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The Idaho Legislature has a new power couple - Dick and Carole Harwood. Rep. Dick Harwood, R-St. Maries, is a sixth-term District 2 representative. Now his wife Carole is in the House chamber too, filling in for newly elected Rep. Shannon McMillan, R-Kellogg, whose husband is ill. “Maybe we set a record,” Carole Harwood said with a smile - spouses serving in the House representing the same district. She said McMillan just called her to ask her to sub yesterday. “As I was leaving the house, I got a call,” Carole Harwood said. “I'm available as long as she needs me.”
Mrs. Harwood hasn't held elective office before, other than a past stint as Republican Party chair for Benewah county. She's now the treasurer.
The governor has concluded his State of the State message, in which lawmakers interrupted him with applause more than a dozen times. House Speaker Lawerence Denney told Gov. Otter, “I'm sure that this is going to be a challenging session for us, and I hope that we are up to that challenge.”
The governor's budget - the dollars and details behind the proposals he outlined today in his State of the State message - uses a variety of steps to cope with what had been expected to be a budget shortfall for fiscal year 2012 as of much as $340 million. First, he uses state economists' newly revised forecast of revenue for the current year, fy 2011, of 4.2 percent, which is revised down from their original forecast of 4.7 percent. In the first five months of the fiscal year, state tax revenues actually have been exceeding that forecast. Then, for next year, he budgets based on 3 percent revenue growth, even though his economists forecast 6.9 percent. That leaves $91 million cushion in case the economy falls short of the forecasts.
Lawmakers set this year's budget based on revenue growth of practically zero, so that revenue makes a big difference in cutting into the budget hole. Then, the governor cut into the maintenance portion of the budget to save $20 million because an anticipated PERSI rate increase was delayed and $40 million by covering health insurance cost increases from reserves in the insurance fund for a second straight year. He also got state agencies to kick back to the general fund any unused reserves, including $8 million from the liquor division and $10 million from the permanent building fund. He tapped the remaining $74 million in the non-endowed portion of the Idaho Millenium Fund, a fund made up of tobacco settlement proceeds, with part of that covering a Medicaid shortfall for this year, and the rest boosting next year's budget. All state saving accounts essentially are drained. Plus, hospitals and nursing homes will kick in millions to help fund the Medicaid program, but it still will take a $25 million cut in benefits, which largely will hit adults on the program.
Then, to make up the final piece of the budget hole, the governor called for $35.5 million in cuts from state agencies, with differing amounts for each but averaging 2.2 percent; those don't affect public schools; and he called for delaying for one year the next scheduled step-up in the grocery tax credit, saving the state $15 million next year. That means the grocery tax credit would stay at its current level - $70 per person per year for the lowest-income Idahoans, and $50 for everyone else. There would be no raises for state employees, little or no funding for inflation, and furloughs could continue at some agencies.
The result, at the end of all that, is a balanced budget for next year - should lawmakers choose to go along with the governor's proposals. Overall, state general-fund spending would rise by 7.7 percent next year, under the governor's blueprint, while total spending would be up 5.3 percent. The budget still would contain $78 million in one-time money to help it balance, continuing a 15-year trend of structural imbalances but bottom-line balance.
Gov. Butch Otter told lawmakers, “It's time to make the extraordinary measures that were born of necessity these past years into the foundation for a new concept of governance for Idaho, governance that emboldens and frees individuals and communities from the soul-crushing tyranny of entitlement.”
The governor just told lawmakers to “think of this legislative session as a family council - all Idahoans drawn up around the kitchen table to discuss how to make the best possible use of what we have.” He said greater value must be placed on “self-reliance,” and said, “We must not be satisfied with answers from government, any government.”
“Tough choices and changes have to be made,” Gov. Butch Otter told lawmakers, including for higher education. “Higher education does have some built-in constituencies that can provide alternatives to a higher level of general fund support,” he said. That's not likely what higher education advocates want to hear; Idaho's higher-ed system has been hit with big budget cuts for several years running. Otter's proposed budget for next year calls for another 1.3 percent cut in state general funds for colleges and universities, and a 1.7 percent cut for community colleges. In total funds, colleges and universities would end up with 6.4 percent more than this year, while community colleges would have 3.5 percent less.
A theme that Gov. Butch Otter talked about last week, changing the “culture” of government, has resurfaced in his State of the State message. “Building partnerships. Fostering more cooperation between the public and private sectors. Doing more with less. All that is part of what must be a cultural change in our policies and our programs throughout state government,” he said, “a change in how we set our priorities and how we approach challenges.”
On health care reform, Gov. Otter has won several rounds of applause - first for noting that a Virginia judge said a health care mandate is unconstitutional, and second for saying, “We are actively exploring all our options - including nullification.”
Gov. Butch Otter has endorsed a plan in the works at the state Department of Labor to issue bonds to cover the state's unemployment fund debt to the federal government, and redeem the bonds over four years. “It also involves raising the target balance in the trust fund formula to avoid borrowing in the future,” he said. “Our plan will save Idaho employers an estimated $110 million over the next three years. My thanks go to Labor Director Roger Madsen for thinking outside the bureaucratic box on that issue.”
What Idaho's economy really needs is for employers to begin hiring, Gov. Otter said, though many have been reluctant to do so in part because of uncertainty about health care reform and other issues. “We must use our bully pulpit to encourage those who can help to take a chance on our state's future,” he said, “to pay it forward by embracing those less fortunate among us. Just as our Project 60 partners are working with us to create and sustain the right business climate in Idaho, the time is now for our citizens and businesses to show confidence in our communities, our neighbors, and ultimately ourselves.”
The governor has again mentioned tax incentives. “We must continue rewarding those private sector investments that grow our economy by providing appropriate and carefully crafted tax incentives for job creation,” he said.
Gov. Otter is joining state Superintendent of Schools Tom Luna to propose a pay-for-performance system for the state's public school teachers. “Excellence should be rewarded,” Otter told lawmakers, “which is why Supt. Luna and I are committed to establishing a pay system for teachers that emphasizes their performance, not their tenure.” The comment won a round of applause in the House chambers.
The Idaho Education Network, a broadband network that links Idaho high schools, is coming in for much praise from Gov. Butch Otter in his State of the State message. Already, he said, school districts are using the network for innovative programs. The Bonneville school district and the Vallivue district in Caldwell are “rolling out a virtual school option for students, and several other districts are heading that direction,” Otter said. “It's a tremendous resource.”
School funding, as the largest single piece of the state budget, is a big focus for the state Legislature. Gov. Butch Otter is proposing a budget for public schools for next year that imposes no further cuts, but keeps in place the full $128.5 million in cuts imposed on schools this year. Overall, schools would get a 1.8 percent increase in general funds next year, and a 0.2 percent increase in total funds. “While my budget recommendation does call for a little more state support for public schools, it also includes significant, targeted investments in our children's future - investments like a third year of math and science in high school, and paying for all Idaho juniors to take college entrance exams,” Otter said. “Those investments are part of important changes that Supt. Luna and I are proposing in the way our public schools do their jobs.”
He said he'll push for “a fundamental shift in emphasis from the adults who oversee the process and administration to the best interests of our students.”
Though there's been much talk among lawmakers of the potential for a tax increase to cope with the state's expected huge budget shortfall next year, Gov. Otter said, “I haven't heard one Idahoan say they want their taxes raised. If anyone wants to contribute more to state government, they're free to do so. But this is not the time for us to coerce those payments with more taxes.”
The governor said his proposed budget for fiscal year 2012 is “based on a modest but responsible 3 percent growth rate in our state revenue.” That's despite the fact that his own Division of Financial Management economists are forecasting 6.9 percent more in tax revenue will come into state coffers in fiscal 2012. Otter is proposing to budget to just the 3 percent figure - leaving $91 million on the table if the state's forecasts prove true. Lawmakers have been pessimistic about forecasts since revenues fell short in the past few years.
Most state agencies will take a budget hit in the coming year, Gov. Butch Otter said. “Most state agencies will see their budgets reduced by more than 2 percent under my recommendation,” he told lawmakers. The governor's proposed budget for next year calls for general-fund cuts that vary by agency but average 2.2 percent; they'd total $35.3 million.
In one of the few specific legislative proposals he's mentioned thus far, Gov. Butch Otter said, “I will be proposing legislation aimed at providing an incentive for investment and creation of career opportunities, targeting those small and start-up businesses that show great promise for Idaho's future - especially as new technology and innovation are applied.”
Gov. Otter has specifically singled out Rep. Marv Hagedorn, R-Meridian, saying he's proposing phased-in tax-cutting legislation that Otter thinks lawmakers should “seriously consider.” “His bill would equalize and then gradually reduce our marginal state income tax rates for individuals and businesses over ten years, starting in 2013,” Otter said. “But whether it's that bill or an alternative, we need a long-term plan for reducing the tax burden on our citizens.”
The governor mentioned the trouble at the state Tax Commission, where his appointee as Tax Commission chairman, Royce Chigbrow, resigned on Friday amid allegations that he interfered in tax cases for the benefit of a friend an of clients of his son's firm. “I have shared some ideas on possible ways to improve operations and public trust at our state Tax Commission with Pro Tem Hill, Senator Stegner and Representative Lake,” Otter said. “While those talks progress, I look forward to working closely with all of you in finding solutions that help restore public confidence in that institution and the essential work it does through greater accountability and efficiency.”
Otter sounded themes he's been hitting in recent weeks about how to improve the economy - that government isn't the answer. “Along with responsibly balancing our budget, there is no task before us more important than improving Idaho's economy,” he said. “That does not mean government spending. It means stability. It means predictability. And it means keeping more money in the hands of the people whose innovation and enterprise actually creates those career opportunities.”
Gov. Otter said, “Our state government today is far better and more efficient than it was two years ago.” He said “all our state agencies are continuing to build partnerships, find efficiencies and develop smarter ways of doing their jobs.”
The governor has been highlighting some of what state agencies have done to save money. The state prisons and parole system are saving $32 million a year, he said, by improving offender assessment and placement and making better use of retained-jurisdiction programs; as a result, the inmate population is more than 1,500 below projections. ITD Director Brian Ness has unveiled a realignment plan that he says will save $1.5 million over the next two years. The Division of Building Safety is saving $415,000 a year through such steps as sharing office space, using videoconferencing and issuing more permits online. And Otter said his tax compliance initiative, which added tax auditors, “now is bringing in more than $1 million a month to the general fund that previously was going uncollected. That's money we can use for public schools or other pressing needs.”
Gov. Butch Otter told lawmakers, “Folks, we've got to turn this discussion back to personal responsibility. We've got to turn it back to the family. We've got to turn it back to the communities.”
The governor had a warning for lawmakers. “No one in this room is under any illusion about the task before us,” he said. It could be the kind of legislative session that leaves people wondering why anyone would want to go into politics or public service. … In some cases it may boil down to what our principles, values and the best data available tell us are the least-bad options.”
Gov. Butch Otter told lawmakers, “Your wisdom, patience, judgment and good humor will be crucial in the days to come as we navigate through the difficult process of balancing our state budget in a way that fulfills the proper role of government.” He said, “Now we have our work cut out for us.”
Senators have arrived in the House chamber, and the joint session has now begun. Next to arrive will be the state's top judges and elected officials; then the governor will arrive to give his State of the State message.
House Speaker Lawerence Denney took a moment after the House convened to convey condolences to the families of those killed and injured in the shootings in Arizona, which he called “a senseless act.” Denney said, “As Speaker Boehner said in the U.S. House, an attack on one of us is an attack on us all.” He called for civility in politics, and said, “What we say reaches far beyond these walls.” Denney said he'll try to set the example in the House chamber this year. “In this chamber … we will not allow any debate that is personal, questions motives or is mean-spirited,” he declared.
The Idaho House has convened for the session, as has the Senate. In the House, the formal announcement of substitutes for the opening of the session included the two previously announced - Julie Chadderdon for her mom, Rep. Marge Chadderdon, R-Coeur d'Alene, and Gayle Batt for Rep. Pat Takasugi, R-Wilder; plus one more: New Rep. Shannon McMillan, R-Kellogg, has named Carole Harwood to be her substitute as the Legislature begins. Mrs. Harwood is the wife of Rep. Dick Harwood, R-St. Maries, who represents the same district as McMillan, whose husband is ill.
Next up, the senators will come to the House for the governor's State of the State address to a joint session of the Legislature.
There’s a desperate edge to the talk in Boise as Idaho’s legislative session approaches. “It’s not going to be a fun place to be in the Capitol this year,” said new Senate President Pro-Tem Brent Hill, R-Rexburg. “We’re probably facing the worst year coming up that I’ve ever seen.” It's a looming budget crisis that's causing the consternation. “It’ll be ugly,” said Sen. Joyce Broadsword, R-Sagle. You can read my full story here from Sunday's Spokesman-Review on the upcoming session in Idaho, which lawmakers say will be a difficult one. It starts on Monday, when Gov. Butch Otter delivers his State of the State and budget address to a joint session of the Legislature at 1 p.m.
Gov. Butch Otter, who made a point of criticizing the reach and growth of the federal government throughout his inaugural speech today, also made a reference before he began to his own run-ins with the EPA regarding Clean Water Act violations at his ranch in Star. After military cannons boomed out a 19-gun salute, belching smoke in a spectacular display that was topped when, between the last two booms, four A-10 jets flew over in formation, Otter said, “I hoped, as I watched that cannon being fired over there, that (state DEQ chief) Toni Hardesty didn't show up with some sort of an air violation.” Amid laughter, he said, “But if she does, general, it's yours - I've already had my tussle with those folks.”
Here, Gov. Butch Otter waves to the crowd after taking the oath of office for his second term. He and all the state constitutional officers took oaths today administered by the chief justice of the Idaho Supreme Court. One of them, Attorney General Lawrence Wasden, set a record by doing so - he's now the longest-serving Attorney General in the history of Idaho. Wasden is starting his third term.
Key lawmakers are splashing cold water on a tea party-backed proposal to extend Idaho's sales tax to cover most services, while also lowering the rate from 6 percent to 4 percent. “I don't know whether that particular piece of legislation will ever materialize,” House Tax Chairman Dennis Lake said at yesterday's AP Legislative Preview. “The amount of tax collected is exactly the same. All it does is lower the rate.”
But, he said, “As soon as that rate is lowered, there will be an immediate push to raise the rate for whatever reason, and it will be right back up to 6 percent in a few years.” Lake said, “What we found is there is a comfort level in the state of Idaho with a 6 percent sales tax. There is not a comfort level with 7 percent, I can tell you that.”
Other top lawmakers also were critical of the idea, saying it would hurt a section of Idaho's economy at a time when businesses are saying they want stability in the state's tax structure. Twin Falls Times-News reporter Ben Botkin interviewed Rep. Janice McGeachin, R-Idaho Falls, about the proposal earlier; you can read his full story here.