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Idaho House approves new $21 million tax relief plan

March 9, 2022 Updated Wed., March 9, 2022 at 4 p.m.

By William L. Spence Lewiston Tribune

BOISE — A complex bill that provides $21 million in local property tax relief and shifts public defense costs from counties to the state advanced to the House floor and on to the Senate Tuesday.

The House Revenue and Taxation Committee held a 45-minute public hearing on House Bill 735 in the morning. Five hours later, the House then took up the measure and passed it 63-1.

The 26-page bill has multiple moving parts.

Among other changes, it eliminates the county charity levy, which counties use to pay for indigent services. It also eliminates the indigent medical care program.

The state and counties historically served as payers of last resort for people who can’t otherwise afford medical care. Lawmakers restricted eligibility to the indigent care program last year, however, so county costs are expected to decrease over time as bills for past treatment are paid off.

HB 735 provides $21 million in state general fund support to the counties each year for the next two years to fully offset any remaining indigent costs. That will reduce local property taxes by an amount equal to the county charity levy.

In north central Idaho, the charity levy ranges from about $121,000 in Clearwater County to nearly $1.5 million in Nez Perce County.

Beginning in fiscal 2025, HB 735 shifts responsibility for public defense costs from counties to the state. However, cities and counties still end up paying a big chunk of the costs.

That’s because the legislation redirects $36 million in online sales tax revenue into a new public defense fund. Cities and counties would have received the money anyway, as part of their 11.5% local revenue share, but the bill dictates that it be used for public defense services.

That prompted opposition from Kelly Packer, executive director of the Association of Idaho Cities.

Packer told the committee that cities receive about half the money that’s distributed through the revenue sharing formula. She also pointed out that cities currently have no financial responsibility for public defense services.

“So you’re going to take funds that (could be) used for other purposes and force cities to help fund public defense needs for the state and counties,” Packer said.

House Majority Leader Mike Moyle, R-Star, who co-sponsored HB 735, said local governments aren’t losing out. They never got any of the online sales tax dollars before now, because those dollars flowed into a dedicated tax relief fund. Consequently, the $36 million is entirely new revenue.

“When you look at the charts, you’ll see you get more money eventually (as online sales tax revenues grow),” he said.

Idaho Association of Counties Executive Director Seth Grigg, who helped craft the bill, agreed with Moyle’s assessment.

“Yes, that first $36 million won’t go into our budgets because those funds pay for public defense,” he said. “But above that, the money does flow back to cities and counties.”

The bill also commits the Legislature to working with counties and other stakeholders to develop a new public defense system by the end of the 2023 session.

Whether that’s a regional approach or a state-based model hasn’t been determined yet, Grigg said. However, HB 735 puts stakeholders on the clock for addressing the issue. In the meantime, it provides $21 million in local property tax relief.

The measure now heads to the Senate for further action.

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