Legislature Update - 1st Week

​A summary of the Governor's State of the State and Budget Address: 
The Governor’s budget proposal includes both permanent and one-time spending changes. On the savings side, it permanently reduces state spending by nearly $120 million through a 3% agency reduction required by the Idaho Act, eliminates more than 100 long-vacant state positions for $20 million in ongoing savings, and cuts $30 million by ending the Empowering Parents grant program.
The proposal also recommends cutting $10 million each year from local drinking water and wastewater projects, making a one-time $275 million reduction to the Transportation Department’s Strategic Initiatives Fund, and not funding higher education enrollment workload increases, saving $9.5 million in fiscal year 2027.
On the investment side, the budget includes $925 million in federal spending authority over five years for rural healthcare, nearly $1 million for graduate medical residency programs, and a $45 million reduction in General Fund Medicaid spending through a 4% provider rate adjustment and other service changes that would require legislative approval.
The Governor also expressed the importance of the continuation of the Idaho LAUNCH program and the growth of workforce development. 

The legislative session opened with an immediate focus on the state budget, as the Joint Finance-Appropriations Committee (JFAC) met early under new leadership and quickly turned to fiscal discussions. Representative Josh Tanner (R, D-14) replaced Representative Wendy Horman and chaired the committee’s first meeting of the year. The Governor’s budget proposal received mixed reactions from legislators. Some questioned whether the proposed reductions go far enough to meet the state’s balanced budget requirement, while others raised concerns about potential cuts to public education or Medicaid provider rates. 

The Economic Outlook and Revenue Assessment Committee developed the revenue projection for current FY26 at $5.665 billion and $5.816 billion for FY27. This number is 2.8% more than the Governor's recommendation for FY26 and 2.4% for FY27. JFAC voted and approved this number on Monday.

HB506 - The State Taxation Anticipated Revenue or STARs program allows developers to receive a rebate of sales taxes to be collected from retailers within a new complex for transportation improvements. The law currently has a minimum expenditure of $6 million and a maximum of $35 million for a qualified project. This legislation increases the minimum project total to $10 million and the maximum to $100 million.

HB519 - This proposed legislation is the annual tax conformity bill to update references to the Internal Revenue Code (IRC). The bill conforms the Idaho income tax code to changes made to the IRC that affect the 2025 tax year. It fully conforms Idaho to the tax changes in the One Big Beautiful Bill, including recapture of past R&E, except for bonus deprecation which Idaho has historically not conformed to. This proposed legislation also ensures that businesses cannot use the same R&E expenses for both a deduction and Idaho tax credits.

SB1225 - This legislation defines the process for all president searches for the state institutions of higher education and amends Idaho Code to make the name of the sole finalist publicly available for 10 days prior to the final decision being made by the hiring authority. (Instead of the current five finalists required)