Senate approves Risch plan

BOISE – It took long into the night, but Idaho lawmakers called into special session by Gov. Jim Risch Friday endorsed Risch’s plan to cut property taxes and raise the sales tax.

The session inched into its 15th hour before the Senate finally voted 24-11 for final passage of the bill.

“I represent a district that has been crying out for property tax relief for many years,” Sen. Shawn Keough, R-Sandpoint, told the Senate as the hour neared 10 p.m. North Idaho residents, she said, “demand to be heard, and they are appreciative of this effort today.”

Risch’s legislation, which he plans to sign into law next week, makes major changes in Idaho’s tax system. Under the bill, Idaho’s sales tax will rise from 5 percent to 6 percent on Oct. 1, to generate at least $210 million. At the same time, a major property tax levy that now goes to fund schools will be eliminated, cutting $260 million in property taxes statewide for all property taxpayers. The $50 million gap in school funding will be made up by dipping into the state’s $203 million budget surplus.

The bill also calls for taking another $100 million from the surplus to set up a savings account to protect schools from future downturns in sales tax revenues, and asking voters, in an advisory ballot measure in November, if they agree with the changes.

Risch called lawmakers back to town for a one-day special session solely to enact his bill – angering members of Idaho’s small minority party, who had their own alternative plan they wanted considered.

In both the Senate and the House, minority Democrats sought to sidetrack the bill and amend it to match their plan, which would give a $104 million tax break only to homeowners. Their plan would tap into the state’s budget surplus and wouldn’t raise sales taxes.

But the Democrats – who hold just 20 seats in the 105-member Legislature – were outvoted.

All of North Idaho’s legislators from districts 1 through 5 voted in favor of the bill except for Rep. George Sayler, D-Coeur d’Alene. Rep. Mary Lou Shepherd, D-Prichard, voted with the Republicans in favor of the bill – the only Democrat in either House to do so.

“It’s lonesome out there, but I need to do what my district asks,” Shepherd said. “I’ve been out there before.”

Sayler said he’s worked hard for the past two years to provide property tax relief to homeowners. “It would be politically expedient for me to vote yes,” he told the House. “It would probably ensure my re-election. But I cannot in good conscience vote for a plan to provide property tax relief that requires someone to pay more every time they sit down to have breakfast, lunch and dinner … especially when the Legislature could have provided the same property tax relief for those homeowners without any sales tax increase.”

He added, “For me, this program represents a transfer of wealth from the less well-off to the better-off. … It would be a failure of leadership for me to support this policy.”

All of the legislators from District 6, Latah County, voted against the bill.

In the Senate, just four Republicans joined the seven Democrats in opposing the bill. In the House, Risch’s bill, HB 1, passed on a 47-23 vote, with 11 House Republicans joining 12 House Democrats in opposing the GOP governor’s bill.

The measure cleared the House Revenue and Taxation Committee on a 13-6 vote, with two Republicans joining the panel’s four Democrats in opposing it. In the Senate Local Government and Taxation Committee, the vote was 6-3, with one Republican joining the committee’s two Democrats in opposition.

House Tax Chairwoman Dolores Crow, R-Nampa, told the House that HB 1 promises “immediate, meaningful and permanent tax relief.”

Rep. Ken Roberts, R-Donnelly, said, “We are hearing loud and clear that property taxpayers are being overburdened.” He added, “Does this bill mean that there’s going to be less money for education? Absolutely not.”

Education groups across the state have opposed the bill for fear that it exchanges a more stable funding source for schools, property taxes, for a more volatile one, the sales tax. They also had other ideas about how to use the state’s budget surplus, including boosting public school funding and expanding higher education.

Rep. Steve Smylie, R-Boise, said, “We will sooner or later have to talk about education funding, because it just simply doesn’t add up. You can’t use surplus funds for ongoing expenses. We’ve been through this over and over again.”

House Assistant Majority Leader Mike Moyle, R-Star, argued that the governor’s bill eliminates the one major property tax levy in Idaho that’s directly tied to escalating property values. All major remaining levies are subject to annual growth caps.

“Is it really fair that because somebody moves in next to you and values go up, that you get taxed out of your home? I think not,” he said. “It’s vital that we do something, and we do it soon, because citizens are going to pay the price – and they shouldn’t have to pay that price because someone moved in next to them.”

Keough asked the Senate, “What, dear folks, does market value have to do with funding education? Because a house is worth $1 million in an inflated market does not mean that the students in that house need that much more for school. … I submit to you that there is no connection.”