February 15, 2026
Session Update: Idaho’s 2026 Budget
By: Idaho Senator Cindy Carlson
We are now halfway through the 2026 Legislative Session. In recent weeks, many have expressed concerns regarding the budget reductions being considered by the Joint Finance-Appropriations Committee (JFAC). I would like to provide clarity on why these reductions are being discussed and what factors have led us to this point.
When the Legislature adjourned Sine Die last year, the state projected a $430 million carryover in the General Fund. This meant that by the end of Fiscal Year 2026, Idaho should have had about $430 million remaining. That balance would have served as the starting point for Fiscal Year 2027, helping to maintain a structurally balanced budget.
However, several unforeseen developments have significantly changed those projections.
On July 4, 2025, President Trump signed the “Big Beautiful Bill” (BBB) into law, introducing substantial positive changes to federal tax policy for taxpayers. Idaho traditionally conforms to federal tax code changes when the Legislature reconvenes in January. Conformity simplifies tax filing for Idahoans and usually ensures alignment between state and federal tax policy.
This year, however, conformity has created notable fiscal implications. The conformity bill was recently passed by the Idaho House, Senate and has been signed by the Governor. The Idaho State Tax Commission will proceed to implement the necessary adjustments to align most of the BBB benefits into Idaho tax code.
Under conformity:
· Individual taxpayers will be able to apply the BBB benefits retroactively to January 1, 2025.
· Corporations will not receive full bonus depreciation at the state level.
· Research and Experimental (R&E) expenses would be prorated over five years for Idaho tax purposes.
While conformity provides state tax relief for taxpayers, it also reduces projected state revenue. Due to conforming Idaho will be issuing tax credits anywhere $155M-$175M ongoing for individuals and corporations. This revenue decline which includes large corporation tax cuts are a primary driver of the proposed budget reductions for Fiscal Year 2026. Don’t forget, the Legislature reduced the income tax rate again last year so we have received less tax income on that front as well.
In order to right size the budget, JFAC has approved further budget adjustments, 1% reduction for Fiscal Year 2026 and 2% reduction for Fiscal Year 2027. These reductions are in addition to the Governor’s recommended 3% holdback.
Idaho has long prioritized balanced budgets and conservative financial stewardship. While budget reductions are never easy, these actions are intended to ensure long-term fiscal stability and protect essential services for Idahoans.
JFAC passed the Base (aka Maintenance ) Budgets Friday which included the 1% additional Budget reductions for 2026. We will now be working hard to ensure the proposed reductions are being done in the right areas of state government . Thank you for your continued engagement throughout this legislative session. I remain committed to keeping you informed as we move forward. These tax cuts have not been easy calls to make, and the JFAC members who have been working to protect our state’s future have been under heavy fire from the media and public. They need your prayers, support, and encouragement as they continue to fight to balance the budget by the best means possible.
Regards,
This Substack newsletter is a collaborative effort of Senator Cindy Carlson Legislative District 7 and Jill Manley, District 7 Intern/Reporter
