Idaho’s projected state budget deficit for the 2026 fiscal year has climbed to $58.3 million, according to newly released budget documents and revenue estimates.
This marks an increase from last month’s projection, which expected the year to end with a $56.6 million deficit.
Revenue Weakness in First Four Months of FY 2026
State officials reported that Idaho’s revenue collections fell short of expectations during three of the first four months of the fiscal year.
The November General Fund Budget Monitor, published by the nonpartisan Idaho Legislative Services Office, highlights the extent of this decline:
- Revenues came in $103.1 million (5.8%) below the revised forecast from the Division of Financial Management.
- Collections were also $59.5 million (3.4%) lower than the same four-month period last fiscal year.
These numbers show that Idaho is experiencing a sustained slowdown across key revenue sources.
Legislators Split on Interpreting Idaho’s Budget Outlook
Two leading lawmakers, one from each party, offered sharply different views on the seriousness of the deficit.
Democratic Concerns Over Budget Cuts
House Minority Leader Ilana Rubel (D-Boise) expressed deep concern, saying the fiscal situation is “dire.” She warned that the 3% budget cuts ordered by Governor Brad Little this summer have already hurt seniors, low-income families, and Idahoans with disabilities.
Rubel believes more reductions are likely, calling the situation “a catastrophe.”
Republican Leaders Say Idaho’s Economy Remains Strong
Meanwhile, Rep. Wendy Horman, a Republican from Idaho Falls and co-chair of the powerful Joint Finance-Appropriations Committee (JFAC), said she sees no reason to panic. She emphasized:
- Idaho has record savings and cash reserves
- The state recently passed the largest tax cuts in Idaho history
- Individual income tax collections remain higher, despite the cuts
Horman noted that only corporate income tax collections, down $58.3 million, match the projected deficit.
“You can explain the entire variance with corporate income tax numbers,” she said.
Idaho Must Pass a Balanced Budget
Under the Idaho Constitution, the Legislature cannot spend more than the state collects. The largest revenue sources include:
- Individual income taxes
- Sales taxes
- Corporate income taxes
Horman assured that Idaho will end FY 2026 with a balanced budget, as required, and aims to maintain a cash cushion for emergencies.
Major Fiscal Pressures Not Included in the Deficit Forecast
The projected $58.3 million deficit does not factor in:
- More than $100 million in supplemental funding requests for 2026
- The revenue impact of President Donald Trump’s One Big Beautiful Bill Act, passed this summer
A report by the Idaho Center for Fiscal Policy estimates that conforming Idaho’s tax code to the new federal law could reduce state revenue by an additional $284.4 million.
Big Budget Decisions Ahead in 2026
During recent meetings, JFAC leaders reaffirmed that lawmakers will take the necessary steps to ensure Idaho finishes the fiscal year without an actual deficit.
However, projections show even larger gaps in the coming years:
- FY 2027 could face a shortfall of $555.2 million
- FY 2028 may also show widening gaps between revenues and expenditures
Horman stressed these are “only projections,” noting the Legislature has never funded every item state agencies request.
Impact of 2025 Tax Cuts on Current Revenue
Part of the strain stems from decisions made during the 2025 legislative session, when the Republican-controlled Legislature approved more than $450 million in tax reductions. A new education tax credit for private and religious schools also contributed to reduced state revenue.
Senate Minority Leader Melissa Wintrow (D-Boise) said the revenue shortfall is “a direct result” of lawmakers setting unrealistic revenue estimates to justify these tax cuts.
Although Governor Little warned in early 2025 that deep reductions could harm the budget, he ultimately signed all the tax cut measures passed by legislators.
Legislative Session Begins January 12, 2025
Idaho lawmakers will return to the State Capitol in Boise on Jan. 12, where the growing budget deficit, federal tax conformity, and supplemental requests are likely to dominate discussions.
Idaho’s $58.3 million projected deficit for FY 2026 has opened a major debate among state leaders. While Democratic lawmakers warn of damaging cuts to essential services, Republican legislators argue Idaho’s economy remains strong and manageable.
With significant new financial pressures looming from supplemental funding and federal tax changes, the Legislature faces critical decisions in early 2026 to ensure Idaho maintains its constitutionally required balanced budget.
