Idaho's headed for a different kind of legislative session in January, one marked less by painful budget cuts and more by political and philosophical battles, key lawmakers said Thursday; you can read my full story here at spokesman.com. House Minority Leader John Rusche, D-Lewiston, noted that it'll be an election year, with every seat in the Legislature up for election, the filing period for legislative candidates starting right in the midst of the session and Idaho's first closed Republican primary looming in May. “I think it's going to be very disrupting,” he said. “Everybody will be trying to get to the right of somebody else because of the closed Republican primary.

Idaho's legislative session starts Jan. 9.

House Speaker Lawerence Denney said, “We will get through the next session, we will balance our budget, we're required by our Constitution to do so. We hear rumors of surplus, but I can tell you, the good news is that we are growing. Our growth line is pretty flat; we're growing at about 3 percent. … That's going to take us probably several years to climb out of where we have been.”

Denney said the question of funding a health insurance exchange and whether to accept part or all of the federal funding for it that Idaho's just been awarded “is going to be a very serious discussion this year.” He said, “Boy, I have mixed feelings. … It's going to be one of those debates that just tears you up.”

Senate President Pro-Tem Brent Hill told the Associated Taxpayers of Idaho that the upcoming legislative session likely will include discussion of guns on campus, state nullification of federal laws, possible tax cuts, and more. He said he doesn't expect lawmakers to eliminate any sales tax exemptions, discuss collecting taxes on Internet sales, or consider increases in tobacco or beer and wine taxes. He added, however, “My predictions are about as good as Boise State's game against TCU - you just can't rely on 'em.”
  

Senate President Pro-Tem Brent Hill, R-Rexburg, said any “tweaks” that lawmakers enact to the “Students Come First” school reform plan in the coming legislative session will be minor, and won't affect the upcoming November 2012 referendum vote on the package. “We don't want to affect the referendum,” Hill said. “They had 40,000 signatures to put it on the ballot. We owe the people the right to vote on that. We're not going to sabotage that.”

Hill said he's conferring with the Idaho Attorney General's office to make sure any proposed legislation doesn't affect the referendum vote. He said the possible “tweaks” would come from state schools Supt. Tom Luna and Senate Education Chairman John Goedde, who sponsored the original package last year, “some small things they want to do to make it work better.”

Senate President Pro-Tem Brent Hill and House Speaker Lawerence Denney are supposed to be sharing their “game plan for the 2012 legislative session,” but Hill said, “Actually we have 105 game plans, folks.” That's the number of legislators between both houses. “Everyone running their own plays. And then we got a bunch of you folks out there calling in plays from the sideline,” he said to laughter. “And yet it works amazingly well, it works amazingly well.”

Hill said, “I think we've seen the bottom of additional cuts, and we'll start climbing out now as the economy improves, but it's going to be slow.”

He said, “We're going to make some tweaks to the education reforms that we did last year, and those tweaks come from suggestions from parents and teachers. I think they'll make the reforms even better, and they'll make them easier to implement.”

Roger Christensen, Bonneville County commissioner and board chairman of the Idaho CAT Fund, told the Associated Taxpayers of Idaho that much of what Idaho's counties do is required by state law - it's not voluntary. “You do have these tremendous pressures on the local taxpayers, that normally have been provided for with a broader tax base, now being shifted down,” Christensen said. County services, he said, are directly affected by changes in federal and state funding and regulations, from jails to roads to care for the medically indigent. “We're required if there are no other resources at the county level to pay for services, if they meet certain criteria,” Christensen said. “If that mandate is not removed from the local level, that's where they end up.”

He said, “All I know is that I'm standing in the water, it's kind of rising, and it's getting deeper.”

House Majority Caucus Chairman Ken Roberts, R-Donnelly, is addressing the Associated Taxpayers of Idaho on “state legislative perspectives past and forward.” Roberts said as part of his remarks, he'll be commenting on “a very dysfunctional federal government that is hell-bent on destroying the greatest nation on earth.”

Roberts also decried the rising cost of Idaho's catastrophic care fund, which helps counties cover indigent residents' medical expenses, saying he objects to “the whole idea of government paying for a growing list of personal needs.” Said Roberts, a sixth-term lawmaker, “Are we going to continue to expand the role of government and raise taxes to pay for the growing list of personal needs and wants? … We must rethink how we think about government, starting with the local fire and cemetery districts and moving all the way up to the massive, out-of-control federal budget.”

He said, “We must create an economic habitat which supplies the factors necessary for the existence of our species. Once this habitat is created, businesses will flourish again, but as long as we compare ourselves to other states and other nations and say, 'we are about the same in this area' or 'a tax is a little lower in that area,' we will struggle to have the reforms that are needed. What I'm talking about is a complete paradigm shift that needs to permeate our entire system.”

Here's why Lt. Gov. Brad Little gave the luncheon speech at the Associated Taxpayers of Idaho conference in Boise today, an event that typcially features an address from the governor: Gov. Butch Otter is away in warmer climes, attending a Republican Governors Association conference in Florida. Otter left early Tuesday and will return late Friday; Little is acting governor when the governor is out of state.

Lt. Gov. Brad Little shared his favorite quote from Erskine Bowles: “We can take little comfort in America that we are the healthiest horse at the glue factory.” He said, “It's gonna be ugly, it's gonna be brutal, but I think the days of deficit denial are about to end.” Little said, “It will generate significant disruption in how federal funding and tax policy affects the state of Idaho” and its local governments. He said the state should be in better shape than many to withstand upcoming “enormous shocks emanating from the federal government. … Idaho, thanks to our limited-government, free-market philosophy can proudly boast, as the governor did in Roll Call last week, of a balanced budget,” Little said.

Idaho Lt. Gov. Brad Little started his luncheon talk to the Associated Taxpayers of Idaho today by recognizing state Tax Commission Tax Policy Manager Dan John, noting how many in the Legislature and elsewhere have relied on John for years to answer their tax questions. “Enjoy your retirement - you deserve it,” Little told John; the crowd responded with a standing ovation.

Greg Casey, the president and CEO of BI-PAC, the Business Industry Political Action Committee, offered this view of the “dysfunction” in Washington, D.C.: “Those of us who are involved in that process spend so much of our time worrying about winning elections, we spend too little time worrying about winning policy debates, which is the idea that elections are supposed to be about.” Addressing the Associated Taxpayers of Idaho, he said, “It is this focus, I believe, on who has the political control in the process … that has contributed mainly to the dysfunction in Washington, D.C. … This was on clear display last week.”

Casey, former president of the Idaho Association of Commerce and Industry and former sergeant-at-arms and doorkeeper of the U.S. Senate, said, “This focus on the power … has all but destroyed the process itself.” He said decisions have been made “in conference rooms, not in hearing rooms,” and said, “We've gone from a nation of laws and procedures … to a government that is driven by ad hoc  impulse. … We lurch from decision to decision without any commonality in the theme. … So we act like a representative republic at election time, but now we govern like a parliament, where those who are in charge of the party basically focus on doing that which they want to do, to circumvent whatever process or rules they need to circumvent in order to pursue their policy or their philosophy. That's sort of where Washington is at this point in time.”

Casey said “both parties have practiced this over the last couple of decades.” He said it's “equally bad, whether you do it for the philosophy of the left or for the philosophy of the right.”

Keith Phillips, senior economist and policy adviser for the Federal Reserve Bank of Dallas, is discussing “Why some states grow faster than others,” noting that regional differences have evened out considerably since the volatile days of the 1980s. The reasons for the differences, he said, include which industries are important in a state and how they're doing; business cycle sensitivity and recessions, including things like the housing boom and bust; and weather crises like Hurricane Katrina.

Phillips also offered this observation about his profession: An economist, he said, is “someone who's good with numbers but doesn't have the personality to be an accountant.”

Phillips compared average annual job growth over the past three decades among all the states. Idaho ranked 6th. Nevada was first, and Washington 10th. “You all know that obviously Idaho's been a strong growing state in terms of jobs,” he told Associated Taxpayers of Idaho. “The strong states tend to be states that are southern, mountain, or agricultural states. The weak states tend to be the older manufacturing states in the northeast and the Great Lakes regions.”

Technology also can have impacts - like air conditioning did in his home state of Texas, Phillips said - as can state policies. “So that's where job growth has occurred in the past.” As to where it will occur in the future, a key factor is where people want to live, and where businesses can maximize their profits, he said. One study showed that states with “high economic freedom,” measured by taxes, size of government, labor restrictions and other factors, had strong job growth. “Within these three subsectors, tax burden was the least significant,” he said. “Government size and labor restrictions were most important.”

Legislative budget chief Cathy Holland-Smith ran through all the numbers and said under current estimates, if the state were to cover all its nondiscretionary adjustments in next year's budget and all supplemental budget requests, assuming a conservative 3 percent revenue growth, “You would have $77 million after you paid for those items and used all of your revenue … for all those great line items and enhancements that are out there.” She said, “Well, how much did agencies ask for? They asked for $142 million. … So there's positive to this, but there's also a sense of caution.”

Nevertheless, it's a budget situation that calls for deciding which additional items to fund or how to allocate additional revenue - rather than what to cut further. Said Holland-Smith: “This looks pretty good, doesn't it? It looks a lot better than it has.”

Idaho legislative budget chief Cathy Holland-Smith has begun presenting a state legislative budget update to the Associated Taxpayers of Idaho conference this morning. The figures, she said, were first presented to the Legislative Council, but because the Joint Finance-Appropriations Committee hasn't yet held its fall meeting, many lawmakers are seeing the figures for the first time. Here's my story from the Legislative Council meeting, which noted that Idaho lawmakers are facing something they haven’t seen in years: A ‘manageable’ budget. When they convene in January, they’ll likely be able to balance next year’s state budget without further cuts, and even make up some cuts and start refilling the state’s drained reserve funds.

Idaho’s state tax revenues fell 16 percent from fiscal year 2008 to fiscal year 2011, and though they’re now growing again, they still haven’t hit the 2008 level. The state’s general fund budget, set at $2.959 billion in fiscal year 2009, was set at just $2.529 billion this year, down 15 percent in three years. Lawmakers and Gov. Butch Otter intentionally left $91.5 million on the table, unbudgeted, for fear that revenues would dip below state economists’ projections. Instead, the state is on track to easily cover its costs next year. That’s even with an automatic transfer of $26 million to the budget stabilization fund - a move triggered by the revenue growth. In recent years, Idaho’s drained all its reserve funds just to balance its budget.

The strong revenues required the state to send more money out to schools to meet federal maintenance-of-effort requirements. “Nobody really anticipated the revenue to be that robust,” Holland-Smith said.

The Tax Foundation calculates “Tax Freedom Day” for each state, the date on which workers theoretically have earned enough to cover their full tax burden at the federal, state and local levels. Economist Mark Robyn told the Associated Taxpayers of Idaho this morning that Idaho's date is April 3rd, which at 93 days ranks as 36th in the nation. Nationally, the foundation sets the date at April 12, at 102 days. That national date is three days later this year than last year, but nearly two weeks earlier than it was in 2007, reflecting a lower overall tax burden comparatively.

Robyn shared graphs and charts showing stats about the nation's tax system, including that top federal tax rates have dropped significantly since the 1950s. “A large and growing percent of families and households … don't pay federal income tax,” he said, displaying a chart showing a sharp rise in “non-payers.” “It's creeping up to near 45 percent.” Meanwhile, since 2000, more business income is now taxed under the individual tax code than the corporate tax code, Robyn said.

The statutory corporate tax rate for the U.S. is second only to Japan's, Robyn said, and there's some interest in reforms. “Lots of people will say the rate doesn't matter, no one pays the 35 percent corporate tax rate, which is true. They have credits and deductions,” he said. Still, he said a statutory high rate can be a “disincentive,” though “it is true that effective tax rates are much lower.” One study by the Tax Foundation showed the effective corporate tax rate since 1994 has averaged around 26 percent.

There's a big crowd already this morning for the Associated Taxpayers of Idaho annual conference, and more are filing in. First up this morning is a federal tax policy update from economist Mark Robyn of the Tax Foundation in Washington, D.C., followed by a state legislative budget update from Cathy Holland-Smith, the Legislature's budget chief. Among those in attendance: Legislators, lobbyists, business people, local and state government officials, reporters and more.

In what's long been considered something of a warmup for the legislative session, the Associated Taxpayers of Idaho will hold its annual conference on Dec. 1, inviting business and government leaders, taxpayers and others to hear a series of presentations about federal, state and local government finances, the impact of a slower-growing economy over the next 10 years, and the outlook for this year's legislative session; typically, about 300 people attending, including numerous legislators. The event will run from 8:30 a.m. to 3:15 p.m. at the Boise Centre, Summit Auditorium. The conference, which includes a luncheon featuring Lt. Gov. Brad Little, is open to all, but costs $100 for non-ATI members, or $50 for the luncheon only; there's more info here.

The final speakers at the Associated Taxpayers of Idaho conference today were two members of the Legislature’s leadership, Sen. Elliot Werk, D-Boise, Senate assistant minority leader, and Rep. Mike Moyle, R-Star, House majority leader. Werk said there’s “no free lunch,” but the public apparently believes there is. “The public believes that they can get the services they want and need, and don’t have to pay for them,” Werk said. “We have a very, very large hole to either fill or cut down our services to.”

Werk said, “So we have a situation in the Legislature where I think we have unrealistic expectations in terms of the public, we have legislators that have made promises, the governor’s made promises, there’s all kinds of promises out there about what we’re going to do.” He said, “I don’t have those answers … but understand that at some point the Legislature’s going to have to make some decisions that are going to be very, very difficult, and there’s no way to avoid those things any longer.”

Moyle said this year’s Legislature will likely discuss three ways of “getting out of this hole:” tax increases; budget cuts, including cuts in services; and “reduction of taxes.” That third one, he said, “may sound kind of odd.” But he said he’s concerned “that we do no harm.” Said Moyle, “We’ve got to be careful that we don’t create tax burdens in areas that will force businesses to leave the state.”

Moyle declared, “Tax policy has a direct effect on where jobs are created.” He recalled when Micron built a plant in Virginia, and said he thought tax incentives could have persuaded the company to expand in Idaho instead. “I firmly believe that the answer is jobs, and to get those jobs you’ve got to have a tax policy that attracts those jobs here,” he said.

Hundreds of state lawmakers, local officials, lobbyists, business people and others are gathered for the annual Associated Taxpayers of Idaho conference today, which will feature Lt. Gov. Brad Little as the luncheon speaker on Idaho’s priorities as the 2011 legislative session and the new budget year approach. So far, the group has received briefings on taxes, health care and the economic outlook, including a lively presentation on health care reform from Joy Wilson, senior federal affairs counsel and health policy director for the National Council of State Legislatures.

Wilson noted that the reason the national health care reform bill included a controversial universal mandate - a requirement that virtually all Americans purchase insurance coverage - is because insurers insisted on that, in part in tradeoff for requirements that they must insure those with pre-existing conditions. The nation’s employer-based health care system is different from any other country’s, Wilson said. “It is a competitive drain on our large companies, because the competition does not have to deal with our health system the way it is, but our companies do.”

Michael Morris, executive vice president of real estate for Zions Bank, is now presenting information on the real estate market and financial risk; earlier, Ed Karl, vice president for taxation of the American Institute of CPAs, discussed federal tax policy. This afternoon, the conference will focus on Idaho, from the state’s budget position to PERSI to the prison system to how Idaho’s local governments cope with recessions.

Click below to read the memo Gov. Butch Otter sent to state agencies last week asking them to further trim spending and limit all “non-essential activities wherever possible.” In his luncheon talk to the Associated Taxpayers today, Otter said, “Folks, we are going to have a tough session - it’s going to be tough because, obviously, we don’t have the kind of money that we’ve had in years past.” He noted that the amount of money Idaho will have for its budget next year is comparable to what the state had back in 2003-2004. So he’s told state agency heads to go back and look at what they were doing then. Anything that’s been added since then, he said, should perhaps be eliminated, unless it’s required by law or the constitution. “That wasn’t a mandate - it was a suggestion,” Otter explained after his speech. “That would be the low-hanging fruit.”

He also said cuts are unavoidable. “The only other means is to raise taxes, and I tell you, in this environment I believe there is little appetite in the state legislature,” Otter declared. He went on to directly criticize a proposal from Rep. Shirley Ringo, D-Moscow, for a temporary income tax surcharge on those earning more than $50,000 a year, as something that could “divide by class warfare,” and said, “I don’t want to see that happening in the state of Idaho. … Those who are successful ought to be celebrated and rewarded. … I resist the effort to start class warfare.” He also derided the idea of temporary tax increases, like the temporary sales tax hike enacted under former Gov. Dirk Kempthorne. A year and a half after the temporary tax increase expired, lawmakers decided to raise the tax again, this time permanently, to fund property tax relief. “Let’s be honest about the history,” Otter said. “Putting a new tax on is like getting a tattoo, folks. You don’t get rid of it without some serious trauma.”

Gov. Butch Otter, in his keynote luncheon speech to the Associated Taxpayers of Idaho today, spoke out strongly on the value of education, and how it’s a central mission of the state per the Idaho Constitution. He shared how he was the first among nine siblings to graduate from college, and proudly described the many advanced degrees now held by his own four children, and his hopes for his grandchildren. “So yeah, we’ve got to make some cuts, and yeah, I’ve already made some cuts - and I’ve been pretty careful about how much we damage that future,” Otter declared.

Otter said he’s a “user-pay guy,” and wants people to pay for the services they use, from roads to parks to hunting programs. But that doesn’t apply to education, he said. “There are those areas where the Constitution of the state of Idaho says otherwise.”