2008 Legislative Session

Week 1: Beginning of the Session
Week 2: Revenue & Tax Print Hearing
Week 3:Tax Exemptions and Credits
Week 4: Grocery Tax Credit Returns
Week 5: Protecting The Little Guy
Week 6: Lawmaking 101
Week 7: Local Initiatives Under Attack
Week 8: Run for Cover Week
Week 9: Tax Two-Step
Week 10: The making of Sausage and Food Tax Relief
Week 11:Business Property Tax Repeal
Week 12:The Road Home
Week 13:Sine Die - Going Home

Week 13: March 31 - April 2. Sine Die - Going Home

Overall the session is ending with more of a whimper than a bang, which in some cases was arguably a blessing. I was tapped yesterday to serve as one of the three House representatives on the House-Senate conference Committee to seek a common ground on H 599, the business personal property tax relief bill. I was somewhat amazed that a rookie would be asked to serve on what is a rather rare special committee, but with what I consider a successful outcome, thoroughly enjoyed the opportunity and experience.

The final form of the bill mirrored the version of the bill after its amendment in the Senate, an amended version the House minority caucus sought to concur in earlier in the week. The three changes unanimously adopted by the conference committees (each body of three being required to adopt the amendments in order for the bill to survive) were to (1) raise the exemption from $75,000 to $100,000; (2) insert a "trigger" - in this case a requirement that the state experience a 5% or greater annual revenue growth; once triggered, the repeal would remain in effect indefinitely, and (3) changing the site specific exemption to a one exemption per taxpayer on a county by county basis.

The first change is estimated to increase the annual fiscal impact from about $15.5 million to $17.4 million; the third change will shrink the number of entities eligible for the exemption statewide, reducing that $17.4 million figure to a lesser number not yet projected. The addition of the trigger means nothing changes until the revenue stream , and the state’s economy, turns up - a prudent change in my view. The balance of the bill keeps local governments fully protected from the reduced tax base and the dollar amount need to do this is allowed to move to reflect the actual economy as time passes.

All in all it is a bill that given about 88% of Idaho business complete relief from the tax while preserving the remaining revenue stream of just over $100 million. Since it won’t kick in until the economy turns up, there is every reason to believe that the impact on other general fund programs will be minimal. For a change, the legislature can give itself a well deserved pat on the back. For those of you who may be wondering what my personal contribution was, I can readily claim that, at a minimum, I didn’t screw anything up.

Week 12: March 25 - March 29. The Road Home

The House Ways and Means Committee meant over the noon hour today to roll out two bills designed to provide additional funding for the maintenance of both state and local highways. By now most of us have heard over and over how Idaho is falling behind over $200,000,000 annually in routine maintenance and repairs of its aging highways. The problem is due to a variety of reasons including plain procrastination by the Legislature, rising costs of materials and services related to road maintenance, and failure to simply suck it up and raise taxes to pay the tab. With 2008 being an election year, this latter factor is especially sensitive to incumbents facing challengers in either the May primary or the November election should they make it that far.

One bill simply removes the exemption on biodiesels, ethanol, and gasohol (the blend of ethanol and gasoline). When enacted there was a substantial price differential between these alternative fuels and their standard counterparts plus a desire to promote their use as a perceived environmentally friendly alternative. In today’s economy the enormous increase in the price of conventional fuels has pretty much eliminated the latter rationale. The annual savings is estimated at about $1.2 million.

The second bill is of major consequence to all of us. It raises registration fees on passenger vehicles, trucks, and neighborhood electric vehicles(?) with annual increases ranging from $12.00 to $48.00 for vehicles under 8,000 pounds. Trucks up to 60,000 pounds would see increases ranging from $36.00 to $258.00. Finally the really big rigs are looking at increases as high as $1,500 annually depending on size and miles driven. In addition to the increase in registration fees a three (3) cent per gallon fuel tax increase would be applied to all classes of over the road use. The revenue produced by these changes is estimated to be $23.5 million for the passenger vehicles, $18.0 million for the trucks over 8,000 pounds, and $27.0 million for the fuel tax increase.

The total of $68.5 million raised would be distributed to local highway programs (38%), with the Idaho Transportation Department (ITD) receiving the remaining 62%. Idaho State Patrol funding from the fuel tax would be frozen at the $16.8 million presently produced from the fuel tax with nothing extra from these increases. ITD’s share will just cover the amount needed to service the Garvee debt, freeing up a like amount from the present level of funding for road maintenance work.

The real test for these bills will be their reception on the House floor, and the Senate if they make it that far, and ultimately, the Governor’s desk.. Stay tuned.

Week 11: March 17 - 21. Business Property Tax Repeal

The Idaho House, at the urging of its Republican leadership and business lobbyists, has chosen to deplete general fund revenues by $120 million to finance a tax break for businesses. H 599 by repealing the property tax on business assets shrinks the tax base and revenues otherwise available to local communities, revenues that fund local services including police and fire protection, parks and recreational services.

H 599, if approved by the Senate and signed off by the Governor, would reimburse local government for their loss, but would be frozen at the current value. With inflation and the passage of time the dollars reimbursed would provide fewer and fewer services.

Siphoning off sales tax revenues to fund the reimbursement will eventually cause a reduction in general funds available to other state funded programs dependent on sales tax, including education, corrections, and health and welfare. Representative Killen sought to amend the bill to limit it to the first $50,000.00 of assets, limiting the revenue reduction to $9.4 million, arguably a more prudent figure in light of the current economic outlook. It was rejected on the House floor, but did receive some support from rural Republican legislators who expressed concern about the fiscal threat to their communities.

The bottom line - Idahoans can expect either escalating property taxes to cover the inevitable general fund shortfall or accept declining services. The notion that tax breaks for businesses will somehow trickle down to the masses has been discredited; at the national level where it has been tried, prices still rose and real wages for working people declined. There is no good reason to expect a different result at the state level..

Week 10: March 10 - 14. The Making of Sausage and Food Tax Relief

The Idaho House finally passed a grocery tax credit bill this week. HB 588 now moves to the Senate where it appears it will likely be viewed favorably. Food tax relief is long overdue and has been a primary focus of Democratic legislators for several years now, so it feels good to have our hard work pay off.

Presently, Idaho is one of just seven states that tax groceries at the same rate as other goods. Four of those seven states, including Idaho, provide an income tax credit or rebate to help offset the sales tax. Idaho's credit is presently $20 per person, or $35 per person for people age 65 and older. But Idaho is the only state which denies the credit to those who need it most - Idaho's low-income households.

In conjunction with the 2006 Special Session the Legislature made a promise to offset the increase in the sales tax by providing tax payers with food tax relief. During the 2007 Session, four bills were considered. Two of them would have removed the sales tax at the cash register and two would have increased the grocery tax credit. Ultimately, none of the proposals were approved.

This session neither of the two proposals to entirely remove the sales tax from food. was given a hearing. The only proposal the Revenue and Taxation Committee was allowed to hear was HB 588, legislation increasing the grocery tax credit. Governor Otter appeared to have provided his implicit approval of HB 588. Explicit approval would have triggered a hearing on the two bills held by the committee chair.

Although this is not the bill I would prefer, it is the bill I supported. Like most Idahoans, I would rather see the sales tax on food removed at the cash register. It provides immediate tax relief and avoids filing tax paperwork to receive the credit. It was clear that it was HB 588 or nothing. The only other option was to kill the bill and try again next year, but - in the end - a bird in the hand appeared better than the two in the committee chairman’s drawer.

Week 9: March 3 - March 7. Tax Two-Step

Serving on the House revenue and Tax Committee these last two years has been an education to say the least. One of the recurring policy issues that surfaces from time to time is the issue of local control. One either starts from the premise that local communities, and their duly elected mayors, councilmen, and commissioners, are best positioned to make decisions affecting their future well-being or, alternatively one presumes that the state legislators are better positioned to control local decision making. What is fascinating, at least to those of us that find politics of interest, is that those who posture the most about their belief in local control, e.g., the best and most effective government is that which is closest to the people, are almost guaranteed to be those who vote exactly contrary to their stated belief.

Case in point - Local option tax authority: the only bills that have received approval from the House majority party leadership are those which give local authority to reduce taxes. In contrast bills which would permit a local community to increase the scope or level of their taxes to fund local projects are either dead on arrival in the Revenue and Tax Committee or are so hamstrung with approval criteria that their chances of success or either slim or none. One can only conclude that their mantra of "local control" being best is nothing but lip service . The reality is that the only local control they support is that which agrees with their personal priorities and values. Communities that wish to chart their own future based on their own values and priorities are hobbled and blindered to the point where achieving those goals is almost blind luck.

Week 8: February 25 - February 29. Run for Cover

The natives are getting restless - all this week it is becoming more and more apparent that the heavyweight bills are emerging from their legislative lairs, beating their chests, bellowing their challenges, and staking our their territory. All the lesser denizens of the Capitol annex are scurrying for cover to avoid being trampled on.

The personal property tax repealer and the Governor’s food tax credit bill are both expected to surface in the near future. In addition are two bills providing enormous property tax and sales tax breaks for fuel/energy production activities (read AREVA, a French quasi-governmental entity with a huge stake in the international nuclear energy industry). One bill would cap property tax assessments to 20% of the expected capital build out value of $2,000,000,000 (yes-that is nine zeros); the other provides a sales tax exemption for production equipment and materials associated with processing fuel targeted for energy production facilities.

The House Ways and Means committee met Wednesday to expedite a series of bills dealing with raising additional revenues for highway and road construction. The Governor has recommended $150.00 for each and every vehicle under 8,000 lbs. GVW. A companion bill is expected to deal with personal vehicles over that weight (pick up tucks) with a similar increase expected. The projected revenues are well over $100,000,000.

Local option taxes for regional transportation and transit projects can’t be far behind; it appears that the "going home" bills will soon be on the table, unfortunately with very accelerated and cursory reviews and hearings in most cases. This pattern seems to be part of the culture here at the legislature, frequently leading to unintended consequences with the inevitable need to come back the following year and cut and patch the prior years bills, now laws, into a workable form. All in all a very clumsy, messy, and inefficient way to make laws; until there is the will to look at issues on a long term generational basis, the quickie - let’s get out of here approach will probably be the process of choice with its inevitable results.

Week 7: February 18 - February 22. Local Initiatives Under Attack

Once again certain legislators appear to be using their legislative position to resolve what in reality are local isolated issues. A bill recently introduced in the House Local Government Committee appears to be a misguided response to the Eagle city council’s efforts to acquire a private water company. H 535 interjects a 2/3 voting requirement into the existing laws regulating the creation and administration of Local Improvement Districts. These districts have been used for over a hundred years by groups of property owners to build sidewalks, improve streets, extend utilities, and otherwise improve the quality of their residential or commercial neighborhoods. They do this by agreeing to tax themselves, and not by taxing the entire community. H 535 throws a monkey wrench in the process by requiring a 2/3 vote of the resident electors in a proposed LID rather than relying on the petition from property owners (and the concurrence of the jurisdiction’s local governmental body) who will be paying the bill.

In effect, residents of the proposed district, whether property owners or not, can veto a program initiated and paid for by the owners (and property taxpayers) of the affected land. In the Eagle case, the water project LID was initiated by the city council, an alternative route provided for in existing Code. Rather than address its purported solution at this aspect, H 535 raises the bar for all alternatives presently provided frustrating the efforts of the very citizens who wish to improve their neighborhoods and are willing to pay for it

Why you ask? At least to this observer, because of a potential contested legislative re-election campaign involving Eagle’s former Mayor, who presided when this water acquisition project was initiated. The water project is highly controversial in Eagle, and presumably will weigh heavily in any contested legislative race in District 14.

Bottom line - it appears a bill that can wreak havoc in communities throughout the state of Idaho is being promoted to seek an edge in a contested election in Eagle. Politics apparently trumps principle, at least in some quarters.

Week 6: February 11 - 15. Lawmaking 101

During this last week the real nuts and bolts aspects of lawmaking became even more apparent. This was especially evident with H 385. This bill says thank you to some of our neighbors in Oregon, Washington, Utah by offering resident tuition to members of the National guard serving in Idaho units. Each of these states already offers a similar benefit to Idaho residents serving in their units.

H 385 became temporarily stalled due to a problem in the resident tuition code section being amended totally unrelated to my bill. A few years ago the co-operative medical education program known as WAMI (Washington, Alaska, Montana, Idaho) added the state of Wyoming to the group. Thus WAMI became WWAMI. Unfortunately that change was not reflected in Idaho code section 33- 3717B, a rather lengthy section, which was the subject of my bill.

When that discrepancy was noted at the House Education hearing on H385, a motion sent the bill to General Orders. This is a parliamentary step by which the House amends bills after they have been printed. Unfortunately it is somewhat arcane and time consuming; the bill gets sent to the floor of the House on general orders, the proposed amended is read and debated, and if successfully passed, the bill goes back to the end of the line on the House calendar at first reading, next to second reading and finally to third reading.

At this point the bill is voted on by the full House. If successful, it then moves on to the Senate where the process, with slightly different parliamentary rules, begins anew. The missing "W" essentially added over a week and a half to the process, and in a roughly 90 day session that can be critical to a bill’s chances of success. Fortunately in this instance it does not appear fatal.

Incidents such as this really bring home the value of experience at the statehouse, particularly when it comes to the parliamentary rules which govern the ebb and flow of bills seeking final passage. I have no doubt the on-the-job training last year and this year is paying off since, cross your fingers, all the bills I have crafted this session are still alive, even if a little bruised. Stay posted.

Week 5: February 4 - 8. Protecting The Little Guy

This was the week that wasn’t in the Revenue & Taxation committee. The major bill up for hearing was the grocery tax credit bill ( H 439) sponsored by a consortium of majority party members, most notably Ken Roberts, the House majority Caucus chair. As mentioned previously this bill is not a compromise proposal with the governor’s office. About a dozen witnesses offered their take on the bill, both pro and con. The rather harsh treatment of food stamp recipients was front and center, with personal life experiences outlining the issue, namely, that receipt of even the minimal benefit of $20.00 /week would disqualify one from any credit, even though the typical household would be expending an additional $300.00 to $400.00 out of pocket for the month, and paying the full 6% on such purchases. The $1.20 sales tax benefit from using these food stamps would mean a penalty of nearly $7.00 a week of the tax credit benefit. So much for helping the little people most in need.

Fortunately the bill was held on a bipartisan vote of 10 - 8; I voted to hold. This should provide an opportunity for bills waiting in the wings to come forward for consideration. At least two are designed to provide relief at the register by phasing out the 6 cent sales tax on food over either four or six years.

Yet to be heard from is the Governor’s bill, presumably similar to last years. It was a means based credit approach but, unfortunately, contained the same food stamp flaw as H 439. My recollection, never perfect, is that the Governor’s office expressed some empathy for the issue; perhaps this years version will reflect that. James Ruchti, (D) Pocatello, is running our food tax repeal bill. It was lodged with the Revenue & Taxation Committee chair last week.

Another tax relief bill was lodged with Rev. & Tax last Friday by Rep. Killen; this is a business personal property repeal bill designed to get relief primarily to small businesses. It exempts the first $50,000.00 of taxable assets for all businesses and reimburses local government from general funds so as to hold them harmless from the revenue loss. To avoid a tax shift to individuals, the bill reduces the business investment tax credit (ITC) in a like amount, thus keeping the general fund revenue neutral.

The $50,000.00 threshold is projected to fully exempt over 80% of Idaho’s businesses. At this Summers’ interim tax committee hearings, a number of participants opined that the ITC had outlived its intended purpose, and thus its usefulness, as a significant factor in attracting businesses to Idaho. Hopefully this small business tax relief bill will receive a hearing. <

Week 4: January 28 - February 1. Grocery Tax Credit Returns

At Wednesday morning’s meeting of the Revenue & Taxation committee, RS 17707C1 was introduced to print. This particular proposal closely mirrors the one put forth by the Governor last session, but comes instead from a consortium of Senators and Representatives from the majority party. On Tuesday the House Majority Caucus chair, Ken Roberts of Donnelly, had characterized it as a compromise between leadership and the Governor’s office. By Wednesday afternoon considerable backing and filling was going on when the Governor’s office made clear there had been no deal worked out.

The bill introduced would phase in a higher credit over the next three years with more relief going to those near the bottom of the economic ladder while still providing increased relief to all regardless of economic status. Unfortunately it has a serious flaw in how it treats food stamp recipients. It provides language identical to that appearing in the Governor’s H80 from last session, language which was roundly criticized by many when its implication became apparent. Namely, it reduces the credit in proportion to the months, if any, in which a recipient received any food stamp assistance, regardless of the amount received. At last years’ hearing one recipient testified that she received very limited benefits, about $20.00 per month. Yet under the current proposal she would receive nothing by way of the credit since any amount, no matter how small, eliminated all benefits. A more fair and reasonable approach would reduce the credit in proportion to the benefits received versus the maximum benefit allowed.<

Dennis Lake, the committee chair, has indicated that unless this bill fails to clear committee, no competing bills will be heard.. It will be interesting to hear the Governor’s take on that. Rep. James Ruchti (D) Pocatello is running one of those bills; it would phase out the sales tax on food at the cash register over a six year period, one cent a year. This approach has proven much more popular with most Idahoans since the relief is immediate and avoids the need to fill out and file forms to obtain the credit benefit. Hopefully his bill and any additional competing bills will get a hearing before any final decisions are made.

Week 3: January 21 - 25. Tax Exemptions and Credits

Eighteen Representatives and Senators spent substantial time and resources this last Summer and Fall serving on an interim committee formally established to recommend a process for reviewing the hundred plus exemptions, credits and deductions scattered through Idaho’s income, sales, and property tax programs. I was one of those 18 and, along with the others, made a real effort to do what we were charged with doing.

When the dust settled we had agreed upon an eight-point set of principles for evaluating tax breaks which, if consistently applied, should produce a more objective and uniform approach for evaluating both existing and proposed breaks. In keeping with this goal, the committee prioritized about 18 existing sales and income tax breaks for review by the responsible committees when the Legislature reconvened this January.

Chairman Lake, as he had promised at the interim committee, brought forward six of the higher priority items for a print hearing by the full House Revenue & Tax Committee last Thursday. Within a matter of minutes all but one failed to muster the majority needed to hold a public hearing on the merits or demerits of the exemptions. It appeared to this observer that once again the House leadership, three of whom sit on this committee, were calling the shots, and had concluded that hearing from the public, and requiring the beneficiaries of these exemptions to rejustify their importance, was unnecessary and a waste of time. The one that did survive for hearing, dealing with how vending machine items are taxed, was killed a few days later following its hearing. It currently provides that items sold between 10 cents and a dollar are taxed on 117% of their wholesale value, rather than on the retail value. When adopted the sales tax was 3%, and this approach was close to 3 cents on the dollar. With a 6% sales tax today it is not even close. In effect vending machine purveyors are enjoying a substantial discount relative to the same item sold over the counter. Go figure.

Week 2: January 14-18. Revenue & Tax Print Hearing

The Revenue & Taxation committee began their print hearings this week. In order to get a public hearing on the merits a proposed bill , an RS in legislative talk, must first secure a majority vote in the germane committee to send it to print. This step is often a formality, but in Wednesday’s meeting it quickly became clear that the House leaders, in one case, had already made up their minds to skip the hearing process. The RS was a more limited version of the Streamlined Sales Tax Project (SSTP) introduced last year

In effect the leadership present on the committee, and their supporters, opined that they had heard everything they wanted to know about the proposal in prior years and weren’t interested in holding a public hearing since their minds were already made up.

The Streamlined Sales Tax Project is a multi state effort to collect the state sales/use tax owing on internet sales. It does not create a new tax, it merely makes it possible to collect the taxes already due and owing.

This year, a bill to allow the tax commission to participate in the multi state compact failed 10-8 on a print hearing in the House Revenue and Taxation Committee. The end effect of this is to require the Main Street business continue to collect the 6% sales tax while their internet competition does not have the same requirement. There is a requirement that Idaho purchasers who are not charged a sales tax pay to the state a "use tax" of 6%. I think this happens rarely, if ever.

So the end result is that the out of state internet vendors get a 6% discount, the State foregoes about $75 million in revenue, and the home town companies and stores get the shaft. These are the hardware, clothing, jewelry and office supply stores that keep our towns and cities operating.

Week 1: January 7-11. Beginning of the Session

This year’s session kicked off with the Governor’s State of the State address on Monday. Within the space of four hours the House convened twice, at the old Ada County Courthouse in the morning and at BSU’s Special Events Center in the afternoon, where we listened to the governor’s presentation. Our regular chambers at the Capitol Annex, formerly the courthouse, is simply too small to hold all 105 legislators, the executive and judicial officers attending, the media and the public.

In contrast to last year I actually have some legislation I will be proposing this session. None are exactly earthshaking but all of them take steps to improve or correct situations confronting or confounding ordinary people. One will allow nonresident members of the Idaho National Guard to attend our universities or colleges at resident tuition rates. Almost all in this category come from our neighboring states of Utah, Oregon, and Washington; each of these states already offer a like benefit to Idaho residents serving in their guard units. It’s a simple way of saying thank you to them for their service to Idaho.

Another will provide information to residential property owners facing foreclosure; the intent is to alert people to the various credit scams being used to prey on those in this situation. The hope is that their chances of successfully hanging on to their homes will be greatly improved. The required disclosures will be in both English and Spanish.

These are just two of several bills I am working on at present, and I am particularly pleased that in virtually every instance I have been able to line up support from across the aisle for these proposals. One of the things you made quite clear when I was campaigning last year was the constant bickering between the parties was not helping solve anything. I’m trying to build some bridges in these small areas with the hope it will produce benefits when the big issues come forward later in the session.