Rep. Joe Palmer

Rep. Joe Palmer

BOISE — Two proposals to use state general fund dollars for transportation projects got a green light from the Idaho House Transportation Committee on Tuesday.

The first bill, sponsored by Transportation Chairman Joe Palmer, R-Meridian, essentially shifts two-thirds of the state’s main “rainy day” savings account into a new account that could be tapped for state and local transportation projects.

“It’s a concept a couple of us came up with, to take the rainy day funds, put them in an interest-bearing account and use the interest to start building a (transportation) endowment,” Palmer told the committee.

If approved, the legislation would shift $272 million from the Budget Stabilization rainy day fund into a new Economic Reserve and Investment Fund.

Almost immediately, $38.2 million would be transferred from the Economic Reserve account into the Strategic Initiatives Program, where it would be split 60-40 between state and local transportation projects.

In future years, 5% of the Economic Reserve account would go to the Strategic Initiatives account — providing an annual source of general fund dollars for transportation projects.

General fund revenues cover all general government expenditures, including public schools and the state match on Medicaid programs.

Keith Bybee, deputy director of the Legislature’s budget office, noted that interest from the Budget Stabilization Fund currently goes to the Permanent Building Fund, which pays for capital improvements and repairs on state buildings and higher education facilities.

Under Palmer’s bill, the new Economic Reserve account would be invested in stocks and bonds — similar to the way Millennium Fund tobacco settlement dollars are invested — in hopes of earning a higher rate of return.

“We basically guarantee a 5% return (on the Economic Reserve account) that’s siphoned off into the Strategic Initiative Program,” Bybee said.

Nothing in the bill guarantees that the Economic Reserve account wouldn’t lose value. However, Bybee noted that “the only year the Millennium Fund actually lost market value was in 2009,” during the depths of the 2007-09 recession.

The Economic Reserve account could still be used to cover state budget shortfalls during future downturns, he said. If the account earns more than 5% in a given year, the additional revenue would stay in the account to help build up the balance.

“This (bill) creates a higher earning potential for our savings account, and also creates a stable funding stream for transportation,” he said.

No one testified for or against the legislation during Tuesday’s hearing. The measure advanced to the House floor on a unanimous voice vote.

Historically, Idaho governors have opposed using general fund revenue for transportation projects, saying they don’t want roads to be in competition with schools. However, the Legislature has shown a greater willingness to cross that line.

In fact, after the committee approved his “transportation endowment” bill, Palmer introduced a second measure that grabs more state sales tax revenue for transportation needs.

The Legislature previously allocated 1% of state sales tax dollars to a transportation “expansion and mitigation” fund. That was worth about $18 million last year, Palmer said. Now he’s proposing to double the diversion to 2% per year.

The state will collect more than $2 billion in sales tax revenue this year, he said. A “huge portion” of that comes directly from transportation-related products, including new and used cars, tires and vehicle parts.

“I think it’s very appropriate that we use some of that money for roads,” he said.

Rep. John Gannon, D-Boise, noted that state employees are only getting a 2% raise next year, supposedly because the state is short on money.

“We keep hearing that the budget is tight, so we can only afford a 2% increase,” he said. “A 1% (raise) costs $7 million, so how can I vote to take another $18 million from the general fund, when we can’t provide more than a 2% raise for employees?”

Palmer said the state needs to invest in its transportation infrastructure to maintain a growing economy.

“If we do (make that investment), it will bring in more sales tax revenue,” he said. “If we don’t, our economy will go down, I guarantee it.”

As with the transportation endowment bill, the committee agreed to introduced the measure on a unanimous voice vote. It will come back for a public hearing.

Spence may be contacted at bspence@lmtribune.com or 208-791-9168.

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