Idaho to hire more auditors, go after tax gap

BOISE - Idaho’s budget outlook for next year is looking a bit brighter now, after legislative budget writers on Friday decided to hire more state tax auditors to bring in an extra $16.4 million next year in already-owed taxes. “It’s a way to get revenue, OK?” said Rep. Darrell Bolz, R-Caldwell, vice-chair of the Joint Finance-Appropriations Committee. “If you can get a 5-1 or 7-1 or 8-1 return, why wouldn’t you do it? Added Rep. Wendy Jaquet, D-Ketchum, “We think that they’ll be able to do it. It was not nearly what they wanted, and it’s one-time - we felt like we were really holding them accountable.” Idaho’s state Tax Commission estimates the state has a collectible “tax gap” of $67 million, due to under-reporting, non-filing and underpayment. It has a four-year plan to go after that by adding to its audit and compliance staff, but that staff has seen budget cuts in the past year as the entire state budget has been trimmed back. This year, Gov. Butch Otter moved $1.5 million from the state’s budget reserve into the program to start the process. The plan for next year, worked out between the two lawmakers, the Otter Administration and its Tax Commission, calls for spending $3.3 million more on the state Tax Commission next year than JFAC had planned in its “blueprint” to fit next year’s budget within the state’s much-lowered tax revenue projections. But with the extra $16.4 million in taxes the move would gain, the net impact is a positive $13.1 million for the state’s general fund. Otter, who had originally proposed just another $1.5 million toward the effort next year, backed the move. “He is very supportive of what happened today,” said Otter’s budget director, Wayne Hammon. Otter himself proposed a key piece of the plan: Quarterly reviews and a quarter-by-quarter phase-in. “What the governor wants is a system where we can watch that,” Hammon said. The Tax Commission reports that this year’s extra auditors, funded by the $1.5 million shift from budget reserves, are on track to exceed their goal of an additional $10 million in state taxes collected. The new money next year would reverse recent budget cuts to bring the audit and collections staff back up to 2009 levels; restore 10 vacant positions in the division; add an array of 43 temporary positions including compliance technicians, compliance officers, tax auditors, financial technicians and technical records specialists; and shift some money within the agency to fund another permanent position. In 2003, at the urging of then-Rep. Mike Mitchell, D-Lewiston, lawmakers funded a $926,000 boost in the compliance budget for the Tax Commission, in hopes of gaining more than $5 million in collections. The additional auditors and collectors ended up bringing in more than $10 million in additional tax revenue in the next year. A few lawmakers worried Friday that the move could prompt collectors to be “overzealous,” but all members of the joint budget committee backed the plan. Rep. George Eskridge, R-Dover, said, “I would ask the Tax Commission to be very precise and very accurate” in tracking the costs and returns. Friday marked the final day of regular budget-setting for the joint committee, though it still must set the delayed budget for the state Department of Administration, which has been put off amid questions over a $60 million statewide broadband network. Overall, the budget for next year was expected to need a $5.5 million infusion from the state’s tobacco settlement proceeds to balance, but now that’s no longer needed. With the decisions made to date, next year’s budget would show a tentative $2.5 million surplus, based on current revenue projections, after a series of transfers from various reserve funds to ensure budget-balancing. Those transfers, also approved by JFAC on Friday, would drain the state’s main reserve fund, the budget stabilization fund, down to $40 by the end of fiscal year 2011; would leave $17.9 million in the Public Education Stabilization Fund; and would leave just under $1 million in the Economic Recovery Reserve Fund. The budget decisions still need approval from both houses, but budget bills rarely change once they’re set by the joint committee.