Governor Wants To Save Surplus Budget Plan Calls For Selling Bonds To Fix Schools

Gov. Dirk Kempthorne wants to dump nearly all of Idaho’s multimillion-dollar state surplus into a savings account and sell bonds to help school districts fix unsafe buildings.

Lawmakers mostly applauded the move to help schools, but some said a smaller savings plan might do the schools more good.

“Maybe his approach is a little more aggressive than what we should be, given our needs, especially school safety,” said Senate President Pro Tem Bob Geddes, R-Soda Springs. “I think we’ll be criticized mightily for putting excess budget reserve money in that account and then asking for more money from the public to fund school safety.”

Sen. Marguerite McLaughlin, D-Orofino, said, “I have no problem with doing savings. The problem I have is that there are a lot of needs.”

Although lawmakers may differ on the details, many said Kempthorne left plenty of room for negotiation in the budget proposal he presented to the Legislature on Wednesday.

“As a partnership, we can do the right thing for the people of Idaho,” Kempthorne told lawmakers who had gathered in joint session in the House chambers to hear him. “I truly respect you. I truly do appreciate working with you.”

Earlier this week, Kempthorne’s game plan drew high marks even from Bob Huntley, the former Idaho Supreme Court justice who is representing a group of school districts who have sued the state over building problems. But Huntley said it remains to be seen if state lawmakers will meet their responsibility to fund schools adequately.

Kempthorne’s $1.8 billion general fund budget is most notable for the spending it doesn’t propose. In a year when the state is flush with a surplus expected to exceed $60 million, the governor called for shifting $54 million of that directly into the budget stabilization fund, a state savings account designed to smooth out future economic dips.

That deposit would bring the fund up to $90 million - 5 percent of the state budget. It’s enough to satisfy legislation written two years ago by Rep. Jim Clark, R-Hayden, that now requires the state to put 1 percent of its budget into the fund during every year that sees strong revenue growth.

The required deposits end when the fund hits 5 percent of the budget.

“Some might ask why not just spend that money now?” Kempthorne said. “I firmly believe it’s now, when times are good, that you put this money away and invest it. This will be an insurance policy against a tax increase.”

Kempthorne called the plan the right way to start a new millennium.

Clark said he was “extremely happy” with the governor’s proposal.

Rep. Don Pischner, R-Coeur d’Alene, who like Clark and McLaughlin serves on the Legislature’s budget committee, said he’ll need to think hard about the idea. “People have needs now, not 10 years in the future,” Pischner said. “I have sympathy with those who have needs.”

North Idaho’s fourth budget committee member, Sen. Clyde Boatright, R-Rathdrum, said he’s not even sure there will be a surplus, though state budget experts now estimate the surplus will exceed $62 million.

Boatright said he likes the idea of funding education if money’s available, but worries that Kempthorne plans to squeeze the Health and Welfare Department to fund other needs. The governor’s budget came in $39 million below Health and Welfare’s budget request.

Kempthorne’s proposal to fix safety problems in schoolhouses calls for the state to set aside as much as $2.5 million from the public schools budget next year, which would cover interest payments. The state would issue bonds through the state Building Authority for up to $50 million, and school districts would pay back the principal of the loans over 20 years. The state would pay the interest.

“That’s the incentive we’re offering,” the governor told lawmakers. “If schools are willing, we’ll help them clean the slate on unsafe conditions.”

Sen. Gary Schroeder, R-Moscow, chairman of the Senate Education Committee, said, “It looks like finally, after all these years, we might get something to put the children in safe schools.”

School districts have sued the state, saying the Legislature hasn’t lived up to its constitutional duty to provide for schools because schoolhouses have been allowed to deteriorate. The state has left that issue to local voters, who have property tax increases as their only option to address it.

“If we sit here and do nothing and we lose the lawsuit, we’ll have to raise taxes next year,” Schroeder said. “They’ll keep us here ‘til June ‘til we do it.”

The lawsuit goes to trial this spring, just after lawmakers wrap up their session.

Kempthorne convened a committee over the summer that studied the issue, and recommended to continue leaving the full cost to local property taxpayers, who must vote by a two-thirds margin to approve school bonds.

“I assume he’s getting some legal advice, and that’s why he’s going against his committee,” Schroeder said. “His proposal does something for kids in dangerous situations. I don’t know if it’s enough, but it’s a start. It’s a lot better than anything we’ve got now.”

House Speaker Bruce Newcomb is resistant to the idea of taking on state debt, and has instead talked about a plan to put some of the surplus money into a revolving loan account. That way, school districts could still get interest-free loans, but there might not be as much money available right off.

Sen. Atwell Parry, R-Melba, co-chairman of the budget committee, said he likes Kempthorne’s plan, because it doesn’t commit state general funds for schoolhouses. Doing that would be “a tragedy,” he said, “because the local people have lost their control.”

Once the state starts putting general tax funds into schoolhouses, Parry said, it’s just one more step for the state to dictate when buildings are needed and how they should be built.

Subsidizing interest on loans is “not a direct payment,” he said. “I think the idea is good.”

Parry backed the governor’s pitch for full funding for the reserve fund. “That fund has served us very well,” he said. “We’ve drawn on it for the floods in North Idaho, we’ve drawn on it for some other emergency situations we’ve had. We never know when it’s going to happen again.” Longtime Rep. Hilde Kellogg, R-Post Falls, vice-chairman of the Revenue and Taxation Committee, also backed the governor’s savings plan.

“My very first term, we had a $70 million shortfall and we had to raise taxes to balance the budget,” she said. “So there’s no harm in being prudent.”

This sidebar appeared with the story: AT A GLANCE Budget highlights

Highlights from Gov. Dirk Kempthorne’s spending plan:

Prisons: Funding for the Corrections Department would rise 20.7 percent, and cover the costs of opening a new 1,250-bed, privately operated prison near Boise. The prison is scheduled to open July 1 with 750 inmates.

Higher education: Idaho’s colleges and universities would get a 7.1 percent increase, including money to ward off a student fee increase by covering $2.9 million in increased costs. But the governor didn’t fund any new programs requested by the universities.

Community colleges, including North Idaho College, were recommended for an 8 percent budget increase to cover rising costs, but no new programs were funded. NIC lost out in its requests for a researcher position and distance learning equipment.

Kempthorne called for increased scholarships, however, including a pilot program to help students who work for the state Department of Parks and Recreation.

Public schools: The budget would increase funding for public schools by 6.4 percent, but the total includes his schoolhouse loan initiative and other items, including 3.5 percent more teacher pay.

State employees: Kempthorne recommended 3.5 percent for salary increases, to be distributed by merit, and also recommended a 5 percent hike in entry-level salaries.

The governor’s budget calls for adding 120 new state employees, but he noted that the number of state employees per capita in Idaho is still below 1992 levels.

Marriage tax penalty: Kempthorne called for another tiny step toward eliminating the so-called marriage penalty from the state income tax, at a cost of $1.25 million. He took the first step last year. At this rate, it would take another six years to completely eliminate the differential.

Though the savings to married couples are small, Kempthorne called the issue a matter of principle.

Overall, the governor’s budget calls for a 7.5 percent increase over current spending.