BOISE — Property tax relief remains a hot topic in the Idaho Legislature, but there’s little consensus on how — or even if — to address the issue.
Gov. Brad Little offered a $600 million tax cut proposal in his State of the State address on Monday. However, it focuses exclusively on income tax rates and, if approved, likely eats up all available revenue this year for any type of tax relief.
Still, Alex Adams, the governor’s budget director, said Little’s budget recommendations for 2022 and 2023 include several items that could help reduce the local tax burden.
“There are no dollars in the (state) budget that come from property taxes, so it’s difficult for us to provide direct relief,” Adams said. “But we spent a lot of time talking about what’s driving property tax increases and what the state can do to help alleviate the problem.”
For example, voter-approved supplemental school levies generate more than $200 million in local property taxes each year. Levies help pay for things like increased teacher salaries, all-day kindergarten, and employee health insurance.
Adams noted that Little has proposed an 11% increase in support for public schools in 2023 — the biggest increase in more than 20 years. This includes a 10% increase for teachers, an additional $4,000 per employee for health insurance, and an additional $47 million in literacy funds, which could be used for all-day kindergarten.
“This should help alleviate the need to increase local property taxes,” he said.
Road maintenance is another major expense for local property taxes, so the governor is recommending one-time funding of $200 million for local bridge improvements, plus $80 million in ongoing support from the general fund for maintenance of local roads.
Another $450 million in state and federal funding would be set aside for local water and wastewater projects, Adams said, eliminating the need to bond for them.
Finally, local governments stand to benefit from recently released updated guidelines regarding US federal bailout funds.
Early indications last year said the money could only be used for water, sewer and broadband projects. However, Adams said the final guidelines released Jan. 6 allow cities and counties to use up to $10 million for virtually any purpose, including property tax relief.
“It should give mental comfort to pick up near every city and county in Idaho,” Adams said. “They (the federal government) think most government units have lost at least $10 million in revenue as a result of the pandemic, so the first $10 million can be used for whatever purpose. “
Most local governments in Idaho have received less than $10 million in total stimulus funds.
Still, between the federal funds they’ve received and the governor’s budget recommendations, Senate Local Government and Taxation Chairman Jim Rice, R-Caldwell, thinks fiscally responsible cities and counties have an opportunity to provide property tax relief to their citizens.
The question is, will they?
“There is no requirement that any of the funds be used for property tax relief,” Rice said. Therefore, “it will be up to citizens to work with local elected officials to ensure that the additional funding actually reaches them”.
House Majority Leader Mike Moyle, R-Star, issued a similar note on Monday, when asked if any of the projected budget surpluses of $1.9 billion this year could be used to reduce local property taxes.
“It’s not a state issue,” he said. Decisions on property taxation “are all taken by local elected officials. If your property taxes are going up, it means you elected someone who raised your taxes.
Moyle noted that the state already returns about $700 million to local governments each year through various revenue-sharing programs.
“But there comes a time when the state can no longer take care of education and all the other things it has to do if it subsidizes local governments,” he said.
Rice agreed that proposals to devote more general fund dollars to property tax relief face “an uphill battle” this session. However, he said other options were in the works.
For example, he is working with county appraisers on moving to a five-year rolling average for assessed values, which should help smooth out sharp rises in home assessments.
Likewise, he is looking for ways to give local voters more of a say in how they are taxed. One possibility would be to let them approve an increase in local sales tax rates on the condition that it is accompanied by an equivalent reduction in property taxes.
“He’s basically asking if they’d rather pay a little more in sales tax and a little less in property taxes,” he said.
Property taxes are a difficult and complex issue, Rice said. It took over 100 years to eliminate property taxes as a source of state revenue. Today, the focus is on local communities.
“We did all the easy stuff, so now we’re left with more difficult issues,” he said. “I don’t expect everything to be resolved this session, but I do expect to make significant progress. And it is important that we move forward.