Idaho Gov. Butch Otter sent out a wake up call when he called on state agencies to consider what happens if federal aid to the state drops 20 percent.
Otter is looking at how we keep crucial services delivered, an important consideration. But his call also reminds us that Idaho’s economy gets a major shot in the arm from federal spending. The Economist in 2011 analyzed how much different states benefit from federal spending compared to how much they pay in with federal taxes.
From 1990 to 2009 the federal government spent $148.4 billion in Idaho. That came in roads, school funding, the Mountain Home Air Force Base the Idaho National Laboratory, the Forest Service the Bureau of Land Management Social Security payment, farm subsidies, Medicaid, Medicare, federal housing grants, economic development grants, fish and wildlife management, tribal health programs, federal employee salaries and benefits, just about anything you can think about.
During the same 20 years the federal government collected $124.3 billion in taxes in Idaho. That left us with a $24.1 billion windfall that has contributed to our Gross Domestic Product that was $53.7 billion in 2009.
So if Otter is right and we do cut the budget by a worst case scenario of 20 percent, Idaho's economy will inherently take a big hit. Even the 10 percent cuts that Republican Sen. Mike Crapo predicted will reduce the amount of money moving through the Idaho economy.
That means that the private economy will have to experience a huge growth trend over the next decade in Idaho to make up the difference. Remember our GDP hasn’t yet exceeded $60 billion despite Otter’s Project 60 goal.
We also could end up getting more of the smaller federal pie if say, new energy programs are started at the INL, a new mission comes to the Mountain Home Air Force Base or some other major event shifts even more federal dollars to the state. There is no sign such a shift is coming.
So who are the states that might actually benefit the most from federal budget cuts? New York gave the rest if us $956 billion from 1990 to 2009. But they got back $2.3 trillion.
The big winner could be Delaware. It got a measly $86 billion in federal spending while paying $211 billion in taxes, a transfer of $124 billion, more than twice its 2009 GDP of $60 billion.