The draft bill released last week by Idaho Gov. Butch Otter to phase out the state’s personal property tax on business equipment would have a “devastating” impact on the state’s public schools, according to a new analysis by Mike Ferguson, the former longtime chief state economist who now heads the Idaho Center for Fiscal Policy; you can read it here. “Other state programs (colleges and universities, health and human services, public safety, etc.) would be adversely impacted, but none to the degree of public schools,” Ferguson writes.
The reason: The bill would give partial replacement funding for the lost property tax revenue to most local governments and taxing entities on a permanent basis, but schools would get replacement money only until their current voter-approved levies expire. A growing number of Idaho school districts now rely on supplemental levies, which last only one or two years, for basic operating expenses. Even if voters renew those levies or new ones are passed, there’d be no replacement funds for any approved after 2012.
“Public schools end up the big loser in what amounts to a three-pronged hit,” Ferguson writes. First, $90.5 million would be removed from the state’s general fund, roughly half of which now goes to public schools. Second, up to $41.2 million in property taxes would be shifted from business equipment to real property, including people’s homes and businesses; that would make school levies for the same dollar amounts more expensive for property taxpayers, and thus less likely to pass. Third, the lack of replacement money would cut into school districts’ property tax bases in future years, with some districts losing more than 50 percent.
Overall, Ferguson says the draft bill is “notable for the adverse impact it will have on Idaho’s ability to provide funds for public education.”