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Otter tamps down expectations for election-year legislative session

Here’s a link to my full story at spokesman.com on how Gov. Butch Otter today continued to tamp down expectations for the election-year legislative session that will convene on Jan. 6, just months before Idaho’s May 20 primary election. Addressing the Associated Taxpayers of Idaho, Otter promised “more of the same” from him, with a lean, cautious approach to new spending or programs, despite the state’s recovering economy. The governor’s already drawn a primary challenge from Senate Majority Caucus Chairman Russ Fulcher, and a Democratic challenger, A.J. Balukoff; every seat in the Legislature also will be on the ballot.

Idaho Senate Minority Leader Michelle Stennett, D-Ketchum, said she expected caution from the governor in an election year, but was “disappointed” by what she heard. “It’s our job to do good policy for the people we represent,” she said. “I hope we actually get something accomplished.”

 

Bedke: ‘No clear consensus’ on road funding, ‘hard choices’ on spending

House Speaker Scott Bedke predicts that the upcoming legislative session won’t address a big backlog in maintenance funding for the state’s roads and bridges, in part because he said people in his region don’t seem concerned about the roads. “We don’t have clear consensus on that issue,” Bedke told the Associated Taxpayers of Idaho today.

He also urged caution on state spending, saying, “There’s been modest growth in the economy, there’ll be modest growth in the money available as we set budgets, but there’s no runaways there. There’s not a lot of extra new money.” Bedke suggested that business interests pushing for further tax relief on business personal property consider whether they think the state should give up a different tax break to fund that, like the grocery tax credit. “In this time of allocating scarce resources, I think maybe it’s incumbent upon us to talk about this,” he said. “We can get rid of personal property tax. … We can buy down the income tax rates, if that’s what we want to do. But it comes with hard choices.”

House Minority Leader John Rusche, D-Lewiston, warned that Idaho’s not investing for its future, from low state employee pay that prompts costly turnover to underfunding for schools, infrastructure and more. “I think we’re going to hear a lot about what’s important in the primary elections,” he said. “So I’m not very optimistic we’re going to be addressing any of these issues.”

Wrestling over rules for state’s new partial personal property tax exemption…

Three panelists at the Associated Taxpayers of Idaho conference today are addressing the state’s new partial personal property tax exemption for business property, which exempts up to $100,000 in value per taxpayer, per county. “A lot of people thought, $100,000 per taxpayer per county, how simple could that be?” said Steve Fiscus, property tax division manager for the Idaho State Tax Commission. But, he said, “It’s not as simple as it could be.”

However, it’s pretty simple for 90 percent of Idaho businesses that previously had to pay personal property taxes – they no longer have to pay at all, because their value was below the $100,000 mark. “About 90 percent of the accounts in the state of Idaho were eliminated, which is pretty close to the estimate we had when we initially did the research on this project,” Fiscus said. That means those businesses no longer have to file annual reports and pay taxes on their desks, chairs and other equipment.

Where it gets complicated: The Tax Commission has adopted new rules drawing the line between real and personal property, and those who landed on the real side – meaning they won’t qualify for the break – are plenty upset. They include operators of cell phone towers, railroad tracks, pipelines, underground storage tanks and more.

Rick Smith, an attorney with Hawley Troxell who represents Northwest Pipeline, Century Link, and AT&T, said, “I think it would be necessary as a matter of tax policy, in order to make this personal property exemption truly reasonable, to expand it to all property.”

When the panelists were asked if they’d change the new exemption or its rules – if they were “king for a day” – Fiscus said, “If I was king for a day, I’d say give it a rest for at least a year, so that we can get caught up and maybe do a little better job administering it.”

Little: Idahoans are angry over debt, gridlock, partisan bickering

Idaho Lt. Gov. Brad Little says he’s hearing a lot of anger from Idahoans across the state. “For the last five or six months, I’ve been all over Idaho, I’ve been to nearly every county, and I’ll tell you, they’re mad – they’re mad about the federal government,” he told the Associated Taxpayers of Idaho conference today. “Particularly in the rural areas, there’s quite a bit of hostility out there.” Issues making Idahoans mad include the federal debt, gridlock and partisan bickering, he said.

Of the new budget deal in Congress, he said, “It’s a little bit of a relief to hear that we’re not going to go off one more fiscal cliff. … At least they got something done, right, wrong or indifferent.”

Idahoans are a little more amenable to their state and local governments, Little said, but, “We have to work a little bit harder because of that animosity that exists out there.”

Little was the luncheon keynote speaker at the conference today. He praised the governor’s education stakeholders task force recommendations as “a laudable road map,” and said it speaks well “that there is bipartisan support for it, and it is very broad-based.” Little said in his view, if Idaho focuses on a strong workforce, robust infrastructure, a regulatory environment conducive to growth and a “fair and competitive tax system with a strong balance sheet,” the state will succeed. “We’ll be the preferred place for prosperity for this generation and generations to come.”

Guv’s budget chief: ‘Not much money to do anything new’

Jani Revier, Gov. Butch Otter’s budget chief, told the Associated Taxpayers of Idaho today, “We expect a conservative budget that doesn’t over-commit.” She said, “The good news is that general fund revenues are recovering from the recession. … The general fund is forecasted to return to the fiscal year 2008 levels by next fiscal year.” Idaho transferred an additional $85 million in unexpected revenue to its budget stabilization fund on July 1, she noted, but said, “Our state economist has warned that much of this revenue is one-time.” The budget stabilization fund, the state’s main rainy-day savings account, now has $135 million in it – nearly reaching its statutory cap.

“As the state’s economy began to recover, the governor set forth the following principles” for the state budget, Revier said. They are: Not to grow at the same rate as the economy; maintaining structural balance; and replenishing rainy-day accounts.  “We are not going to simply restore lost general fund from the agencies that we cut,” she said. “The governor wants to focus on making strategic reinvestments,” focusing on core areas of government and not losing efficiencies gained during the years of downturn.

Revier said Otter has made clear that certain items will be included in his budget proposal for fiscal year 2015: Recommendations of his education task force; health and human safety needs; addressing a maintenance backlog; and covering increased employer healthcare costs. The state is expecting a substantial increase in those costs, to the tune of $1,400 per employee, she said, and covering that will be “a significant investment in our state’s workforce.” She said once basic needs are covered for state government, “There just isn’t much money to do anything new.”

Speaker: Federal online sales tax bill wouldn’t mean tax hike

Wayne Harper, a Utah state senator and president of the Streamlined Sales Tax project’s governing board, told the Associated Taxpayers of Idaho conference this morning that the move in Congress to enable states to collect sales tax on online sales doesn’t mean a tax increase. “It’s being labeled as a tax increase, a new tax. It’s not,” he said. “It’s just a collection method for the states.” He noted that various states are planning for corresponding tax cuts if they get the opportunity to directly collect sales tax on online purchases; in Idaho, those taxes already are due and payable by law, but people are supposed to self-report them and pay them on their state income tax returns, which few do.

Harper said he sponsored a bill in Utah saying if that state gets to collect the taxes directly, it’ll put them all in a restricted account, and use them to reduce the state’s general sales tax, “so it’ll be revenue neutral.” Other states are planning income tax cuts; others are planning to use the increased revenue. Virginia already has put it into law that it’ll void an approved sales and fuel tax increase if it can begin collecting the tax on online sales. “It’s an issue and it’s an opportunity for each one of the states, to do what you want to do,” Harper said.

“I think there’s an equity situation there,” he said. “Right now, you’re requiring your local businesses to collect those sales taxes, but you’re not doing them on remote.” Harper said states that join the Streamlined Sales Tax project, which Idaho has thus far resisted doing, would be able to start collecting the taxes six months after the congressional bill becomes law. Without that step, he said, “I think that’s going to be much more challenging and onerous for you.”

Otter promises ‘more of the same’ in upcoming legislative session

Gov. Butch Otter told more than 400 local officials, legislators, lobbyists and others gathered for the 67th Associated Taxpayers of Idaho conference today that the headline for his agenda for the upcoming legislative session should be “More of the Same.” “I would rather be a little short on the front end, and perhaps under-promise and over-deliver,” Otter said. “And that’s what I think we’ve done in the last seven years with the help of the Legislature, and that’s what I’m planning on doing with the rest of my time on office.”

Otter said the state budget that’s set for the coming year likely will represent an increase of between 3 and 3.5 percent. “I would tell you, in my meetings with the JFAC chairs and leadership, we’re going to focus on replenishing some of those institutions that the Constitution tells us is our responsibility – we’ll focus on those first,” he said. “Then, next, other proper roles of government that we can agree need to be replenished. And finally, well maybe not finally, replenish our savings.”

Said the governor, “I don’t know what we would’ve done in 2008 if we hadn’t had $400 million in savings. … I can tell you there’s nothing tougher to do or more dysfunctional in government than a holdback.”

Lawmakers look ahead to political battles

 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.

Denney: ‘The good news is we are growing’

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.”
  

Hill vows that school reform ‘tweaks’ won’t affect upcoming referendum vote

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.”

Hill: Lawmakers to ‘tweak’ ed reforms

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.”

County commissioner: Counties required by state law to provide services

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.”

Rep. Roberts: Fed govt ‘hell-bent on destroying greatest nation on earth’

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.”

Guv is in Florida, Little’s acting guv

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. Little: ‘The days of deficit denial are about to end’

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.

ATI applauds Dan John; longtime state tax policy manager is retiring

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.

Casey on D.C. ‘dysfunction’: ‘We govern like a parliament’

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.”

Why some states grow faster than others…

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.”

State budget outlook ‘looks pretty good - a lot better than it has’

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.”

State budget: ‘Nobody really anticipated the revenue to be that robust’

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.

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About this blog

Betsy Z. Russell covers Idaho news from The Spokesman-Review's bureau in Boise.

Named best state-based political blog in Idaho for 2013 by The Fix

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