Idaho's Budget Survived FY2026 on a $72 Million Margin
Summary
A second round of tax cuts pushed Idaho toward a deficit its constitution doesn't allow; a governor-ordered spending holdback and mid-year budget cuts pulled the state back to a thin surplus.
A second tax cut, on top of the first
The year opened already strained. The Division of Financial Management⧉ -- the governor's budget office, which sets Idaho's official revenue forecast -- had revised that forecast down by $853.9 million to account for tax cuts the Legislature passed in 2025, leaving a $358.1 million opening cash balance and a projected $79.9 million deficit before the year's first month had even closed. Lawmakers then added a second cut mid-year: House Bill 559⧉, signed February 10, 2026, conformed Idaho's income tax code to the federal One Big Beautiful Bill Act -- declining to follow only its bonus-depreciation and a research-expense transition rule -- at a fiscal-note cost of $155 million in FY2026 revenue and $175 million the year after.
To keep the ledger from tipping further, Governor Brad Little signed Executive Order 2025-05⧉, "The Idaho Act," on August 15, 2025, directing every executive-branch agency outside K-12 public schools to cut General Fund spending 3% -- reverting funding tied to positions that had sat unfilled, trimming travel, and consolidating services where possible. Agencies reported $79.2 million in holdbacks, which the October Budget Monitor credited with narrowing the projected deficit to $56.6 million even as September revenue came in $92.4 million below the same month the year before.
View data as table
| Aug 2025: projected deficit | 79,900,000 | One month into the year, after an $853.9M revenue-forecast cut |
|---|---|---|
| Oct 2025: projected deficit, after 3% holdback | 56,600,000 | Narrowed once the $79.2M agency holdback and September revenue were counted |
| Mar 2026: projected deficit, if unresolved | 44,100,000 | If February's revenue shortfall held with no further action |
| Apr 2026: projected surplus, at Sine Die | 67,300,000 | After the session's rescissions and supplemental appropriations |
| May 2026: projected surplus, latest update | 72,400,000 | Most recent Budget Monitor on record as of publication |
The 2026 legislative session layered on more. The Joint Finance-Appropriations Committee (JFAC) -- the joint House-Senate panel that writes Idaho's budget bills -- approved $111.1 million in supplemental appropriations, mostly required growth in Medicaid ($92.6 million) and the Department of Correction ($17.3 million), and offset it with $131.3 million in General Fund rescissions: a net $20.2 million cut that still left a projected $44.1 million deficit if the revenue shortfall held. By Sine Die -- the session's adjournment -- the Budget Monitor had flipped to a $67.3 million projected surplus. Stronger-than-forecast sales and corporate tax collections through May pushed the latest estimate to $72.4 million, even as individual income tax, the category H559 most directly touches, ran $128.5 million below forecast for the year.
View data as table
| 3% agency spending holdback (Executive Order 2025-05) | 79,200,000 | Ordered August 15, 2025; K-12 public schools exempted |
|---|---|---|
| Mid-year General Fund rescissions | 131,300,000 | Approved by JFAC during the 2026 session |
| Supplemental appropriations added back | 111,100,000 | Mostly Medicaid and Department of Correction caseload growth |
- The swing from deficit to surplus rode on spending cuts and on sales- and corporate-tax collections outperforming forecast -- not on the tax cuts themselves generating the revenue lawmakers gave up.
- Individual income tax, the category H559 directly reduces, stayed $128.5 million below forecast all year; the eventual surplus came from tax categories the conformity bill didn't touch.
- H559's fiscal note prices next year's installment at $175 million, $20 million more than this year's hit. Governor Little's FY2027 budget already answers it: making the 3% holdback permanent (about $120 million a year) and reverting more than 100 positions vacant over six months, a $20 million cut to personnel spending that was never filled to begin with.
The Legislative Services Office's own October 2025 Budget Monitor labels the 3% holdback order "Executive Order 2025-02." The Governor's Office's executive-order index lists EO 2025-02 as an unrelated permitting measure (the SPEED Act) and identifies the 3% holdback as Executive Order 2025-05, "The Idaho Act," signed August 15, 2025 -- the numbering this piece follows. As of publication (July 16, 2026), the Legislative Services Office had not yet published a Budget Monitor covering actual, closed-year revenue and spending through the June 30, 2026 fiscal year-end; $72.4 million is the most recent projected estimate on the public record, not a final figure.
Sources(8) ▾
- Idaho Legislative Services Office, Budget & Policy Analysis Division, FY 2026 General Fund Budget Monitor — August 2025 (2025-08-21) — First monthly Budget Monitor of fiscal year 2026: records the Division of Financial Management's $853.9 million downward revenue revision (from tax cuts passed in the 2025 legislative session), the year's opening cash balance, and the first projected ending balance, negative $79.9 million. Fetched directly and read in full. legislature.idaho.gov · original document
- Idaho Legislative Services Office, Budget & Policy Analysis Division, FY 2026 General Fund Budget Monitor — October 2025 (2025-10-10) — Reports September revenue collections ($92.4 million below the same period a year earlier) and the dollar total of the governor-ordered 3% agency spending holdback ($79.2 million), and shows the projected deficit narrowing to $56.6 million once the holdback and September revenue are incorporated. Note: this report's own text labels the holdback order 'Executive Order 2025-02' — the Governor's Office identifies the 3% holdback as Executive Order 2025-05, 'The Idaho Act' (see doc-eo-2025-05); EO 2025-02 is an unrelated permitting measure. Fetched directly and read in full. legislature.idaho.gov · original document
- Idaho Legislative Services Office, Budget & Policy Analysis Division, FY 2026 General Fund Budget Monitor — March 2026 (2026-03-11) — Reports February revenue collections ($89.5 million below the Legislature's January revenue target), the Joint Finance-Appropriations Committee's $111.1 million in supplemental appropriations (mostly Medicaid and Department of Correction caseload growth) offset by $131.3 million in rescissions, and the resulting $44.1 million projected deficit if the shortfall held. Fetched directly and read in full. legislature.idaho.gov · original document
- Idaho Legislative Services Office, Budget & Policy Analysis Division, FY 2026 General Fund Budget Monitor — May 2026 (2026-06-12) — Most recent Budget Monitor as of publication (published June 12, 2026, covering data through May): shows the Sine Die (end-of-session) projected ending balance of $67.3 million rising to $72.4 million on stronger May sales- and corporate-tax collections, itemizes the $155.0 million 'H559 - Tax Conformity' revenue reduction on its own revenue-reconciliation table, and reports cumulative individual income tax collections $128.5 million below forecast. A Budget Monitor covering actual (not projected) revenue and spending through the June 30, 2026 fiscal year-end had not yet been published as of this writing. Fetched directly and read in full. legislature.idaho.gov · original document
- Idaho Legislature, Revenue and Taxation Committee, House Bill 559 (2026) — Statement of Purpose / Fiscal Note (2026-01-29) — The bill's own fiscal note: H559 conforms Idaho's income tax code to the federal One Big Beautiful Bill Act (with two narrow exceptions) and prices the impact at a $155 million General Fund revenue decrease in fiscal 2026 and $175 million in fiscal 2027. Governor Little signed the bill February 10, 2026, retroactive to January 1, 2025. Fetched directly and read in full. legislature.idaho.gov · original document
- Office of the Governor of Idaho, Gov. Little signs Executive Order 2025-05, "The Idaho Act" (press release) (2025-08-15) — Official announcement of Executive Order 2025-05, directing every executive-branch agency other than K-12 public schools to cut General Fund spending 3% in fiscal year 2026 — reverting funding for positions vacant more than six months, cutting travel spending, and consolidating services. The Governor's own executive-order index confirms EO 2025-05 as 'The Idaho Act' and EO 2025-02 as a separate, unrelated permitting measure (the SPEED Act). Fetched directly and read in full. gov.idaho.gov · original document
- Idaho Legislature (Constitution of the State of Idaho), Idaho Constitution, Article VII, Section 11 — Expenditure Not to Exceed Appropriation (1890-07-03) — The constitutional balanced-budget clause: no appropriation or expenditure may exceed the tax revenue provided for it within the fiscal year, absent a war or insurrection exception. Fetched directly; full section text read. legislature.idaho.gov · original document
- Office of the Governor of Idaho, FY 2027 Budget Highlights — The ENDURING IDAHO Plan (2026-01-12) — Governor Little's FY2027 budget recommendation, released with his January 12, 2026 State of the State address: makes the 3% Idaho Act spending reductions permanent (about $120 million a year in ongoing savings) and reverts more than 100 state positions vacant over six months (a nearly $20 million personnel-spending cut), among other reductions, to keep FY2027 balanced. Also independently states H559's 'estimated ongoing revenue impact is $155 million,' matching the bill's own fiscal note. Fetched directly and read in full. gov.idaho.gov · original document
Comments
Always open. Logged-in readers can annotate paragraphs in place.
Idaho's constitution doesn't let the state spend more than it takes in during a fiscal year -- Article VII, Section 11⧉ bars any appropriation that exceeds the tax revenue provided for it that year. For most of fiscal year 2026, Idaho was on the wrong side of that line. The Legislature's own monthly Budget Monitor⧉ -- the Idaho Legislative Services Office's running scorecard of revenue against spending -- projected a $79.9 million deficit one month into the year, after lawmakers cut taxes for a second straight session. By the most recent update, the same report put the state at a $72.4 million projected surplus: about 1.3 cents of cushion for every dollar Idaho expects to spend, built almost entirely on spending cuts and one-off revenue strength, not on the tax cuts paying for themselves.