BOISE, ID – Members of the Idaho Legislature’s budget committee said Tuesday they are preparing to enter a new era of budget setting in 2026 where they focus less on approving spending requests and focus more on trimming budgets.

The Idaho Legislature’s powerful Joint Finance-Appropriations Committee, or JFAC for short, is conducting three days of budget workshops this week in Boise in preparation for the 2026 legislative session that begins Jan. 12.

JFAC is responsible for setting all the budgets for all state agencies and departments once the legislative session convenes in January.

However, the financial and budgetary landscape has fundamentally changed since fiscal year 2022, when Idaho’s state budget had a record surplus estimated at $2 billion.

Now, the state of Idaho’s general fund budget is projected to end the current fiscal year 2026 on June 30 with a deficit of $49.3 million, according to budget documents state staffers shared with JFAC on Tuesday.

Legislators said they won’t allow a budget deficit to occur and will use their authority to take steps during the 2026 session to prevent a deficit

“Instead of deciding how much we’re going to add to budgets, by and large we will be deciding how much we will trim,” said Rep. Wendy Horman, R-Idaho Falls. “So it will be a very different mindset that we will have.”

Horman and Sen. Scott Grow, R-Eagle, serve as the two co-chairs of JFAC.

Idaho Gov. Brad Little has already ordered state agencies, other than the K-12 public school system, to reduce spending by 3% during the current fiscal year due to revenue shortfalls. While the governor can order agencies to reduce spending, only the Idaho Legislature has the authority to set the budget.

Why is Idaho’s general fund state budget projecting to run a budget deficit?

The revenue shortfall is occurring after the Idaho Legislature and Little reduced revenue by more than $450 million during the 2025 legislative session in order to pay for tax cuts and a new private education tax credit.

During the 2025 legislative session, JFAC members also delayed setting their revenue projection until after the Idaho Legislature signed off on its largest tax cuts and JFAC had approved more than $5 billion in spending – a move criticized by some members of both political parties.

The projected state budget deficit does not include the costs of conforming to tax changes in the One Big Beautiful Bill Act that Congress passed this summer or more than $100 million in supplemental funding requests that the Legislature will consider during the 2026 session. The Idaho Legislature will ultimately decide whether and how to conform with the One Big Beautiful Bill Act and whether to approve the supplemental budget requests.

The Idaho Constitution requires the Idaho Legislature to pass a balanced budget where expenses do not exceed revenue.

Unless revenues reverse course and start exceeding forecasts, the Idaho Legislature will need to intervene to avoid an unconstitutional budget deficit.

Those options include:

• Cutting spending.
• Dipping into nearly $1.7 billion worth of rainy day savings accounts and unobligated cash.
• Raising taxes or fees, or otherwise increasing revenue.

Given conservative Republicans, who have spent years cutting taxes, control a supermajority in both chambers of the Idaho Legislature, increasing taxes does not seem realistic politically.

That leaves cutting spending and dipping into rainy days savings and cash on hand as potential tools the Idaho Legislature will deploy to avoid a budget deficit before the current fiscal year ends June 30.

The budget picture doesn’t become any easier in the coming years either. Graphs and charts legislative budget staffers presented Tuesday showed the gap between expenditures and revenues is projected to widen in the upcoming 2027 and 2028 fiscal years.

One general fund budget scenario presented Tuesday by Legislative Services Office Budget and Policy Analysis Manager Keith Bybee listed an estimated deficit of $555.2 million for fiscal year 2027.

Still, Bybee said the Idaho Legislature is well positioned because of its rainy day reserve savings accounts and a history of making conservative budget decisions.

“All solvable – we have solutions,” Bybee said. “We have plenty of money in reserves. We have other options.”

Horman stressed Tuesday that JFAC and the Idaho Legislature have not violated the Idaho Constitution’s balanced budget requirement.

Horman pointed out the projected deficit is merely a forecast on paper and that what matters is where the budget stands at the end of the fiscal year on June 30.

Horman also said she has seen an opinion from the Idaho Attorney General’s Office indicating the state reserve funds count as revenue.

Throughout Tuesday’s hearing, some members of JFAC and staffers frequently used phrases like “right size government” and even heralded a return to the “good old days,” when state budget writers focused on funding only needs, not wants.

But Idaho Department of Health and Welfare Director Juliet Charron used plain language to describe how her department will navigate the new budget realities within the Medicaid program.

“We are at a point where we need to make difficult decisions,” Charron told JFAC members.

In addition to budget and revenue briefings, Tuesday’s agenda included a hosted buffet dinner for JFAC members at the downtown Boise steakhouse Hemlock, which was paid for by Regence BlueShield, an insurer that began managing the state health insurance contract in 2024.

JFAC meetings are scheduled to continue Wednesday and Thursday at the Idaho State Capitol in Boise and Boise State University.

This story first appeared on Idaho Capital Sun.