Why It Matters
Idaho’s state finances are under a microscope as the fiscal year winds down, with May revenue collections coming in below projections. The shortfall raises questions about whether the state can close the books with a healthy reserve — especially as the Legislature bet heavily on an optimistic revenue forecast.
What Happened
Idaho brought in $367.1 million in revenue during May, falling $21.1 million — roughly 5.4% — short of the monthly forecast. The primary drag came from individual income taxes, which missed their target by $30.9 million. Sales tax and corporate income tax collections, however, came in above projections, partially offsetting the income tax gap.
The state’s fiscal year ends June 30, leaving one final month to make up ground. Despite May’s miss, officials say the broader picture remains stable. Lori Wolff, who oversees state revenue reporting, noted that “although May revenues were about $21 million below forecast, overall collections for the fiscal year remain strong and are running $155 million ahead of the projections.”
Wolff expressed confidence the state would finish in the black: “Idaho’s economy continues to perform well, and we have confidence we will close out this fiscal year with a balanced budget.”
By the Numbers
- $367.1 million — total May revenue collected
- $21.1 million (5.4%) — May shortfall below forecast
- $30.9 million — individual income tax collections below forecast in May
- $72.4 million — projected positive ending cash balance for fiscal year 2026
- $94 million — what the projected ending balance was just one month earlier
A Budget Built on Optimism
One complicating factor is that Idaho lawmakers built the state budget using a revenue projection $152.5 million higher than the estimate produced by the state’s own Division of Financial Management. That gap has drawn scrutiny as actual receipts have trended below the legislative target in recent months.
Adding pressure, the 2026 legislative session passed a bill to retroactively align state tax law with recent federal tax cuts, carrying an estimated price tag of $155 million for the current year. Over the previous five years, Idaho lawmakers approved roughly $4 billion in cumulative income tax reductions, a series of cuts that reshaped the state’s revenue baseline.
To manage spending in the face of tighter revenue, state agencies absorbed a 4% budget cut in fiscal year 2026, with a steeper 5% reduction already locked in for fiscal year 2027. Idaho’s Constitution requires a balanced budget and bars the state from spending beyond what it collects — a hard constraint that keeps state leaders focused on the bottom line.
Zoom Out
Idaho is not alone in watching income tax receipts soften. Across the Mountain West, states that passed significant income tax relief over the past several years are now recalibrating expectations as the full revenue impact comes into focus. The combination of large tax cuts and an aggressive legislative forecast puts Idaho in a position where a strong June performance is important to land comfortably above zero.
The narrowing of the projected surplus — from $94 million a month ago to $72.4 million now — reflects how quickly the picture can shift in a single reporting cycle. Idaho already carries one of the highest grocery tax rates in the nation at 6%, a topic that resurfaces regularly in budget conversations as lawmakers weigh revenue trade-offs.
What’s Next
June revenue figures, expected after the fiscal year closes on June 30, will determine the final cash balance. If collections hold or exceed forecast in the final month, the state should comfortably meet its constitutional balanced-budget requirement. A second consecutive significant miss, however, would narrow the margin further and put added scrutiny on the Legislature’s revenue assumptions heading into budget planning for fiscal year 2028.
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