Voters will decide in November whether the state should guarantee school bonds.
On a 58-8 vote, the House overwhelmingly gave the plan its final approval Friday. All North Idaho representatives voted yes.
Designed to get lower interest rates on school bonds and save taxpayers money, it was the only move to help Idaho’s schools with their building problems to clear the 1998 Legislature.
If voters approve the amendment to the state Constitution, enacting legislation still would be needed next year for the plan to go into effect.
“This is not going to cure all of our problems with facilities, but it’s one piece of a bigger puzzle and I think it’s a very important piece,” Education Committee Chairman Fred Tilman told the House.
Rep. Bill Deal, R-Nampa, said, “This is a very excellent plan that will help all the school districts in Idaho obtain the highest possible rating, and that’s a Triple-A.”
The measure wouldn’t change any of the rules about how Idaho school districts pass bonds to build new schools. But it would allow the districts to get lower interest rates once they’ve passed bonds. Districts also could refinance existing bonds to get lower rates, under the program.
Idaho is the toughest state in the nation in which to build a school. That’s because it’s the only state that both requires a two-thirds vote to pass a school construction bond, and leaves the entire bill to local property taxpayers.
Although the legislation wouldn’t change that, supporters argued that voters might be more likely to vote for bonds if they know they’ll get the lowest possible interest rate.
No Idaho school district has ever defaulted on a bond. Under the legislation, if one did, the state would make the missed payment from its sales tax proceeds. Failing that, a loan would come from the $435 million school endowment fund.
Either way, the district would have to pay the state back, and if it didn’t, the state would intercept its school funding.
That double guarantee is enough to give every school bond a Triple-A bond rating - the best rating available.
Because underwriters prefer the secure tax base of a large population, Idaho’s smallest school districts now tend to have low bond ratings. That means their interest rates are higher.
Depending on a district’s current bond rating, the savings under the guarantee program would range from a third to two-thirds of a percentage point in interest rates. That would add up to about $1.6 million on a typical 20-year, $20 million school bond to build a high school.
On a typical $5 million, 20-year elementary school bond, savings would be about $420,000.
“This allows us to reduce the cost of a bond…and it’s not going to cost the state of Idaho one penny,” said Tilman, R-Boise.
Having passed both houses of the Legislature by better than a two-thirds vote, the measure now needs support from a simple majority of voters to pass.
Enabling legislation already had passed the Senate, but was pulled at the last minute because of technical questions from the Idaho Bankers Association. The association says it supports the concept, and will back a fine-tuned version of the enabling bill next year.