As of January 2021, 80% of Idaho’s 115 school districts had a supplemental levy in place to fund day-to-day operations. But a state senator from Caldwell is proposing a plan that would phase out the supplemental levy authority for school districts entirely, replacing it with a sales tax-driven state fund instead as a means of providing property tax relief.
Sen. Jim Rice, R-Caldwell, introduced the idea Friday in the Property Taxes and Revenue Expenditures study committee meeting, which is a joint committee studying Idaho’s property tax system to make recommendations to help with property tax relief and other goals.
The proposed plan would be to allocate half a cent from Idaho’s 6% sales tax and create a new fund outside of the education budget and distribute the funds to school districts based on the number of enrolled students. By today’s calculations, that would be about $180 million.
The total number levied by school districts across Idaho last year was $216.6 million.
School districts would still be able to secure bond funding through elections.
BOND, LEVY — WHAT’S THE DIFFERENCE?
Bond: A bond must be approved by voters and can only be used for capital costs, such as building construction/renovation and vehicle and equipment purchases. The district sells the bonds to investors, use the money and then pay it back over a specific period of time. A bond requires a two-thirds majority vote.
Levy: A levy must be approved by voters and is supplemental to the general fund, which pays for items such as salaries and benefits, supplies and equipment and utilities. A levy requires a simple majority vote.
For school districts with existing levies that are larger dollar amounts than what the fund would provide, Rice said districts could levy for the difference until the fund grew large enough to replace that revenue.
“It would phase (supplemental levies) all out and replace it with money from the sales tax that’s growing at a faster rate in actuality than what we’ve been seeing supplemental levies grow at,” Rice told the Idaho Capital Sun on Monday.
The idea reflects several realities of Idaho politics — residential property tax rates are increasing, education budgets are increasingly a target of some Republican legislators, and school districts have struggled in recent years to pass supplemental levies in all corners of the state, from West Ada to Swan Valley.
During the committee meeting, Rep. Lauren Necochea, D-Boise, said she was concerned by the idea of tying education funding to economic growth because there are years when growth slows or when the state experiences a downturn in economic activity.
Rice said he isn’t as worried about that.
“Even in a downturn, sales tax doesn’t tend to go down as much,” Rice said. “Income tax is where you see the real volatility. And when you have a downturn in the economy, that makes it even harder to pass a supplemental (levy), so if you can’t pass it because of an economic downturn, you get zero.”
Necochea told the Sun it doesn’t matter whether the funds come from sales tax or income tax, because they are part of Idaho’s general fund revenue stream. In a downturn, she said, there will be more pressure on general fund dollars to move around and education funding would be hurt in the process.
“The entire reason we need so many supplemental levies is the Republican-controlled Legislature has not provided adequate support for basic operations, and now this proposal asks Idahoans to trust that same Legislature to do right by schools in the future, while taking away a critical locally controlled school funding tool,” Necochea said.
Rice said the plan would provide property tax relief on a permanent basis and would create a stable funding source for education since it would be separate from the education budget.
“By keeping it separate, you create a real disincentive for it to ever be taken away or to have the education budget reduced because they get these other funds,” Rice said. “I don’t think anybody would be dumb enough at that point to try taking it away or try reducing the education budget.”
Necochea said the plan is reminiscent of the tax changes implemented by U.S. Sen. Jim Risch, R-Idaho, when he was acting governor in 2006, but unlike that proposal, Rice’s plan includes no new sources of revenue — only existing funds. And in 2006, Necochea said, legislators were promised the change wouldn’t affect education budgets.
“I absolutely want to see us direct more state funding to schools because it also increases equity across our state, but I don’t trust this Legislature to be there for our schools and students and keep our schools whole,” she said.
Rice said he wants people to read the bill and provide feedback on the idea leading up to the 2022 legislative session in January. It may also become a ballot question in next November’s election, he said.
“The purpose though is to solve problems without creating new ones, so I’m open to adjusting it, we’re open to all sorts of things,” Rice said. “… Our purpose is to expand the people we’re hearing from, the people we’re talking to, so it’s not a bubble. It really is a discussion with the population of the state of Idaho.”
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