Following the Money Home: Revenue Sharing, Schools, Medicaid and Local Budgets

A budget fight in Boise sounds far away until a county commissioner says the road district will wait another year for a grader, or a school board cuts a bus route. The link is real, and it is traceable. State money reaches local governments by three channels: a formula in the sales tax statute, the school funding formula, and the Medicaid match that sits inside the Department of Health and Welfare budget. This lesson walks each channel with real figures, shows the arithmetic, and ends with how to tell whether a state decision in Boise is the cause of a local budget gap.

The sales tax split in Idaho Code 63-3638

When Idahoans buy a couch or a tractor part, the sales tax goes to the State Tax Commission. Section 63-3638 says where it goes. The statute lists the distributions in order, and each percentage names its own base, so the order matters.

First come the refunds, which are paid from the collections as claims arrive. Then fixed amounts come off the top. The statute names $5,000,000 a year for the permanent building fund and $4,800,000 a year for the water pollution control fund. It also sets aside money certified by the Idaho Housing and Finance Association for its capital reserve fund. Counties get $4,100,000 a year for election costs: $2,200,000 split equally among the 44 counties and $1,900,000 split by population. After the first years the amount rises with the consumer price index, and it can never fall below $4,100,000. The county money may be spent only on election costs.

Then the percentage and fixed dollar slices apply. The statute states the base for each percentage: the 11.5 percent follows refunds and the distributions required by sections 63-3203, 63-3620F and 63-3709, while the 2.25 percent and the 3.25 percent follow those same items plus the revenue sharing and transportation slices. The text does not say whether the fixed dollar items above are subtracted before the 11.5 percent is applied, so ask the State Tax Commission for the exact base before quoting a dollar figure. The table lists the main slices as they read in the statute in October 2026.

Slice of sales tax revenue	Amount or share in 63-3638	Goes to
Revenue sharing account	11.5 percent, paid quarterly	Cities, counties and special purpose taxing districts (split below)
Homeowner property tax relief (FY2024 onward)	2.25 percent	Homeowner property tax relief account
School district facilities (FY2024 onward)	3.25 percent	School district facilities fund
Transportation and local highways, July 1, 2025 to June 30, 2026	$145,000,000: $100,000,000 to the transportation expansion fund, $45,000,000 to local highways	State expansion projects and local highway jurisdictions
Same, July 1, 2026 to June 30, 2027	$165,000,000: $120,000,000 and $45,000,000	Same
Same, from July 1, 2027	$185,000,000: $140,000,000 and $45,000,000	Same
Public schools educational support program (FY2024 onward)	$330,000,000 to the General Fund for the program, plus $80,000,000 to the in-demand careers fund	School operations and career programs
School modernization	$125,000,000, transferred quarterly	School modernization facilities fund
Everything left	The remainder	The state General Fund

Before July 1, 2025 the transportation slice read differently: 4.5 percent of the revenue, but not less than $80,000,000 or more than $140,000,000. Local highway jurisdictions received the excess above the first $80,000,000. The Idaho Association of Counties wrote in 2022 that because the state's side of that slice was capped at $80 million, local highway districts received all of the growth above it. The statute now uses fixed dollars instead.

One consequence deserves plain statement. Most of these slices do not pass through the General Fund and are not part of an appropriation fight in January. They are set by statute, and changing them takes a bill. That is why a story about the "state budget" and a story about a county's sales tax check can both be accurate and look unrelated.

Revenue sharing: who gets what and how it is counted

The 11.5 percent goes into an account that the statute continuously appropriates, so no January vote is needed to pay it. Three shares come out of it every quarter:

Cities, 45.2 percent

The base for each city is its FY2020 quarterly payment. If the whole account is the same as the same quarter a year earlier, every city gets the same amount as that quarter. If the account grows, cities below their base are brought up first, up to the base plus 1 percent. What is left goes to cities with below-average per-capita payments, divided by population. Cities at or above their base get their prior-year amount plus a proportional increase of up to 1 percent, and again the remainder goes to the below-average cities. If the account shrinks, the cuts first hit proportionally until each city is down to its FY2020 base, and further cuts are split by population. In short, the formula grows slowly for cities that already receive more per resident and protects a floor tied to FY2020.

Counties, 47.1 percent

The county share is itself split in two. Under the statute, 59.8 percent of it first pays $1,320,000 a year equally to the 44 counties (1/44 each), and the balance goes by population. The other 40.2 percent is built on what each county was paid in the last quarter of 1999, adjusted proportionally if the money available differs. Increases on that part are capped at 105 percent of the 1999 quarter total, and anything above the cap is split by population. A reader who sees a county with a growing population but a tiny check from the second piece is looking at a 1999 base.

Special purpose taxing districts, 7.7 percent

Districts that were paid in the last quarter of 1999 get a like amount, adjusted if funds fall short. Excess money is shared by each district's share of statewide current property tax budgets. Districts formed after January 1, 2001 are not eligible. The money may be used only for the purposes the district was formed to serve. These are fire districts, highway districts, hospital districts and similar bodies that levy their own property tax.

A worked example from the State Tax Commission

The Tax Commission publishes these payments as numbered reports. The County Revenue Share report for the quarter ending June 30, 2026 (EPB00679) lists each county's flat portion, population estimate, population percentage and population-based portion. Its grand total is $25,611,325.84 for 2,029,733 people. The flat part is $7,500 per county, $330,000 in all, which is the statute's $1,320,000 a year divided by four quarters. The population-based pool is $25,281,325.84.

County	Population estimate	Population percent	Flat portion	By population	Total
Ada	546,141	26.907%	$7,500.00	$6,802,455.58	$6,809,955.58
Blaine	25,517	1.257%	$7,500.00	$317,826.82	$325,326.82
Custer	4,636	0.228%	$7,500.00	$57,743.67	$65,243.67
Clark	783	0.039%	$7,500.00	$9,752.65	$17,252.65

The same Commission also posts sales tax distribution by county for the base-and-excess and special purpose district pieces, such as report EPB00678 for the quarter ending June 30, 2025. That one showed a quarterly total of $22,707,113.34 split between a base and excess piece ($16,175,361.60) and a special district piece ($6,531,751.74). For one county, Ada, the distribution was $5,210,264.15 for the quarter after $8,598.40 was withheld from the special district piece. Figures change every quarter, so any story needs the report for the right quarter.

Property tax relief and the other sales tax slices

The 2.25 percent for homeowner property tax relief and the school facilities slice mean that an Idaho sales tax purchase is, in part, a property tax payment by another name. The relief account pays money that lowers homeowners' property tax bills. How the relief reaches the bill is covered in Idaho Property Taxes, lesson 03, and how school and local levies fit together is in lesson 05 of that module. For the three percent budget growth cap on local governments, see Local Government, lesson 05.

For a local government, the practical effect is that a bill in Boise that changes any slice changes local revenue the same quarter. A bill that raises the transportation slice sends more to the state expansion fund and the same $45 million to local highway jurisdictions, so local highways get no increase from the larger state number. A bill that changes the revenue sharing percentage changes every city and county check. A bill that cuts income taxes changes the General Fund, which is a different pot, and has no direct effect on the 63-3638 slices until revenue falls.

School funding: from the state to a district

Idaho public schools are funded mainly from the state General Fund, plus dedicated funds, federal funds and local property tax levies. For the FY2026 appropriation, the Legislature appropriated $3,391,205,700 for public schools and $16,800,500 for the Idaho School for the Deaf and the Blind, for $3,408,006,200 combined, per the State Department of Education's funding formula guide. The same guide shows state general and dedicated funds of about $3.13 billion and federal funds of $260,647,800 inside the public schools figure.

The district-by-district split starts with support units. Under Idaho Code 33-1002, a district's average daily attendance is divided by divisors set by grade level and school size. Kindergarten uses 40 for 41 or more students. Elementary divisors range from 12 to 23. Secondary divisors range from 12 to 18.5. Exceptional education uses 14.5 for larger groups. A small school needs fewer students per unit, so it counts more units per student. The statute then totals the state funds, subtracts set-asides for salary-based apportionment, transportation and other named programs, divides the rest by total state support units to get a per-unit amount, multiplies by the district's units, and adds back the district's approved set-aside amounts.

The Department of Education's guide gives the working rule of thumb: a support unit was worth about $154,000 statewide in FY2026, which is roughly $3,850 per kindergarten ADA at a divisor of 40 and $12,830 per ADA at a divisor of 12.

FY2027 numbers from the Department of Education's budget presentation

Item	FY2027	Change from revised FY2026
Support units (the bill sets 15,722)	15,722.02	Unchanged
General Fund for public schools, the Deaf and Blind school, central services and the Idaho Digital Learning Academy	$2,750,379,700	Up $18,087,600 (0.7 percent)
Total expenditures	$2,373,194,500	Down $10,433,000 (0.4 percent)
General discretionary, on-site schools, per support unit	$23,472	No change
General discretionary, fully virtual schools, per support unit	$19,723	Down $3,749 (16.0 percent)
Health insurance, state plan, per support unit	$25,063.50	Up $3,161.50 (14.4 percent)
Idaho Digital Learning Academy	$12,310,000	Reduced $13,500,000 (52.3 percent) under Senate Bill 1438
Transportation	$113,901,900 in the summary table	Senate Bill 1444 reduces payments by $7,500,000 for eligible costs, distributed proportionately

Two lines can both be true at once: the General Fund appropriation rises 0.7 percent while total expenditures fall 0.4 percent. Different funds, different base. The presentation's summary table still shows $113,901,900 for transportation, and the Legislative Fiscal Report says the $7.5 million reduction is not shown as a decrease in appropriations because that money had been distributed from the Public Education Stabilization Fund rather than the General Fund the year before. Check the final appropriation before quoting a transportation figure.

What the state does not cover shows up on the property tax bill. School districts levy for supplemental levies, plant facilities and bonds. For how those work and what recent legislation changed, see School Boards, Budgets, Bonds and Levies, lesson 04 and lesson 05.

Medicaid: the biggest state-local-federal link

Medicaid sits in the Department of Health and Welfare budget, and it is a three-way split. The federal government pays a share set by the Federal Medical Assistance Percentage. KFF lists Idaho's FMAP as 0.6759 for FY2025, 0.6691 for FY2026 and 0.6731 for FY2027. The state pays the rest of traditional covered services. The rate for expansion adults is different and is covered in the Idaho Medicaid module. Its lesson on following the money goes through provider rates and the JFAC fights, and the lesson on having a say covers testimony.

The recent numbers show the pressure. In September 2025 Idaho Medicaid asked for about $60 million more for fiscal year 2026, even after provider rate cuts expected to save nearly $30 million that year, according to the Idaho Capital Sun. Health and Welfare cut Medicaid provider rates 4 percent after the governor's August 2025 order. The reported drivers were higher health care costs, more people seeking services and more intense services, mainly in the traditional population, plus a Luma business system error that released about $22 million in General Fund meant for FY2025 into FY2026. The governor's FY2027 recommendation in the Legislative Budget Book (Division of Medicaid, Governor Initiatives, about page 2-57) was an ongoing General Fund reduction of $45,017,700 ($23,017,700 for the 4 percent provider rate cut plus $22,000,000 from further service reductions, which the department said need legislative action), part of a $151,812,200 reduction in all funds.

In the 2026 Legislative Fiscal Report, Health and Welfare's General Fund appropriation for FY2027 is $1,269,218,900, about 22.58 percent of the $5,621,837,100 total General Fund appropriation. With public schools at about 48.9 percent, those two items together are about 71.5 percent of the General Fund. That is why any state belt-tightening arrives at schools and Medicaid quickly: it is hard to find a large cut anywhere else.

What a holdback or a cut means locally

Three different words get used for money not spent.

A holdback

On August 15, 2025, Gov. Brad Little signed Executive Order 2025-05, which directed state agencies to reduce spending by 3 percent by June 30, 2026 and exempted public K-12 schools. The order rests on Idaho Code 67-3512A, which lets the governor reduce spending authority when expected expenditures for the year exceed expected money. The statute lists limits: elected officials' reductions cannot stop them from performing constitutional duties, legislative and judicial branch reductions need the written permission of those branches, and the reduction does not reduce the underlying appropriation. A department head may appeal to the state board of examiners, and the governor may restore the authority. The statute itself names no exempt agency, so the K-12 exemption was a choice made in the order.

The Division of Financial Management's FY2026 holdback summary shows the 3 percent applied to the original General Fund appropriation. The largest lines:

Agency	FY2026 original General Fund appropriation	3 percent target
Health and Welfare	$1,213,585,100	$36,407,600
Correction	$352,029,700	$10,560,900
Colleges and Universities	$383,583,700	$11,507,500 target; $11,513,600 submitted
Public Schools	$2,754,590,600	Exempt under the order
State Police	$66,381,900	$1,991,500
Water Resources	$54,941,800	$1,648,300

Check: 3 percent of $1,213,585,100 is $36,407,553, which rounds to the $36,407,600 shown. The document also notes that Career Technical Education reduced its cut to hold public school funding harmless.

A rescission

A rescission is a bill. Senate Bill 1331, the 2026 Rescissions Act, relates to reducing the appropriation for fiscal year 2026. It passed the Senate 18 to 17 on March 2 and the House 48 to 22 on March 6, and the governor signed it on March 16, 2026 (Session Law Chapter 45). The Idaho Capital Sun reported that it reduces the General Fund by $131.3 million and eliminates 110 full-time positions, adding a 1 percent cut to the 3 percent for a 4 percent total in fiscal year 2026 for most agencies, with most agencies at 5 percent for FY2027. According to that report, K-12 schools, Medicaid, Idaho State Police and the Department of Correction were exempted from the extra 1 percent. The bill's Statement of Purpose and Fiscal Note on the Legislature's site gives the same totals: a reduction of $192,656,600 in all funds, of which $131,321,800 is from the General Fund, $9,097,700 from dedicated funds and $52,236,600 from the Federal Grant Fund, with 110.05 positions reduced. It describes the extra cut as approximately 4 percent for most agencies, with Public School Support, Medicaid, Correction and the Idaho State Police reduced by 3 percent. The Legislative Fiscal Report adds that S1331 cut the public school support budget by about $22.3 million for projected lower enrollment (232 fewer support units, 15,954 to 15,722); the Department of Education presentation shows the revised FY2026 General Fund line $22,366,500 below the original ($2,754,658,600 to $2,732,292,100). So K-12 operating money was shielded from the holdback and from the extra 1 percent, but S1331 did adjust it. Separate FY2027 school bills (Senate Bills 1438 and 1444) trimmed some education lines even though public school operating money was shielded from the holdback. A story that says "K-12 was exempt" is accurate about the 2025 order and incomplete about 2026 school appropriation bills.

A cut

"Cut" is a plain word that can mean a reduced appropriation, a lower spending limit, a reduction from last year's actual spending, or a smaller increase than requested. A reporter should say which.

How a cut reaches the local budget

1. State agency spending falls. The agency passes the reduction to its contracts, grants and staff.
2. Local recipients lose money: a provider rate, a grant to a county program, a pass-through to a city, a school line.
3. The local government covers the gap from its own funds, reduces service, or raises a fee or levy within its limits.
4. Property tax is the local backstop, but local property tax growth is limited by a statutory cap (see Local Government lesson 05), so a local government cannot simply levy the difference.

Questions and answers

Does my city get a revenue sharing check even if it has no property tax?

Cities are paid under the formula in 63-3638 based on an FY2020 base, regardless of what a city levies. A city that did not exist at the base date or was newly formed has to be checked against the statute and the Tax Commission's list of recipients.

Are the 44 counties paid equally?

Only part of the money is. The flat piece is $7,500 per county per quarter in the June 2026 report. The rest follows population, with a separate piece tied to 1999 payments.

Why do the county reports show a withheld amount?

The June 2025 sales tax distribution report has columns for amounts withheld and released in the special purpose district piece. The report does not explain why in the columns reviewed here. Ask the Tax Commission before saying why a withholding occurred.

Is the 11.5 percent a percent of all sales tax?

Not exactly. The statute says 11.5 percent of revenues collected, computed after refunds and the distributions required by sections 63-3203, 63-3620F and 63-3709. It does not say whether the fixed dollar items listed before it are subtracted first. A story should say "11.5 percent of sales tax revenue after refunds and the named sections, shared among cities, counties and special purpose districts," and should ask the Tax Commission for the dollar base.

Where does a school district's money come from?

Mostly the state through the support unit formula and statutory lines, plus federal funds and local property tax levies. The proportions differ by district, and the State Department of Education and each district's budget document are the places to look.

Did K-12 get cut in 2026?

The 2025 holdback exempted public schools, and S1331 did not add the extra 1 percent for them. But S1331 reduced the FY2026 public school General Fund by about $22.3 million to reflect 232 fewer projected support units, and the FY2027 school bills include a $13,500,000 reduction to the Idaho Digital Learning Academy and a $7,500,000 reduction in transportation payments. The honest summary is that the holdback skipped schools, while later bills trimmed specific lines and adjusted for enrollment.

Does Idaho's federal match change?

Yes. KFF lists Idaho's rate as 67.59 percent in FY2025, 66.91 percent in FY2026 and 67.31 percent in FY2027. The change moves the state share from 33.09 percent to 32.69 percent between FY2026 and FY2027.

How do I know if a local property tax increase is caused by a state cut?

Use the tracing steps above. If the local budget shows a revenue line that fell by an amount matching a state action, there is a link. If not, the cause is probably local growth, a bond or a levy decision.

Hard questions

Should revenue sharing be changed to reflect current population?

Those who want a larger population share argue that fast-growing cities and counties carry more service demand than their FY2020 or 1999 bases reflect. Those who favor the current system say the base-and-floor design protects smaller governments from losing their predictable revenue, and the statute lets the Legislature change it at any time. The facts: the statute uses the bases described above, and the Legislature wrote them.

Is exempting K-12 from a holdback fair to other agencies?

The governor said the exemption keeps schools a priority. The Idaho Education Association president called the holdbacks unfortunate and predictable and credited the governor for exempting schools. Sen. Melissa Wintrow, a Boise Democrat and minority party leader, argued for repealing a $50 million private education tax credit rather than cutting agencies. Idaho Democratic Party Chair Lauren Necochea said the cuts would weaken state law enforcement and affect health care for people with disabilities; that is her description, not a finding in an agency report. The statute lists no exemptions, so the choice was the governor's.

Do state tax cuts reduce local services?

Reports tie the 2025 holdbacks to revenue shortfalls and tax reductions of more than $400 million a year, in the Sun's account. Supporters of the cuts say they let taxpayers keep more and that government spending must fit revenue. Opponents say the cuts forced service reductions. Both sides cite the same dollars. A reader should ask for the fiscal note of each tax bill and the agency's list of reductions.

Is Medicaid growth caused by expansion?

The Sun reported that the 2025 supplemental request was driven mainly by the traditional Medicaid population (children, pregnant women and people with disabilities) rather than by expansion enrollees, along with provider rate increases that expanded access and a system error. The Medicaid module covers expansion in depth.