Tax Commission seeking software upgrade

BOISE – Idaho’s state Tax Commission needs an expensive software upgrade to keep up with changing technology, commissioners told lawmakers Tuesday.

Gov. Dirk Kempthorne has called for funding just part of the upgrade next year, at a cost to the state of $500,000. But under questioning from legislative budget writers, Tax Commissioner Dewey Hammond said that amount would just allow the agency to keep up. If the full, $2 million project were funded, he said, the state would bring in millions more in tax revenue each year.

“It would return $2.4 million annually,” Hammond told the Joint Finance-Appropriations Committee.

Senate Finance Chairman Dean Cameron, R-Rupert, questioned why the state wouldn’t fund the upgrade all at once to include the parts “which would bring in income for us.”

“This year is a very tight year,” responded Dawn Hall, an analyst with the governor’s Division of Financial Management. The governor’s office decided the $500,000 start to the upgrade was an “essential first step,” Hall said, and that he’d look at funding the rest in future years.

Sen. Brent Hill, R-Rexburg, a CPA, questioned that thinking. “We’re all concerned about the 2007 budget,” he said. “Getting this done would help us in 2007. … There’s no reason not to get a 50 percent return on your investment.”

Lawmakers have been trying to save every penny they can in the budget for the upcoming fiscal year 2006 so they’ll be able to balance the state budget the following year. That’s because Idaho’s sales tax is scheduled to drop back down from 6 percent to 5 percent on July 1 – the start of the 2006 fiscal year.

The state has enough surpluses, savings and one-time funds to get it through 2006 despite the sales tax change, which will remove $180 million a year from state tax revenues. But those will be largely spent when fiscal year 2007 rolls around.

Hall said the governor’s office doesn’t question the Tax Commission’s projections that the software upgrade will bring in revenue.

“It really is just because we were trying to be financially conservative in ‘06,” she said.

Members of the joint budget committee were complimentary to the Tax Commission and its staff for collecting more taxes in recent years while trimming costs.

“I am very impressed with the payback ratio and the record that the Tax Commission has,” said Rep. Scott Bedke, R-Oakley.

A year and a half ago, lawmakers funded additional tax collectors to try to collect more of Idaho’s unpaid taxes. That effort paid off in a big way, Hammond told the committee.

An additional $22.3 million was collected over the 18 months, he said, and the cost of the new staffers was just $2 million. So the net gain for the state was $20.3 million.