Tax debate raises questions for future
Statesman Editorial board
August 27, 2006
Idaho Statesman
A lame-duck Legislature did the expected Friday night, handing short-term Gov. Jim Risch the property tax relief he wanted.
Lawmakers approved Risch's plan — the only game in town in a one-day session — moving $260 million in public school funding from local property taxes, and raised $219 million in sales taxes to cover much of the difference.
In a lengthy day of debate over Idaho's tax and budget structure, three outgoing legislators, opponents of the bill, raised the tough questions that face their successors:
Will legislators do more for working Idahoans?
Much of Friday's debate, predictably, centered on class warfare over who should benefit most from property tax relief. Supporters made no apologies for extending property tax cuts to summer-home owners, landlords, farmers and large and small business alike. Critics — largely but not exclusively the Democratic minority — dismissed a plan that will provide only 40 percent of its property tax relief to homeowners, while raising the sales tax by a penny.
Outgoing Rep. Steve Smylie, R-Boise, framed the debate with a pair of personal anecdotes.
He expects to come out ahead under the changes. He owns his car outright and does not expect to buy another one soon, and will save property taxes on increasingly valuable ground in Valley County.
However, the West Junior High School teacher and unsuccessful state schools superintendent candidate talked about one of his students' mothers: a single parent with three kids, two jobs and a rental. She will pay higher sales taxes to support a tax break for wealthier Idahoans. "How can I do that in good conscience?" he asked.
If this tax overhaul is a work in progress — as supporters insisted Friday — the next step should focus on trying to help taxpayers who will see a wash, or worse, from the property-for-sales-tax swap. That includes revisiting the sales tax on groceries, and the state's grocery tax credits ($20 per year per person, $35 per year for seniors).
Risch expects the grocery tax to come up in 2007. He said he could not come up with a grocery tax plan that would get majority support without jeopardizing his consensus for the property tax bill. "I'm not a magician," he said recently. Coming up with a better tax break on groceries doesn't require magic — merely time and effort. The 2007 Legislature should make it a priority.
Will the state keep its promise to schools?
To the end Friday evening, retiring Sen. Hal Bunderson remained a steady, studious opponent of the tax shift. The Meridian Republican, chairman of the Senate Local Government and Taxation Committee, recognized Friday's session for its full historic significance. "We are changing in a day the way we fund public education in a profound way."
He's right. By assuming $260 million of public school funding, now paid through local property taxes, the state assumes $260 million of responsibility over public education. Not just for this year, and for purposes of providing election-year property tax relief. But permanently.
State funding must not subvert local control; it would be tempting but inappropriate for 105 legislators to try to assume the work of 114 school boards. The state's task — and future legislators' priority — is insulating school budgets from economic hardship. Risch's $100 million schools savings account, a move that drew praise from some education officials opposed to the property tax bill, moves in that direction. But at the same time, the state will use at least $41 million of surplus this year to replace the school levies — a dangerous use of one-time money to pay for ongoing needs.
This highlights the challenge facing future lawmakers. The Legislature must do a better job of making good on its commitment to replace schools' property tax levies. Lawmakers cannot repeat their actions of the past, when they assumed a portion of the schools' property tax levy in 1995 and capped their reimbursement during a cash-strapped 2003 session.
Tax overhaul extends a promise not just to property owners, but to school districts. Future legislatures will be judged on how they honor this commitment.
How will legislators juggle priorities?
The property tax bill commits the bulk of this year's $203 million surplus — either to the school budget reserve or to cover a portion of the property tax levies. This will limit what the 2007 Legislature can spend on other new needs, such as new prison beds or expanded community colleges.
"I wish you luck, but I think it's tough," said Rep. Kathy Skippen, R-Emmett, who was defeated in the May GOP primary and won't be back in 2007.
Skippen raises a good point that extends well beyond 2007. Schools now will have to compete all the more for state dollars, in an era when prisons and Medicaid consume an ever-growing share of the budget. And there's no guarantee, in future years, that school districts will get the money from the state that they would have collected in local property taxes.
Legislative supporters said public schools have been, and will continue to be, their No. 1 spending priority. Future legislatures will now have to keep the promise lawmakers made Friday.
One of Friday's winning arguments came down to timing and opportunity. Lawmakers said they had to pass property tax reform now, to head off another round of property tax increases in December. This year's surplus opened the window to make a "historic tax policy change," said House Revenue and Taxation Committee Chairwoman Dolores Crow, R-Nampa, another outgoing lawmaker making her final vote in the Statehouse.
Crow and 70 other lawmakers voted for this change. Only time, and future legislators, will determine whether taxpayers and schools will come out winners or losers.
Originally posted at http://www.idahostatesman.com/apps/pbcs.dll/article?AID=/20060827/NEWS0501/608270410/1053
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