Following the transition to a new statewide business system called Luma, Idaho state officials on Friday delivered the first official revenue report of the 2024 fiscal year that began July 1.
The report, published late Friday afternoon on the Division of Financial Management’s website, showed state revenues have come in $38.8 million below the predictions year-to-date. The report covered the state’s three largest revenue sources – the individual income tax, corporate income tax and sales tax. The report did not include miscellaneous revenues, which are still being calculated as a work in progress, Division of Financial Management Administrator Alex Adams said.
“Individual income taxes are stronger than expected while both corporate income taxes and sales taxes are weaker than expected,” state budget officials wrote in the report.
“These three (revenue sources) are pushing the general fund to a 3.3% deficit compared to our prediction,” the report continued.
State revenues also lagged behind predictions at this point a year ago, so it is too early to tell how things will ultimately end up when the fiscal year ends June 30. State officials have previously told the Idaho Capital Sun that April is the most important budget month of the year because of Tax Day and the deadline to file tax returns.
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Normally, state officials release a monthly budget monitor report that details the state’s revenue receipts and offers comparisons against forecasted revenue projections and previous years’ revenue collections.
The budget monitor report allows Idaho legislators to track revenue that the state budget is built around and gives the public insight into the state’s economy and budget.
But due to data entry errors and difficulties that some state agencies and employees had transitioning to Luma, the state had not been able to publish a budget monitor report for the 2024 fiscal year until Friday.
During a normal year, the first monthly Budget Monitor report would have been released in the middle of August and covered the month of July.
Idaho’s state government runs on a fiscal year calendar that begins July 1 and ends June 30 each year.
Idaho officials say state should be able to release monthly budget reports come November
To produce the new report the state released Friday, officials with the State Controller’s Office worked with officials from the Idaho State Tax Commission, Legislative Services Office and Division of Financial Management. One of the challenges was officials had to manually input the historic revenue data for the report.
With the work the agencies put in to generate the most recent report, the state should be on track to resume the monthly release of budget monitor reports in November, Chief Deputy State Controller Joshua Whitworth said in a telephone interview Friday.
“Going forward, I believe we are at that monthly cadence with them again,” Whitworth said. “All of this work was to help them run on that consistent cadence.”
The state’s goal is for the next budget monitor report to come out in November and cover revenue activity from October, Whitworth said.
Because of a commitment to accuracy, Whitworth said the Idaho State Tax Commission did not want to release the revenue report before it had verified everything.
Whitworth said the raw revenue data was always in the Luma system, but one of the challenges with the transition to Luma has been representing the data the right way and generating the reports the way they had before.
“I give (the state) tax (commission) a lot of credit; they are very adamant about accuracy,” Whitworth said.
What does Idaho’s Luma system do?
The Luma system is a cloud-based enterprise resource planning system that standardizes all of the state’s budget, procurement, payroll, human capital management and financial management systems for all 86 state agencies. As part of the transition, state employees have had to learn the new system and learn new business processes changes, Whitworth said.
The rollout of training for the new system has varied among different state agencies, which has added to the difficulty of the transition and meant that some state employees are learning the system on the job as reports and projects are due.
Whitworth demonstrated aspects of the Luma system to the Idaho Capital Sun last month and showed that the state was able to verify revenues on an unofficial basis and confirm the revenues had been received.
The revenue report wasn’t the only challenge with the transition to Luma. In a Spet. 13 email to legislators, Legislative Services Office budget and policy manager Keith Bybee wrote that the changes have affected all of state government, the Idaho Capital Sun previously reported.
For instance, the Idaho Commission on the Arts website features a note at the top of its homepage explaining that the state is transitioning to a new enterprise system to modernize and standardize financial, operational and human capital management for all state agencies.
“Over the next several months, payments, reports, communications and other business processes may be temporarily interrupted or delayed,” the note states. “We appreciate your patience as we navigate this transition.”
Employee training continues for new Luma financial system
As of last month, about 100 state employees per pay period were experiencing payroll issues or delays under Luma. Whitworth said about 100 state employees per week also experienced payroll issues under the old system that Luma replaced.
The rollout of Luma training has also continued to vary from agency to agency, Whitworth said.
“There is still a large learning curve agencies are dealing with, and we are not in the clear yet,” Whitworth said Friday.
“Over the next two months, our office is dedicated to specialized training in areas where agencies are struggling,” Whitworth added. “In the reporting area, we need to do a lot more training and support for agencies.”
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The delay in releasing the budget monitor reports made some legislators uneasy. The state is now nearly four months into the fiscal year and preparations for the 2024 legislative session and budget-setting are already underway.
In an interview with the Idaho Capital Sun last month, Rep. Wendy Horman, R-Idaho Falls, said it was disconcerting to be this far into the new fiscal year and not have the official revenue reports available. Horman is the co-chair of the Idaho Legislature’s Joint Finance-Appropriations Committee, which is scheduled to hold a series of meetings in early November to gear up for the 2024 legislative session.
Despite the early setback with the revenue report transition, Horman said the Luma will benefit the state in the long run by increasing transparency and security and standardizing business systems from one state agency to the next.
What is Idaho’s Luma system?
Luma replaces the state’s old employee information system and the statewide accounting and reporting system, which were acquired in 1987 and 1988. The state’s old systems had reached the end of their lifespan, were vulnerable to security threats, could not be updated and were inconsistent, Whitworth said. The new cloud-based system features security enhancements and protects the state from emergencies such as floods, earthquakes, fires or other disasters that could cause a physical data center to fail or go offline, state officials said.
Because all 86 state agencies and roughly 17,000 state employees are tied into Luma, it is designed to be more efficient and standardized and provide greater transparency in state government, Whitworth said. For instance, when it comes to state expenditures, the new Luma system electronically links transactions from contracts to the purchase orders to expenditures. The system is designed to give more public insight into the total number and value of state contracts across the different agencies, and it allows state employees to manage their time cards and apply for any job in the state under one system.
The state has been gearing up for the Luma transition since at least 2018, when the Idaho Legislature passed House Bill 493, which provided a funding source for the Luma project. The fiscal note attached to House Bill 493 estimated the cost to modernize the state’s business information infrastructure to be $102 million spread over five years.