BOISE - The Legislature is poised to approve a budget for state agencies that is just $7.5 million higher than last year, a sharp decrease from past annual bumps and less than Gov. C.L. "Butch" Otter's initial proposal, lawmakers and budget analysts said Monday.

Lawmakers say the figure reflects the state's shrinking budget and the cautionary approach by the Joint Finance-Appropriations Committee. Idaho is among states across the country are feeling the burn of declining tax revenue, a housing bubble burst and tough economic times.

JFAC members said their decision to decrease overall new spending to $7.5 million - some recalled it the smallest they knew of - from Otter's overall request of $28.5 million in enhancements stems from a tightening budget and not disagreements with Otter. The money is a combination of surplus and ongoing funds.

"It's simply a matter of money," said Rep. Fred Wood, R-Burley, who sits on JFAC and helped draft the Department of Health and Welfare budget.

Among Otter's requests still in the budget are at least 12 new staffers for the Department of Health and Welfare; funding for an influenza vaccine; $1,500 for a vegetable garden overseen by the Idaho State Department of Agriculture with produce destined for a food bank; and $335,500 to expand the "Read to Me" program.

JFAC co-chairwoman Rep. Maxine Bell, R-Jerome, said the Read to Me Program was important to Otter's wife, Lori, and remained one of his priorities. He wants to add 5,000 kids and more than two dozen libraries to the summer reading program that serves more than 7,000 kids currently.

"He has to administer a budget and we have to produce one," said Bell.

Over the past three months, state revenue has fallen by a cumulative $13 million, said state economist Mike Ferguson. Revenues were positive in December, but in January revenues were about $39 million short of projections, which caused the committee to set employee pay raises at 3 percent, down from Otter's preference of 5 percent.

February tax revenues are expected to be $8 million below projections, Ferguson said.

But Idaho is still bucking the trend than most states, probably because the Division of Financial Management adjusted expectations midway in the budget process, Ferguson said.

"This essentially cuts back on the amounts of funds available," he said. "I would not characterize it as a fiscal catastrophe."

Budget writers are estimating the 2009 revenue at $39 million lower than estimates from Financial Management. To pay for a new $70 million mental health facility, the state was going to use both surplus and dedicated funding. Instead JFAC decided to bond for the facility entirely.

"The Legislature is being extra cautious and still able to fund enhancements," said Ferguson.

The state has about $300 million in economic reserves, some of which is released throughout the year. Most of it is considered to be "rainy day" money put aside for the worst economic times to avoid raising taxes or cutting services.

"One of the toughest decisions is deciding when it's finally raining," said Rep. John Rusche, D-Lewiston.