an overall reduction in state spending of 7.33 percent. These agencies face larger cuts based on recommendations from Otter's staff about which spending is less critical.

Other than eliminating some one-time spending, the agencies will decide how to make the cuts work.

PARKS AND RECREATION

General fund appropriations would drop 55.83 percent from $16 million in the fiscal year ending June 30 to just over $7 million.

Park visitors may feel some "inconveniences," department spokeswoman Jennifer Wernex said. The department won't have money for a long list of capital projects.

"It's also going to limit our ability to address facility repair," Wernex said. "Things are tight, so the department will have to prioritize."

There is a bit of money in the budget for things like restroom and sidewalk repairs, but if something breaks, repairs could be delayed, she said.

One state park could close: Old Mission State Park, named for the old Cataldo Mission and owned by the Coeur d'Alene Tribe. The Mission of the Sacred Heart is the oldest standing building in Idaho, built between 1848 and 1853 by members of the tribe and Catholic missionaries. Wernex said because the agency doesn't own the park, it was identified as a place to save money. The department is working with the tribe to keep the park open.

The department may hire fewer seasonal workers for the summer camping season.

PUBLIC TELEVISION

IPTV could lose 51 percent of this year's original $3.5 million general fund appropriation. Otter recommends $1.7 million.

Nearly all of the cut is in spending to make the federally required conversion from analog television signals to digital, scheduled to happen next month. Otter recommends no money for the coming year. He also recommends a 4.3 percent cut in general operations.

General Manager Peter Morrill said the Federal Communications Commission just two weeks ago told public television stations to apply for licenses that would allow them to buy and use new equipment to boost their digital broadcast signals in areas where signals are blocked by geography. Idaho has seven such areas: the Portneuf Valley; portions of the Wood River Valley near Hailey, Ketchum and Sun Valley; Glenns Ferry; Idaho City; the east side of Emmett; the Boise Front along the Foothills; and the Harris Ranch area of east Boise.

Once the licenses are granted, stations have just six months to get the new facilities working. The last time the FCC offered such licenses was 15 years ago, Morrill said.

"We believe this is critical," Morrill said. "If the door closes on this, we probably won't have another opportunity."

IPTV has applied for $1.7 million in grants to help pay for the purchase and installation of equipment to boost the signals to those areas. But the grants require local matching dollars.

Morrill said the opportunity developed after the budget was submitted. So he'll ask the Legislature to find another $300,000 to match any grants. Otherwise IPTV won't get the grants and the seven areas could remain without a digital signal.

COMMERCE

Otter recommends a nearly 41 percent drop in general funds for the Commerce Department, which markets the state and promotes new businesses and jobs. Spending would fall to $5.4 million, a cut of $3.8 million.

The biggest cut is likely to be in a grant program to help rural communities build infrastructure that brings jobs, said Bibiana Nertney, a department spokeswoman. The communities must match those grants, and in the weaker economy applications aren't coming in, so those dollars became an easy target, she said.

The cuts also reflect the loss of $1.5 million in one-time money for the promotion of the 2009 Special Olympics World Winter Games that begin next month and some one-time federal money, Nertney said. The department also eliminated $50,000 for a paid internship program. Other cuts will come in travel, subscriptions and light bills.

One bright spot for Commerce: Otter has included $717,000 for Project 60, an economic development initiative to expand Idaho's economy to $60 billion a year.

AGRICULTURE

The Department of Agriculture faces a 31 percent cut, to $11.7 million from $17 million. The agency is cutting five positions. The department plans to stretch prior appropriations to help eradicate Eurasian water milfoil, an invasive plant that chokes lakes and waterways, through the next fiscal year, said Kelly Nielsen, the department's financial officer.

General Fund Expenditure Holdbacks — A Twenty-eight Year History

Due to economic factors over the years, it has become necessary from time to time for state agency budgets to be reduced during a fiscal year to bring spending in line with lagging revenue collections. There are two ways authorized by statute to reduce spending when the Legislature is not in session; one is temporary and one is permanent.

Temporary Reduction of Spending Authority:

Idaho Code 67-3512A states in part “…Whenever the governor as chief budget officer of the state may determine that the expenditures authorized by the legislature for the current fiscal year shall exceed anticipated moneys available to meet those expenditures, the governor by executive order may reduce the spending authority on file in the office of the state controller for any department, office or institution of the state…”

Reduction of Legislative Appropriations:

Idaho Code 67-3512 states in part “…Any legislative appropriation made for any department, office or agency may be reduced in amount by the state board of examiners upon investigation and report of the administrator of the division of financial management; provided that before such reduction is ordered the head of such department, office or institution shall be allowed a hearing before said state board of examiners...”

Secretary of State, have the authority to reduce appropriations, in almost all cases over the last thirty years, spending reductions were initiated through executive order early in the fiscal year, allowed to expire with the start of the legislative session, and then were taken up as budget cuts by the Legislature. The Board of Examiners’ authority provides a tool to ensure the state budget can be balanced late in the fiscal year after the Legislature has gone home.

As the following historical summary indicates, the decade of the1980s was the decade of the holdback. State agency budget growth accelerated during the 70s largely due to steep inflationary rates during that time. That house of cards collapsed in 1980 with a deep recession and restructuring of the U.S. economy. Between 1981 and 1986 there were General Fund holdbacks in five of six years.

FY 1981: Initially a 3.0% holdback was ordered by Governor John V. Evans, then increased to 3.85% for all agencies. By June the revenues had improved and the holdback was released for public schools.

FY 1982: The shortfall did not materialize until April, at which time Governor Evans directed General Fund supported state employees to go to a four-day work week for the last seven weeks of the fiscal year to make up $8.0 million.

FY 1983: Governor Evans ordered a 9.0% holdback, followed by an additional 1.5% shortly thereafter, as the national recession hit Idaho hard, creating a $69 million shortfall in a $374 million budget. The Legislature passed bills to reduce agency budgets by 12%, and public schools by 3.6%, but both were vetoed. Eventually a temporary one and one-half cent sales tax increase was passed (from 3 to 4.5 cents) to fund a tax anticipation note designed to cover the shortfall. The sales tax became permanent at 4 cents the following session.

FY 1985: Governor Evans ordered a 3.0% holdback that expired January 31. Appropriations designed to make the holdback permanent were vetoed, and the deficit was covered with a transfer from the Budget Reserve Fund.

FY 1986: Governor Evans ordered a 2.5% holdback that expired on January 31. The Legislature enacted a 4.5% budget reduction over the Governor’s veto, and passed a temporary one cent sales tax increase (from 4 to 5 cents), which later became permanent.

FY 1992: A mid-year shortfall developed that prompted the Legislature to cut agency budgets across the board by 1.1%, and covered public schools with a transfer from the Budget Reserve Fund. Governor Cecil Andrus vetoed the budget cuts (except for the Legislative and Judicial branch reductions), believing revenues would improve. On April 16, however, the Governor ordered a 0.3% holdback on state agencies, and on May 21, after reviewing April revenues, delayed the final $10.9 million public school payment to PERSI into the next fiscal year to cover the shortfall.

FY 1996: In September, Governor Phil Batt ordered a 2.0% holdback on state agencies and public schools that expired on January 31. The Legislature covered the schools portion from the Budget Reserve Fund, and authorized the Governor and Board of Examiners to reduce appropriations, if necessary, in the spring.

FY 1997: Governor Batt ordered a 2.5% spending holdback in September on state agencies and recommended covering the public schools portion of the holdback with the Budget Reserve Fund. The latter transfer turned out to be unnecessary because of slightly improved revenue collections in the spring.

FY 2002: In August, due to declining revenues as a result of high tech industry-driven economic problems, Governor Kempthorne ordered a 2% holdback on state agencies and a 1.5% holdback on public schools. That holdback was increased two months later in the aftermath of 9/11 to a total of 3% on state agencies and 2.5% for public schools, which would save an estimated $54 million. Eventually the Legislature increased the spending cuts to $64 million and authorized the transfer of another $120 million in cash balances from the Millennium Fund, Capitol Endowment Fund and Permanent Building Fund (HB 701).

FY 2003: Governor Kempthorne ordered a 3.5% holdback on all state agencies except for public schools and higher education. He later reduced the holdback for Health and Welfare to 1.9%. The Legislature enacted these holdbacks into budget cuts during the 2003 legislative session, along with transferring the remaining cash reserves to cover a $214 million budget gap. With cash reserves gone and further budget cuts facing vetoes, a two-year temporary sales tax increase of one cent was put into effect beginning in May, capping off the longest legislative session in Idaho history.

FY 2009: In September, Governor Otter ordered a 1% holdback on state agencies and public schools, covering the public schools portion from the Public Education Stabilization Fund. On December 1, Governor Otter increased the holdback to 4% total, with directions to state agencies to hold another 2% in reserve should further cuts be necessary. Again, the public schools portion of the 4% holdback would be covered by the PESF.

Staff Contact: Jeff Youtz