BOISE — As the budget-setting process gets further underway, the Joint Finance-Appropriations Committee will soon be tasked with enacting budget cuts for state agencies, which are due to arrive with layoffs.

Idaho’s state agencies provided reports to the Legislative Services Office (LSO) on Friday detailing how 1-2% cuts would impact their operations if adopted by the Joint Finance-Appropriations Committee (JFAC). With these reports now in hand, JFAC reviewed a slate of potential agency cuts as well as recommendations from Gov. Brad Little to right the state’s budget picture.

JFAC members acknowledged Tuesday that while current revenue and spending projections avoid a deficit, this could be reversed if the cost of implementing the tax cuts of the One Big Beautiful Bill — which passed out of the House on Tuesday — reduced state tax revenues more than anticipated.

Utilizing analysis from the Idaho State Tax Commission, Rep. Jeff Ehlers, R-Meridian, who authored the House’s conformity legislation, predicted the federal tax changes will cost the state $155 million for this fiscal year.

Sen. Scott Grow, R-Eagle, who co-sponsored Ehlers’ bill, said Tuesday there still “remains so much uncertainty” in the cost of the tax cuts. He highlighted the changes to the research and expensing (R&E) credit for businesses as being among the key variables.

Ehlers estimated many businesses in Idaho have already adjusted their tax filings in recent months assuming the state would adopt the federal tax code changes. If this is the case, Ehlers said making a change around this credit is “about a wash” for this fiscal year.

Grow was more cautious, saying the provision could cost the state as little as $0, as Ehlers anticipates, or as high as $80 million for this fiscal year alone.

Sen. Melissa Wintrow, D-Boise, questioned why the state was working to implement the tax cuts retroactively in the first place, an aim that deviates from Little’s recommendation to have the tax cuts arrive starting in the 2026 tax year, rather than in the 2025 tax year.

The governor’s budget recommendations — through a series of one-time transfers and targeted ongoing reductions — already provided a balanced budget without requiring the added 1-2% state agency cuts JFAC is considering. Why further cuts were needed for agencies when a balanced budget plan was already provided by Little was unclear, Wintrow said.

Like Grow, Rep. Josh Tanner, R-Eagle, pointed to the “uncertainty” around implementing the federal tax changes that could very well wipe out the roughly $30 million surplus JFAC is projecting for this fiscal year.

Either option for cuts would do little to improve the state’s cash cushion, if this is the intention.

A report from the LSO calculated the impact of 1-2% cuts if they were added onto Little’s 3% holdbacks that were ordered in the fall. If 1% cuts were adopted, it would save the state another $15.3 million from its general fund. If 2% cuts were enacted, these savings would grow to $28.9 million.

On the employee side, added 1% cuts would eliminate over 17 full-time positions while 2% cuts would eliminate over 42 full-time positions, according to the LSO report.

These reductions account for several agencies that were recommended to be exempt from further cuts.

These include K-12 public schools, the Idaho Department of Correction (IDOC) and the Idaho State Police (ISP). Keith Bybee, budget and policy division manager of LSO, added Medicaid services have been held “effectively harmless” by not touching trustee benefits, but making cuts to staff and the administration of the program.

These carve-outs arrive after IDOC and ISP indicated in their reports to LSO last week that further cuts would come at the cost of public safety across the state, as was previously reported by the Idaho Press.

Administrator of Idaho’s Division of Financial Management Lori Wolff reiterated Tuesday the 3% cuts ordered by Little were arrived at to “avoid structural damage to government systems and services that people rely on.” Going beyond the governor’s recommendations, she said, would enter this territory.

“It’s not just a number on the bottom of the spreadsheet,” Wolff said. “There are a lot of implications within that number that hopefully are very transparent to both the representatives and senators that are going to be voting on it and to the communities who are going to feel it.”

Responding to suggestions from JFAC leadership that the agency cuts would be an ongoing reduction, Wolff said she dd not understand the need given the state’s bottom line improving to over $150 million by fiscal year 2027 based on JFAC’s own projections.

Though the state remained “pretty tight” on its bottom line for this fiscal year, it represents a “one-time problem” that should be met with “one-time solutions,” Wolff said.

JFAC’s coming decisionsJFAC will be tasked with making a variety of decisions at its Friday meeting beyond whether to enact the 1% or 2% agency cuts as presented in LSO’s plans.

The committee will also consider aligning itself with some of Little’s recommended budget adjustments unveiled in his “Enduring Idaho” plan at the outset of the legislative session.

To achieve a balanced budget, Little recommended several one-time cash transfers for this fiscal year including:

$10 million from the In-demand Career Fund$15 million from the Water Pollution Control Fund $45 million from the Idaho Transportation Department’s Strategic Initiatives Fund $3 million from the Opportunity Scholarship Fund $33.7 million from the Permanent Building Fund

Each recommendation will be voted on individually during the committee’s Friday meeting. While not necessarily indicative of the JFAC voting one way or the other, Grow, who serves as co-chair, characterized the transfers as “great decisions.”

Another vote from the body on Friday will impact how agency budgets are structured moving forward, including how much of the cost for employee health insurance is picked up by the state.

JFAC can either follow the governor’s recommendation of funding the full 14.4% increase or adopt recommendations from the Department of Government Efficiency (DOGE) Task Force.

Their recommendations include either funding 95% of the insurance cost increase for agencies with more than 125 full-time employees or funding insurance increases at agencies of the same size that accounts for cost-savings from “natural turnover,” JFAC documents said.