One Percent Cap May Hurt Colleges Officials Say Higher Education Would Lose $58 Million
State Board of Education officials estimate higher education support, already declining as a share of overall state spending, could suffer a $58 million cut with voter passage of the One Percent Initiative capping property taxes.
The initiative, which has already won a spot on the November ballot, would limit property taxes to 1 percent of taxable value and eliminate any use of property tax for education. State officials have estimated the proposition would mean $225 million to $250 million in education and other costs now covered by property taxes would have to be made up either through state and local spending reductions or increases in state income or sales taxes.
Considering the anti-tax attitude of the electorate, some believe spending reductions may be the only way to handle the impact of the initiative, and that would cost colleges nearly a third of their state support.
“Personally, I think it is a potential disaster,” state education board member Curtis Eaton of Twin Falls said. “We argue over tens of thousands of dollars for certain programs. When you look at that number, it is potentially debilitating.”
State Board analysts concede that the figures are just early estimates based on state Tax Commission information. But to cover just the $150 million loss of property tax support for public schools would essentially require slashing the remaining programs in the state budget by 32.5 percent. In a higher education budget of $178 million, that translates into a $58 million reduction.
The state is also facing renewed litigation from school districts about a public school building backlog approaching $1 billion that the districts believe the state, not local property owners, should be financing.
The alternative to budget cuts is higher taxes. With Oregon and Montana having no sales tax, prospects for raising Idaho’s 5 percent sales tax are all but nonexistent, and the state has one of the highest income tax rates in the country.
The combination of factors has led some policy-makers to look at the more than half of the financial transactions in the state that are currently exempt from the sales tax, and their first category is services. Even if health care remained exempt, taxing the remaining services would raise $250 million a year by the most recent estimate.
The state board so far has steered clear of a position on the initiative with members instead declaring their personal stands. Jerry Hess of Nampa said that reflected Gov. Phil Batt’s desire for state government to stay out of the debate.
But Hess said he personally objects to the financial disruption the initiative would cause and would not oppose the board taking a public stand against it.