Idaho lawmakers unlikely to seek tax hike

Otter prefers trimming unneeded programs

Sat., Dec. 27, 2008

By JOHN MILLER Associated Press

Luna still hoping for teacher merit pay

BOISE – The state Education Department may still push for compensation of Idaho teachers based on performance instead of experience, but lawmakers aren’t expected to fund that idea or any pay hikes for teachers in 2009.

The agency is considering whether to shelve the proposal until the economy improves or plow forward and ask lawmakers to approve the framework for a pay-for-performance plan without the $18 million price tag, spokeswoman Melissa McGrath said.

Superintendent of Public Instruction Tom Luna requested $27 million for teacher raises and a pay-for-performance plan in his $1.5 billion proposed budget for the state’s public schools in 2009 and 2010.

Now, as some groups and agencies trim their legislative proposals, doubting lawmakers will be willing to spend more money during economic hard times, Luna concedes the $1.5 billion request no longer seems realistic.

McGrath said the Education Department plans to submit a revised budget proposal to lawmakers in January.

As part of the revision, Luna is considering a proposal to designate two-thirds of any teacher salary increase for a pay-for-performance plan, McGrath said. The remaining one-third would go to increase the base salary for teachers.

Associated Press

BOISE – When tax revenue plunged 14 percent six years ago amid an income tax cut and economic slump, then-Gov. Dirk Kempthorne twisted conservative lawmakers’ arms in the record 118-day Legislature to win a $160 million sales tax increase to shore up Idaho’s budget.

The latest economic dip is forecast to chop 10 percent or more from state receipts in fiscal year 2010, starting next July, but heads of the Legislature’s Senate and House taxation committees say another sales tax increase is off the table.

House Revenue and Taxation Committee Chairman Dennis Lake, R-Blackfoot, and his counterpart in the Senate, Brent Hill, R-Rexburg, said Friday that times may be tough, but the current situation isn’t comparable to 2003.

When Kempthorne won his temporary increase of the sales tax by a penny per dollar to 6 percent until July 1, 2005, Idaho’s economic reserve, or “rainy day,” funds had already been depleted, raising the specter of massive cuts to education and other programs.

What’s more, a property tax cut pushed by temporary Gov. Jim Risch in August 2006 was accompanied by boosting the sales tax back to 6 percent, to offset losses to schools. Going even higher would be tough, Lake told the Associated Press.

“We did a lot of research in 2003 and found that a penny increase didn’t cause a whole lot of heartburn,” he said. “But when you went above 6 percent, that would cause a lot of problems. And I think the same is true today.”

Another big fear is that raising the sales tax further could send more Idaho shoppers across the border to Oregon or Montana, where there is no sales tax, or to Nevada, Washington and Wyoming, where grocery purchases are exempt.

Gov. Butch Otter has ordered state agencies to cut 4 percent of their budgets, or about $130 million, and delay spending another $54 million, in case things get worse. He’s also asked agencies to prepare to cut another 6 percent in the 2010 budget year that begins in July, on pessimism the economic slowdown could be longer and deeper than previously forecast.

Otter aides couldn’t be reached Friday for comment, but the Republican governor has said he sees the slowdown as an opportunity to pare government programs that aren’t necessary or mandated by federal or state law. In other words, belt-tightening, not raising additional money to plug budget holes, is Otter’s mantra for 2009.

Idaho has about $320 million in reserve, including an education stabilization fund, an economic reserve fund and the state’s share of the national tobacco settlement.

Otter has already used a portion of the education money in the current fiscal year to offset a roughly $60 million hit to public schools. The governor said he’ll use more of the money in fiscal year 2010. Until the funds are depleted, however, there won’t be any appetite for increasing taxes.

“We didn’t have any choice at that time,” said Hill, of the temporary sales tax increase in 2003 under Kempthorne. Now, “we’ve got enough in there to get us through a couple of years, although it will be tight. If we’re still hurting at that time, every option will be on the table – cuts as well as tax increases.”

Rep. John Rusche, D-Lewiston and the new House minority leader, said he’s heard some discussion in his north-central Idaho community that lawmakers should revisit a 2007 interim committee’s recommendations to eliminate tax exemptions passed over the years to benefit specific businesses, including ski resorts, broadcasters, publishing companies, funeral homes, dairies and vending machine operators.

However, an attempt to do that earlier this year fell on its face as affected businesses protested. Rusche said it won’t likely gain any momentum – at least not until economic reserve funds are tapped out.

“I have not heard a groundswell for revenue augmentation,” he said. “I think there’s going to be some real tough choices around services.”

Rusche said decisions to pare services should be “surgical,” rather than across-the-board in nature. “We have to try and be as smart as we can,” he said.