The Idaho Division of Financial Management is telling all Idaho state agencies and departments – other than public schools – to cut next year’s budget requests by 3%. The directive makes the budget holdbacks that Gov. Brad Little ordered for the current fiscal year permanent, budget documents provided by the state show.
In addition to revising their base budgets down to make the 3% budget holdbacks permanent for fiscal year 2027 and beyond, all state agencies and departments other than public schools were told to eliminate all general fund budget requests for replacement items in next year’s fiscal year 2027 budget, state budget records show.
Idaho state revenues continue to lag behind budget projections
Replacement items are a routine part of the budget process. Just as the term suggests, replacement items include requesting new equipment or vehicles to replace aging models, such as police cruisers for Idaho State Police, computers for state employees and heavy equipment used by the Idaho Department of Lands to fight wildfires.
Instructions for the new cuts were included in a budget memo the Idaho Division of Financial Management, which is part of the executive office of the governor, sent to state agency directors and fiscal officers on Wednesday.
“This effort is about ensuring that Idaho government remains lean, efficient, and aligned with the values of our taxpayers,” Idaho Division of Financial Management Administrator Lori Wolff wrote in Wednesday’s budget memo. “By right-sizing government today, we strengthen our ability to fund the state’s highest priorities well into the future and create an even stronger economy.”
The cuts for next fiscal year expand midyear budget holdbacks ordered by Gov. Little
Little first announced he was implementing 3% holdbacks for state agencies other than public schools for the current fiscal year 2026 on Aug. 15. Idaho’s fiscal year 2026 ends in June, and fiscal year 2027 starts in July.
Wednesday’s budget memo expands that action by making the cuts ongoing in fiscal year 2027 and beyond.
Under state law, all Idaho state agencies and departments submitted their fiscal year 2027 budget requests to the state prior to Sept. 1. This week’s new budget guidance means they have to take those requests back, reduce their base budgets by 3% and zero-out general fund replacement items, state records show.
State agencies and departments have until Oct. 3 to submit their revised 2027 budget requests to the state.
The budget holdbacks are occurring after the Idaho Legislature and Little reduced state revenue by more than $450 million during the 2025 legislative session to pay for a series of tax cuts and create a new education tax credit that reimburses families for education expenses including tuition at private religious schools.
In simplified terms, revenue is the amount of money the state has available to spend in the budget.
The Idaho Constitution prohibits the state from spending more money than available revenue.
Idaho’s state revenues are coming in lower than estimated
Since the Idaho Legislature and Little approved reducing state revenue by more than $450 million, state revenues have come in below projections.
Through the first two months of the current fiscal year 2026, state revenues have come in $22.6 million, or 2.8% below the Division of Financial Management’s revised revenue forecast.
Idaho legislators planned to end fiscal year 2026 with a $439.8 million ending balance, or surplus. However, since the Idaho Legislature adjourned in April, that projected ending balance has decreased to an estimated $21.8 million as revenues lag behind projections.
Senate Minority Leader Melissa Wintrow, D-Boise, said the state is facing budget holdbacks and revenue shortfalls because of what she described as “gross negligence” by the Idaho Legislature and Little.
Wintrow said it was completely irresponsible for the Idaho Legislature and Little to reduce state revenue by more than $450 million.
“I wish I could say I was surprised, but it doesn’t make it any less infuriating,” Wintrow said Thursday afternoon.
The state’s projected $21.8 million ending balance may not tell the full budget story.
That projection does not include a $60 million supplemental funding request the Idaho Department of Health and Welfare said it needs to pay its Medicaid bills. The projection also does not include the cost of conforming to the tax changes included in the One Big Beautiful Bill Act President Donald Trump signed into law July 4.
One outside estimate by the nonprofit Tax Foundation estimates it could cost Idaho another $167 million to conform to tax changes such as no tax on workers’ tips, no tax on employee overtime, no tax on borrower’s car loan interest and an expanded senior deduction.
Because of the cost of the tax changes and the $60 million supplemental funding request, the state could actually be facing a $200 million deficit, not a $21.8 million surplus, House Minority Leader Ilana Rubel, D-Boise, warned this week.
Wintrow said the Idaho Legislature and Little need to take responsibility for cutting revenue so deeply and spending more money on tax cuts that she says the state cannot afford.
“Just because you say something over and over again doesn’t make it the truth,” Wintrow said. “Just because you say, ‘We’re being lean and efficient,’ – no, it’s not true! It is because you cut the revenue stream too hard, and I think knowingly so. You can quote me on this: I think the best term for it is gross negligence.”
With nearly 10 months still to go in the current fiscal year 2026, state officials said Thursday there is still time for revenues to rebound and increase, or to fall even further behind forecasts. State officials did not rule out the possibility that additional budget cuts could still be necessary in order to balance the fiscal year 2026 and fiscal year 2027 budgets.
Idaho Capital Sun is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Idaho Capital Sun maintains editorial independence. Contact Editor Christina Lords for questions: info@idahocapitalsun.com.