Rep. Steve Berch Newsletter: Yellow flags (budget cuts)

Rep. Steve Berch Newsletter:
Yellow flags (budget cuts)

Each legislative session usually ends around the beginning of April. However, legislative activities continue throughout the year and can be a harbinger of what’s to come in the next legislative session. 2025 is no exception. Three recent news items are raising yellow flags. It remains to be seen whether or not they will turn into red flags during the 2026 legislative session:

Across-the-board cuts to the state’s budget
A dubious new charter school
Idaho’s DOGE committee

This newsletter addresses the first issue (budget cuts). Subsequent newsletters will address the other issues.

Budget cuts

Governor Little recently announced a 3% budget cut across all state agencies. This happened after revenues in the first month of the 2026 fiscal year (July, 2025) came in 10% below projections. It was then learned that 2026 revenue may be reduced by an additional $167 million due to tax cuts in the federal government’s Big Beautiful Bill.

Since then, the state has lowered its total FY’26 revenue forecast by $854 million. A notable exception to the governor's budget cuts is the K-12 school budget. It would be hard for the governor to explain why public school budgets were being cut while at the same time he gave $50 million to for-profit private and religious schools. Higher education, however, is not protected. Idaho colleges and universities are expecting their budgets to be cut by $13 million.

All fiscal decisions have consequences. In addition to the cut to higher education, Idahoans should expect a reduction in other important state services that can have a profound impact on their lives, including (but not limited to):

Affordable housing
Special education
Road and bridge repair
Rural physician incentives
Workforce training
Ongoing fire suppression
Energy assistance program for seniors and veterans.

This budget crisis was easily foreseeable and completely preventable. It started with the governor proposing $100 million in permanent tax cuts during his State of the State address in January. That would have reduced state revenue by $1 billion over 10 years. What made his proposal so absurd is that he also signed a bill which obligates the state to borrow $1 billion over the same 10 years – and pay interest on the loan with taxpayer dollars. How could the state cut $1 billion in “unnecessary” revenue if it also had to borrow $1 billion over the same 10 years? That makes no sense.

Not to be outdone, House and Senate majority party leadership passed a series of bills that would permanently reduce state revenue by over $4.5 billion over the next 10 years. Over $2.5 billion of this revenue reduction comes from an income tax reduction (H40) that primarily benefits corporations and the very wealthy, while only giving the average Idaho family about $127 in tax relief. H40 reduced revenue by 2.5 times what the Governor proposed – and he gleefully signed it into law (along with other revenue reduction bills that collectively were over four times what he originally proposed):

This isn’t trimming the fat. This is cutting into muscle and bone.

I debated against introducing H40 in the House Revenue & Taxation committee, knowing full well that I would be attacked for opposing a “tax cut.” Coordinated attacks against me from extremists in North Idaho and Ada County started right away – nearly two years before the next election.

Click here to see my full debate, which highlights three fatal flaws in this legislation:

Failure to consider the state’s future fiscal needs.
Failure to consider the impact of tax cuts at the federal level (e.g. the Big Beautiful Bill).
Failure to consider an eventual downturn in the economy over the next 10 years.

Perhaps most disturbing was how H40 was introduced to the committee. The sponsor’s opening words were so revealing, I wrote them down on the white board in my office. They remind me how the majority party has replaced sound, balanced, and professional fiscal management with political slogans:

This effectively says: “We don’t care about the consequences of reducing state revenue.” Successful business people conduct a cost/benefit analysis, not just a cost analysis. No organization – private, public, or personal – thrived by simply cutting costs. Being smart and efficient with dollars every day must be balanced with making smart investments in one’s future, otherwise you don’t have what you need for the future – especially when you’re a fast-growing state with an aging infrastructure.

H40 alone cut $2.5 billion from state revenue over 10 years without first considering the need for:

$5+ billion in road/bridge maintenance and new construction for growth
$1+ billion for deferred and ignored public school building maintenance
Hundreds of millions of dollars every year for the new state-run public defender system, EMS services, updated coroner system, adequate compensation for in-home care, and many other vital state services that people depend on or take for granted.

I don’t know if this was a deliberate maneuver to starve the state of revenue, or if it was just fiscal malpractice. I do know that no evidence was presented to justify why the state didn’t need this revenue.

The responsible course of action would be for the legislature to acknowledge it went too far and scale back the $4.5 billion in revenue reduction in order to close the deficit it created. It is more likely that the legislature will double-down and cut revenue (and thus vital services) even further.

Governance by political slogans is never a good thing.