Tax relief, school funds are at odds

BOISE – Idaho would trim funding for public schools to the tune of $27 million a year under property tax relief legislation being pushed by Hayden Lake Rep. Jim Clark.

“Why am I going through all this drill – I don’t like children?” Clark asked the House Revenue and Taxation Committee on Tuesday, drawing nervous laughter from the crowd of just less than 100 gathered for a hearing on property tax reform bills. “If we’re concerned about the spending side like I am, what we need to do is pass HB 418.”

Clark’s bill kicked off discussion of an array of legislation to change how Idaho allows local school districts to collect property taxes. They are among more than 30 property tax relief bills up for hearings this week.

It also showed how education funding – which statewide polls have shown to be a top priority among Idahoans this year – is colliding with property tax relief, which people across the state demanded at a dozen public hearings over the summer.

HB 418, which Clark is co-sponsoring with House Revenue and Taxation Chair Dolores Crow, R-Nampa, and Rep. Mike Moyle, R-Star, would shift half the funding that schools now collect from property taxes to the state general fund and would allow that amount to increase just 3 percent a year in the future. Also, it would cap local property tax budgets for schools – other than additional, voter-approved bonds or levies – to no more than 3 percent growth a year, with exceptions for new construction.

If the bill passes, schools would have $27 million less next year. Meanwhile, the state would pick up about $130 million in school funding, saving property taxpayers across the state that amount on their local tax bills.

“I think things would work fine under a 3 percent cap,” Clark said, noting that schools still would get more money from year to year. They’d just see a smaller increase. The same estimate that shows the $27 million cut in funding also shows schools would see an increase in total funds of 2.4 percent, Clark noted, rather than 6 percent.

Robert Huntley, the former Idaho Supreme Court justice who represented school districts in a successful lawsuit against the state over inadequate funding, told the panel, “I think this would be a very sad day for Idaho schools to have that kind of cap in place.”

Cliff Green, lobbyist for the Idaho School Boards Association, told the committee, “Idahoans don’t mind paying for education.” In the past five years, as state funding for schools has remained relatively flat, more than half of Idaho’s school districts have successfully asked their local voters to approve extra override tax levies, Green said.

Mike Chatterton, business manager for the Blaine County School District, told the lawmakers the cap would just force more override elections. “The only thing it does is create supplemental levies, which goes back to the property tax again,” he said.

Clark noted that Idaho has held other local governments’ property tax budgets to a 3 percent growth cap for nearly a decade, but not school budgets. “I think they should be capped like all other taxing districts are capped,” he said.

The committee also took testimony on HB 424, legislation proposed by a special interim committee on property taxes. Like Clark’s bill, that measure would shift half the funding schools now get from property taxes for day-to-day operations to the state general fund. But HB 424 wouldn’t impose caps on school budgets.

Rep. Dennis Lake, R-Blackfoot, co-chair of the interim committee, said his one regret was that “we did not provide a revenue source” to pay for the new state funding for schools and resulting property tax relief. Instead, the panel just required the money to come from the state’s general fund.

Clark noted that when Idaho shifted a quarter of school property tax funding to the state a decade ago, no particular source was identified. “They did not raise taxes. They took it from within government,” he said. “If they could do it then without raising taxes, why can’t they do it now?”

Testimony on those two bills will continue this morning as the committee moves into its third day of property tax hearings.

Also on Tuesday, owners of rental property urged the committee to include them in the homeowner’s exemption from property taxes, and Rep. Shirley McKague, R-Meridian, pushed legislation to grant a $150,000 tax exemption to all homeowners over age 70, regardless of income.