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BOISE — Idaho’s state tax revenues for August came in much higher than expected — $37 million higher, the second straight month of big overages — putting the state on track to end the current fiscal year with a giant surplus if current trends hold, even as it has cut budgets due to the economic impacts of COVID-19.

Those cuts have included a $99 million holdback on the current year’s public school budget, which Gov. Brad Little proactively imposed at the start of the fiscal year July 1 as part of 5% holdbacks statewide.

“Two months does not make a trend,” said Alex Adams, Little’s budget director. “We’re optimistic, but cautiously optimistic.”

The state’s largest categories of general fund tax revenue, individual and corporate incomes taxes and sales taxes, all were up substantially in August. Individual income taxes were 19% higher than forecast and 25.4% higher than last year at the same time. Corporate income taxes came in 206.5% over forecast and 64.1% ahead of last August. And sales taxes were up 7% over forecasts and 8.2% higher than last August, and that’s not even counting $9.6 million in taxes on online sales in August that went directly into a Tax Relief Fund, rather than the state general fund.

However, he said any decision likely wouldn’t come before the Legislature convenes in January.

“We’re going to keep seeing what happens between now and the end of the year, and I think we’ll have enough information behind us that we’ll be able to make objective decisions in the governor’s budget in January,” Adams said.

To date for the fiscal year, two months in, individual income tax collections are $109.6 million or 49.3% more than last year. Corporate income tax collections are up $18.0 million, and sales tax collections are up $33.3 million compared to last year.

Adams said as the revenues have come in for the first two months of the new fiscal year, “my jaw has dropped.”

“Right now, revenue is coming in stronger than even the pre-COVID forecast,” he said. “We’ve talked about a lot of things, but they’re just theories at this point. … It’s hard to put a finger on why the numbers are coming in the way they did.”

State economists expected general fund tax revenues to take a big hit this year as a result of the novel coronavirus pandemic, from business closures to job losses.

Idaho’s unemployment rate in July was around 5%, less than half the 10.2% national rate. It was a 2.7% in February, and ballooned up to 11.8% in April before beginning to drop again.“It may be Idaho employment in August was stronger than anticipated as businesses this summer worked off the backlog of services such as elective surgeries that were postponed this spring,” wrote state economists Derek Santos and Greg Piepmeyer in their monthly Idaho General Fund Revenue Report, published Tuesday afternoon. “Individual income tax receipts have come in 11.9% ahead of forecast across the two months of the fiscal year.”

The state’s revised economic forecast for the fiscal year, released last month, calls for a “coronavirus-induced sharp, short decline in local economic activity followed by a slow recovery,” and predicts individual income tax receipts for the year will decline by 0.3% from fiscal year 2020. Overall, the economists are forecasting 2% growth in state general fund revenues this year to $4.11 billion; in fiscal year 2020, which ended June 30, state general fund revenue grew by 8%.

Adams said, “We’re cautiously optimistic, but skeptical of how much of this will sustain, and how much of this is propped up by federal transfer payments and things like that.”Forecasts initially suggested state tax revenues could fall by as much as 14% this fiscal year.

The state’s bottom line also was boosted in August by a post-year-end reversion from the state Department of Health & Welfare, largely due to increased federal payments for Medicaid authorized under the CARES Act, of $60.3 million.

Between that figure and the unanticipated general fund revenue collections thus far, the Legislative Budget Office calculated that if current trends hold, Idaho would end the fiscal year next June 30 with a budget surplus of $503.2 million.

Adams cautioned that many other factors could affect that year-end balance that can’t yet be quantified, from supplemental appropriations approved by the Legislature during its session to wildfire costs and other unanticipated expenses.

Little, in a statement Tuesday, praised Idaho’s fiscal performance, saying, “We’re far better off in Idaho than elsewhere.”The Tax Relief Fund to which lawmakers have directed sales taxes from online sales has now collected more than $103.5 million, but $39.3 million of that was transferred to the state disaster fund for the coronavirus pandemic. That likely will be paid back from federal CARES Act funds; the state hasn’t directed any tax relief from the fund, so its balance simply accumulates.

Asked if the state’s looking at stopping the continued flow into that account as it imposes budget holdbacks, Adams said that’s “certainly part of the discussions, I’m sure, that will be had with the Legislature.”

Betsy Z. Russell is the Boise bureau chief and state capitol reporter for the Idaho Press and Adams Publishing Group. Follow her on Twitter at @BetsyZRussell.

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