March 26, 2010. The 2010 session in Review. I was asked today what events or bills, if any, were noteworthy this session. In thinking back on the last eleven weeks it was difficult to single out any one bill that stood out. Some good bills did make it to the Governor’s desk and some bad bills made it as well. There were, however, certain patterns for a number of these bills.
Probably the biggest group comprised what I call the 10th Amendment/Sovereignty group or, as some have characterized them, the “Fed-bashing” group. From our chief executive officer through our majority leadership group in both the House and the Senate, there seems to be an inordinate obsession with revisiting the congressional debates of the 1850s and 60s. As you history buffs may recall, states’ rights, the relationship between federal authority and that of the several states, dominated virtually every issue of moment.
Back then it was slavery that fueled the debate, today it is health care. In both cases passion frequently has overshadowed reason, with sloganeering trumping rational discourse. On one hand these bills rant on about the usurpation by the Feds of State authority, as an interference with the rights of our people, in particular their right to reject outright any mandatory obligation to join the health insurance pool. Others argue this would lower premiums for all of us and eliminate the present ER health care approach, which is rapidly becoming the program of choice for our uninsured and underinsured population.
Yet at the same time these same players are lauding a so-called “Freedom of Conscience” bill which permits health care providers, doctors, nurses, pharmacists and others, to decline to offer services or information to their patients, if doing so offends the providers’ “religious, moral or ethical” beliefs. Translation – they can ignore their patient’s wishes and preferences with respect to a variety of services including an individual's end-of-life instructions typically detailed in what are known as “living wills” or physician’s directives. Apparently sovereignty ends at the edge of the hospital bed.
My personal high-light, given the tidal wave of such bills - I can now spell “sovereignty” without any need to resort to a spell checker.
March 18, 2010. Tough Times Demand Tough Legislators.
The Streamlined Sales Tax Project (SSTP) did not gain a prospective Associate Member today. A motion by Dell Raybould (R) – Rexburg, was to send the Bill to the floor without committee recommendation. The vote was 9-9, thus failing to gain the House floor for debate. H 658 was co-sponsored by me and Leon Smith (R) - Twin Falls.
The debate in the Revenue and Tax committee was spirited and mirrored much of what has been heard over the last four sessions. On one side members argued that it was premature to join the Project unless and until Congress acts to sanction the growing multi-state compact. On the other side, the argument is that Idaho cannot afford to ignore the growing retail sector represented by remote sales, namely, e-commerce phone and catalog sales to merchants residing outside Idaho. It is a sector growing by double digits, a sector that typically fails to collect and remit to Idaho the use (sales) tax owing under existing law. Lacking an effective collection mechanism such as that provided by the SSTP, Idaho essentially is relying on the honor system to collect the estimated $81 million accruing and owing each year.
My view is that many of the no votes today arose not from a concern with deferring to the Feds (a rather bizarre likelihood given the rhetoric usually heard in Committee from members of the majority party), but from a perception that this is somehow creating a new tax, something they wish to avoid at all costs. No one openly states this, but the code words were all there in the debate. In this election year, even the false perception that a new tax is being created is to be avoided at all costs. The consequence? – Once again Idahoans who pay their taxes, and Idaho businesses that collect them, are carrying the burden for those who evade them, or decline to collect and remit them. Brick and mortar Idaho businesses are compelled to operate under a 6 % handicap and honest Idaho taxpayers are ultimately subsidizing tax dodgers, all in order to improve the re-election chances of legislators unwilling to make hard choices in hard times. In good times this would be shameful; in today’s economy it is a travesty.
March 11, 2010. Frontier Justice.
House bill 500 came before the House Judiciary and Rules Committee today. H 500 establishes a statewide protocol for mutual aid relationships between tribal police agencies and local county sheriffs. One might think something akin to this would be a no-brainer given the limited resources available at all levels of government in the current economy. One would be wrong.
Statewide virtually all county sheriffs with reservation lands overlapping their jurisdictions have reached similar accommodations of varying complexity. One has not – the Benewah County sheriff. This bill came to the committee from the Coeur d’Alene’s in an effort to break the impasse. As the testimony progressed it became obvious that there were two main camps – those that saw it as a terrible infringement on Idaho’s soveigenty and those that saw it as a means of filling a law enforcement gap on reservation lands. The latter opine that non-tribal lawbreakers violating Idaho state law on reservation lands are effectively getting off scot-free. In their view, even though stopped and arrested by tribal officers (incidentally, all of whom are certified by Idaho’s police academy – POST), calls to the Sheriff’s dispatch result in little or no response. Benewah deputies are essential to carry forward on the charging and booking process in order to put the alleged lawbreakers into the state judicial system for further proceedings. Without their timely response and cooperation, the tribal officers eventually must turn them loose.
The opponents of the legislation believe the situation is exaggerated. They also believe that H 500 infringes on the sovereignty of the State, that to permit the arrest of non-tribal members by tribal police officers is offensive of our constitution since they lack the right to vote in tribal elections. The sheriff of Benewah county declined to offer testimony at the hearing, responding “well ain’t that a pain” when told that legislators were disappointed that he hadn’t. One begins to get an inkling of why there may be a problem. Eventually three motions were made – the first two proposing to send the bill forward with a varying amendments; the final amendment, voted on first, passed. It extended the deliberations until the following Wednesday (March 17th) in the hopes that the parties may be able to reach a compromise. If not the other amendments will undoubtedly return. The Wild West is still alive and well in Idaho
March 5, 2010. E-Commerce and Other Loopholes.
In the four years I have served in the Legislature, one particular piece of legislation has surfaced each year. Commonly referred to as the Streamlined Sales Tax Project (SSTP), it would have allowed Idaho to join with other states to implement a coordinated method of collecting for each state the sales taxes owing to them arising from the purchase of goods by their respective citizens from on-line vendors located elsewhere. Under our sales tax law since its inception in 1965, an Idaho resident purchasing goods elsewhere, for example in Oregon, is obligated to pay a sales tax upon the value of those goods upon their return to Idaho.
If you’ve ever bought a car in Ontario or Spokane, you know what the drill is - when you register and license it at home you fill out a Use tax form and pay your money (use tax is the alter ego of sales tax when the goods are purchased elsewhere). In the 2007 session a robust bill came forward proposing that Idaho join with a number of other states in putting together a coordinated approach. It would utilize a common software protocol and clearinghouse, much like credit card purchases are not processed so that each vendor need not keep track of all the details, a centralized service processor handling that chore. It made it through the House Revenue and Tax Committee but was narrowly defeated on the floor. Opponents argued it would infringe on our sovereignty by removing our discretion as to what to tax and by what amount – patently false since the project left each participating states discretion fully intact.
In the following two sessions a much simpler bill was introduced, simply allowing our Tax Commission to attend and offer input to the project members as to how we would prefer any final agreement to be structured. It never made it out of committee in either session. This year other attempts have been put forward, both in the House and Senate. Prospects do not look good on the House side, even though the Senate has acted favorably already (perhaps because the Senate likes it?).
It is difficult to comprehend a mentality, during an economic period where revenues are so dear. The State Tax Commission estimates that about $81 million annually of e-commerce, telephone and catalog transactions are not being captured by our existing tax laws. These revenues, even if only a fraction could be reached, could materially aid our current revenue woes.
February 25, 2010. Kumbaya Time.
As you may have read in Thursday’s Statesman, an old wound between the House and Senate leadership surfaced once again. The house leadership bill seeking to rejection a 1% cost of living adjustment (COLA) for PERSI retirees, which sailed through the House last Friday, hit a roadblock in the Senate on Tuesday of this week. If it had passed the Senate, it would have been the first time in history that a recommendation of the PERSI board was overridden by the legislature. In hindsight, it appears the leadership team did not anticipate a problem, either in the House committee which first entertained it, or in the Senate Committee which was scheduled to hear it on Tuesday.
As a practical matter, the bill had absolutely no impact on balancing the budget being set this session. Symbolically, it apparently had a great deal to do with the tone of the message majority leadership wished to convey. On one hand we heard that it could be up to two years before things got better and every dollar was critical even if it had only an indirect effect on general funds at some unknown future date. Alternatively it was suggested that since active duty employees were feeling the pain, it was appropriate that retirees (because they were once active employees?) should share in the pain.
Regardless, tensions were triggered between the two bodies, or at least concerns that they might began to percolate to the surface. Immediately after adjournment the majority party, both House and Senate, went into caucus – the Governor was sighted attending the one on the House side. One might conclude that a peace making effort was underway in an effort to keep the session from dragging on as it did last year, escalating costs as well as tempers, and accomplishing little in the way of the people’s business. Instead of developing job creating solutions to our economic dilemma, majority leadership is busy putting out fires and soothing injured egos.
p.s. I really, really wrote this piece prior to the A.P.‘s John Miller wrote his Friday piece essentially confirming the above.
February 18, 2010. I-JOBS : An Update.
Since the six Idaho Jobs and Opportunity Blueprint bills (IJOBS) were rolled out some three weeks ago, they have generated a lot of interest. The bills are focused primarily on small business enterprises, both existing and start-ups. Responses since have been both positive and negative. The most common complaint has been to the effect that they should be expanded to cover larger businesses as well. The reality is that we have a number of big business incentives already on the books and more coming. What was noticeably missing and overlooked was the need to focus on the little guy. Small businesses account for the majority of new jobs in our economy in both good times and bad. In simple fairness, if nothing else, it appeared to those of us crafting these bills that more balance was needed. However even the bills receiving a lot of positive attention need further tuning in order to make them as effective and workable as possible.
For example, House Bill 479, the Idaho Small Business Venture Capital Investment and Jobs Act, was printed in the House Revenue and Taxation Committee two weeks ago. Since then it has gone through several revisions designed to clarify it. However, both the original and subsequent versions are designed to achieve the same goal, namely, to attract investment capital to Idaho small business ventures. Given the inherent high risk associated with startup enterprises, conventional lending sources such as commercial banks, both state and national, cannot participate in their funding.
This leaves the budding entrepreneur with FFF sources, angel investors or venture capital firms. In the trade, FFF (family, friends, and fools) usually are the first source. Angel investors, normally individuals with deep pockets and expertise in their niche industry, are the second tier. At the top of the investment food chain are the professional venture capital firms, with bigger purses and more extensive management expertise.
This bill offers these risk-takers a sweetener in the form of a tax credit on any capital gain they may realize on their equity investment. However the eligibility criteria are tightly hedged. The Idaho business must be 20 employees or less, the 50% credit can only be applied to capital gains realized from the equity investment, and the investment window extends for only five tax years. In effect the credit can only be realized if the ownership interest itself can be resold at a gain. It is rare to see that happen under the best of circumstances, give the high risk nature of venture capital investments. If these small start-ups were indeed “sure-fire entrepreneurial startup companies whose innovations eventually explode into mega-million or mega-billion giants” as some have suggested, there would be no need for this bill. For that matter there would be no need for venture capitalists, since “sure-fire” deals could readily attract funds elsewhere (and a lot cheaper).
The reality is otherwise. If the bill helps create only one successful home grown Idaho enterprise, with homegrown Idaho jobs it will, in my opinion, have been well worth it. Turning the current economy around will happen when and if we create more good jobs at the local level. Hunkering down and waiting for someone else to do it for us is not my idea of leadership.
February 11, 2010. Doomier Than Thou.
Additionally, January’s sales tax receipts (reflecting transactions occurring in December) exceeded forecast by $6.5 million following an essentially break even December figure ($492.9 actual vs. $493.0 forecast). Sales tax receipts are considered the most current indicator of economic activity. In light of all this, Mr. Ferguson is sticking to his original forecasts for the balance of the current fiscal year and the following year, FY 2011.
In spite of this, the contrarians in the majority party, including Ferguson’s boss, Wayne Hammon, and according to Hammon, the Governor himself, are now moving further downside. They now favor the lower forecast put forward by a majority of the Economic Outlook and Revenue Assessment Committee. Who can be the doomiest seems to be the theme of the day.
What does this mean, you say? In contrast to Ferguson’s forecast of $2.35 Billion for FY 2010 and $2.43 for FY 2011, the favored numbers are likely to be $2.28 for 2010 and $2.29 for 2011, differences of $70 million this year and $170 million next year. These reductions will be on top of the holdbacks already imposed over the last two budget cycles, creating major reductions in staffing and program support throughout state government. This will also impact local governments and the private sector. The two largest cost centers in state government are Education and Health and Welfare. In the former, spending is almost all at the local district level in the form of salaries; in the latter, the Medicaid program accounts for the lion’s share of their expenditures, virtually all of which is channeled to private sector health care providers.
The result will be further job loss, home foreclosures, and increased demand for safety net programs. What was originally billed as a necessary belt-tightening exercise is rapidly becoming a death march. It is difficult to accept that the subjective opinions of doomsayers, rather than those of professional forecasters, should control the policy and planning responsibilities of our state’s elected leaders. Could it be that politics rather than sound policy is at play here?
February 3, 2010 Fire, Ready, Aim!
No sooner had the bill been ushered out of the House Health & Welfare Committee and read on the floor when the unintended consequences began to surface, kind of like those pop up ads on your computer. Consequently the bill was moved directly to General Orders (House parlance for the mechanism for amending a bill that needs corrective surgery). The most likely change is to accommodate a recent state law requiring college students to have health insurance – counties hosting higher education campuses were getting hammered by indigent students seeking financial assistance for the medical needs. A similar concern has been raised about immunization requirements and quarantine procedures within the purview of school districts and health districts. The wording of the bill which speaks to “health care services” and the “mode of securing same” does so in such a manner that it could be read rather broadly, producing results at odds with decades of statutory law and judicial construction of same.
Depending on how the expected amendment(s) is drafted these problems may or may not be effectively resolved. Finally, the overarching issue, likely to be resolved in the Federal Courts, is whether or not a state can override a Federal pronouncement in this arena, the tenth amendment to the Federal Constitution notwithstanding. The bill ponies up a $100,000 of scarce general funds to let the Attorney General fight the good fight down the road. A number of my colleagues have questioned why the angst over a federal bill whose precise content is still unknown since it has yet become law (and may never become law). As I said at the outset: fire, ready, aim!
January 28, 2010 Jobs ‘R Us.
January 21, 2010. Crystal Balls and Other Fantasies.
January 14, 2010. LEGISLATIVE DAY NO. 4.
It's Thursday afternoon in the wonderfully refurbished House chambers of the State Capitol. My first session as a representative to the Idaho House in 2007 was in this same room - what a difference three years makes. The refurbishment accomplished in 2008 and 2009 was truly successful in restoring the Capitol to a real gem for the Gem State.
Yesterday afternoon when I was working in my fourth floor office, a tour group came through the adjoining gallery area. I invited them in to view my/their office and had a great time fielding questions and exchanging pleasantries. When asked whether I thought it would make any difference in how the people's business was conducted, I recounted how I felt the first day I came in back in early December - it was so drop-dead gorgeous, impressive and inspiring that I felt obligated to work twice as diligently simply to live up to the standards of the setting. Hopefully everyone else will experience a similar reaction.
Given the dire economic conditions, everyone needs to be really focused on making the best of our limited resources to keep alive the critical programs and services provided by Idaho to those in need. Currently their numbers are growing by leaps and bounds and many who viewed themselves as being reasonably well off are lining up at the food banks for the first time in their lives. One can only hope that things are starting to turn around, but until they do all of us must raise our game to a new level.
As a result the extreme downward slide in Idaho’s economy the last two years (beginning in August of 2007), The majority of the legislators serving on the committee expressed great angst at accepting the Governor’s official forecast presented by Mr. Ferguson, choosing instead a much lower number, not only for the balance of this fiscal year 2010 (ending June 30 of this year), but for the ensuing twelve months comprising FY 2011. One senator urging caution about this approach said this extreme “low-ball” forecast could be self fulfilling. As I commented to the media afterwards, in the aura of doom and gloom pervading the meeting, the majority chose doom over gloom. In my view we should be concentrating on what it’s going to take to turn things around, on creating and preserving jobs, particularly in the private small business sector. If one has no real vision or plan on how to improve matters in a gloom and doom situation, in looking ahead one will see only more darkness. This is the kind of leadership the majority party is providing, or perhaps I should say, failing to provide.
As a member of this committee the last two sessions it has been like riding a roller coaster, but only on the downward leg. Mike Ferguson, the State’s chief economist is a thirty year veteran of this exercise and has excellent track record of hitting the mark. As he freely admitted at Wednesday’s session, the only thing one can say for certain about such forecasting is that it will always be wrong. However, if the forecasting model used is valid, statistically one expects to miss the mark with equal likelihood on either the high side or the low side. When the economy is in turmoil, as it has been these last months, those misses can be rather extreme.
The high point, or low point, depending on one’s perspective, this week was the hearing held Wednesday afternoon by the legislature’s Joint Economic Outlook and Revenue Assessment Committee (EORAC). Meeting each year the week preceding the beginning of the session, the committee is charged with making an overall assessment of Idaho’s economy and outlook for the next eighteen months. Once that is done, they then review the Governor’s forecast for the balance of the current fiscal year and the following year. Finally they provide advice to the Legislature as a whole, namely their estimate of what the general fund revenues will be for this period.
Some of these bills are quite simple, some are more complex; all are aimed at keeping or putting people to work again. Jobs keep people in their home, put food on the table, support their families and spur the economic well being of their communities. Finally it’s a well know economic principle, likely familiar to most of you, the people with jobs can pay more in taxes than people without jobs
The “Idaho Small Business Venture Capital Investment Act” is designed to attract venture capital, the lifeblood of most start-ups. It will be transferrable, but capped and subject to recapture if the qualifying criteria do not survive the required period. It applies to outfits with 20 or fewer employees and has a two year window. This bill and the prior one will be introduced in the House Revenue and Tax Committee.
The “Idaho Small Business Jobs Development Act” differs from laws already on the books in that it focuses on smaller enterprises, covering from one to 50 employees. During a 5 year period, a qualified business can earn a credit against their Idaho income tax for each new job meeting the specified hourly wage rates. Favorable Sales tax treatment and tech help are also provided.
The “Small Business Incubator and Jobs Act” is designed to foster small business startups by providing shared physical space and business services to be jointly provided and administered by Labor and Commerce. Low cost flexible leasing arrangements during those crucial first years can improve their odds of survival. It will be introduced in the House Business Committee.
I-JOBS, the bills we have crafted, are specifically designed to help the small business sector get moving again, to give them a leg up, and to make it easier for individuals looking to build new enterprises to succeed.
Yesterday the House and Senate Democratic leadership kicked off their jobs creation package, the Idaho Jobs and Opportunity Blueprint, or I-JOBs for short. Six bills are being put forth, three in the Senate and three in the House. All are focused on creating and preserving jobs, and are particularly focused on the small business sector. Small businesses, both nationally and in Idaho, are the real engines of the economy, generating the vast majority of all new jobs. As we have seen locally, many of our largest business enterprises have been struggling to keep their bottom lines in the black, shedding jobs in large numbers over the last two years.
Once again a member of the House majority party is marching forward under the sovereignty banner to battle the evil denizens of Washington D.C. Mirroring the rancor and conflict witnessed in our nation’s capitol these last month’s over Health insurance reform, a substantial number of states are considering similar actions. While one can speculate on the real motives underlying House Bill 391, in its original incarnation it declares any person within the State of Idaho is free to choose or decline to choose any mode of securing health services. Further it precludes any state governmental official from enforcing any penalty that interferes with this right. So, Congress, take your health care insurance bill and put it where the sun don’t shine.
It appears I underestimated the ability of the majority party to wallow in doom and gloom. On Tuesday our caucus invited the Governor’s chief economist, Mike Ferguson, to make a presentation regarding the latest state revenue figures. Though not final, January’s revenue figures were down about the same as December’s, $12.8 million compared with $12.6 million. Ferguson, in discussing the numbers, pointed out that a significant change in filing timing – one not anticipated - appears to have resulted in far fewer Idahoans filing early returns. Historically taxpayers with hefty tax bills would file and remit their state taxes prior to the end of December, making it possible to deduct those dollars on their Federal returns the following April 15th. Changes in the Federal income tax laws have greatly reduced that incentive. The net result – those state tax dollars will not arrive until sometime in 2010.
