Idaho

Bringing the Economy Home

Sen. Cameron: Idaho May Be “Falling Short” When It Comes To Funding Schools

Molly Messick / StateImpact Idaho

Sen. Dean Cameron is a Republican from Rupert, Idaho. He represents Minidoka and Cassia Counties, and has been in the Legislature for nearly 25 years. He’s the co-chairman of the panel that crafts Idaho’s annual budget, the Joint Finance-Appropriations Committee.

StateImpact met with Cameron last month to hear his views on key issues including education funding and the personal property tax.

Q: One of the big issues this session, it seems, is going to be the personal property tax. Do you think the state should get rid of it, or begin to phase it out?

A: I think most people believe that it’s an unfair tax.  In my business, if I buy computers, I pay sales tax on it and then I have to turn around and pay personal property tax.  And so I think most people believe it’s an unfair tax.  The issue, however, is how will counties be treated?  Or taxing entities who receive revenue from the personal property tax.

The state doesn’t receive any personal property tax revenue.  It all goes to local units of government.  There are two camps.  One says, ‘It’s not our responsibility as a state to replace the funding.  It’s our job to set the public policy, and if that’s an issue for the counties, they have to deal with it.’  That’s a really harsh approach.  And the other approach is that the state would step up and use additional revenue sources to pay the counties for what they would lose.

The difficulty is that about 85 percent of those who would be affected wouldn’t cost the state that much, and that’s actually who the legislature would love to help, and that’s individual businesses.  Small business in particular.

There’s a group of large business – utilities, railroads – where their dollars, their 15 or 20 percent is actually the large cost items.  And I’m not sure we can get there.  It would cost the state about $80 million, is what I’ve heard, in order to replace that from the state level, and frankly we just don’t have it.

We’re running right now at about a 3 percent revenue stream.  And for every percentage that’s about $27 million of income.  It takes about $70 million in order for the state to just operate under its statutory requirements, without taking on additional obligations.  So you’d have to come up with another $80 million on top of that $70 million.  You really need revenue growth to be in the 6 to 7 percent range in order to replace revenue lost from repealing the personal property tax.

Q: I don’t want to put words in your mouth, but it sounds like that harsh view, as you put it, is not where you fall.

A: No.  I don’t know how you can harm local units of government.  It’s a partnership.  We ask them to fulfill certain requirements. We have certain mandates, if you will, that we give local units of government.  I don’t know how you tell them that you have to comply with these mandates, and yet then cut their funding out from underneath them.

It’s going to be a difficult discussion.  I will probably be on the back end of the discussion.  My job will be to show the budget realities of what they’re choosing and how that affects the overall budget.  If you take $80 million out of our overall revenue stream, then that means budget cuts to agencies, and they need to know that.  And on top of some fairly lean times already.  Those are the rubs that are at play there.

Q: What business personal property tax repeal proposals have you heard so far?

A: There are hundreds of different ideas.  Obviously IACI [the Idaho Association of Commerce and Industry] is leading the charge on what they want to do.  I’ve understood that the governor has said he’s in favor of repealing the personal property tax, but I don’t believe he’s in favor of replacing it to the local units of government.  I don’t know that.  I don’t want to speak for him, but that’s certainly what I’ve been told.

Q: Idaho has a lean budget in the wake of the recession.  It seems worth asking: if there is going to be an effort to direct money to local government to make up for the personal property tax repeal, is that something the state can withstand?  Is this the time, really, to be considering the personal property tax repeal?

A: You know, from my perspective, there will be some shifting.  It’s going to be a very, very difficult budget year, because first of all, the make-up of the committee.  The committee, JFAC, is changing and will be even a more conservative committee if people can believe that.  On top of that, there are a lot of competing demands and competing issues that have gone unaddressed for the last several years because of the shortage of funds.  We in many cases robbed Peter to pay Paul and we did everything we could to minimize the reductions, particularly to education.

Then as we built out of last year, the last dollar that we cut was public schools, and then they were the first dollar we helped restore.  And higher ed.  But we’re still not funding higher ed at the level that they need.  We’re still not funding public schools at the level that they need.  We may not even be meeting the constitutional requirements of our funding there.  The Medicaid expenses have diminished, and they’re not quite as robust as what we thought was taking place, because the economy is improving.

There’s a lot of competing demands with the core responsibilities, which is education, public health and public safety. It will be difficult for us to meet those core responsibilities and replace the personal property tax, in my mind.  Can it be done?  Yeah, but you’ve got to do it, in my opinion, with some strategy.

Q:  There’s a tension between the desire to cut revenue and the need to put funding into a program as substantial as public education.  And there’s the question of whether the state is meeting its constitutional requirements with respect to education funding.  How do you think that is going to be addressed this session?

A: For me, funding public education and higher education is our highest priority.  We may fall a little short and we need to work on it.  It remains to be seen, however, whether I’ve got the political support to fund it at the level that it should be funded.  I do believe that they will be our highest priority and we will give them more deference than any other state agency.  There’s probably state agencies that cringe at hearing that, but that’s the truth.  We will do the best we can.

Whether it’s good enough or not is a whole separate question, and whether the legislature can address it or not is a whole other question.  We have a lot of new legislators, not just this year, but even you go back two or three years, there’s not a lot of folks with long legislative experience.

I can look back and remember times when the state was sued before.  When other states were sued before and lost.  And the requirements that they went through, where courts ended up taking over and raising revenue, etcetera.  I hope we don’t get to that.  I don’t think that’s a win-win for anybody.  I think that’s a very difficult situation.  I hope we don’t get there.  It’s up to me and others to try and advocate and help do the right thing, and we’ll do the best we can.

Q: You said that you want to be sure that the state is adequately funding education.  Do you have a number in mind?

A: I don’t.  Obviously we’ve got a lot of challenges with education because of the failure of the referendums.  And one of the issues will be – for public schools – what do we do with the pay for performance money.  Do we keep it in the budget as pay for performance, or do we move it into their base salary, or do we do a combination?  As to a hard number, I don’t know.  We’ll be grappling with what the revenue is going to be.  And you may have heard that the governor reduced his projection for both 2013 and 2014.

Q: Lawmakers will also have to weigh in on whether Idaho should expand Medicaid eligibility. The governor’s panel created to study the issue unanimously recommended expansion. Do you think Medicaid eligibility should be expanded?

A: We have to look at what the savings would be for the state, but we have to look at the long-term aspects as well, and there are a number of questions surrounding how that would be done and how you would implement it.  It’s not tied to the health insurance exchange, but there are some arguments that you help business and industry if you expand Medicaid.  If they’re now required to provide health insurance coverage for their six employees, and four out of six would qualify for the Medicaid expansion, they’re going to look at the state and say, “Why didn’t you do that?”

What I’m a little disappointed in is that no one’s come forward to do the Medicaid expansion under a revised, reduced benefit.  Some minimal approach, if you will.  The Department of Health and Welfare’s approach is, ‘These are our benefits, so if we expand it, we’re going to expand the same level of benefits to everybody.’  I’m not sure that sells in these halls.

This interview has been edited and shortened.

Comments

  • Proud_Idahoan

    Very wise words on the need to restore dollars to education and to preserve critical funding for our communities! This is the sort of fiscally responsible position we are known for in Idaho. The property tax on business equipment raises $39 million for schools and $141 million total across the state. Real estate property taxes would have to rise (in some areas they would have to double) to make up the difference. It doesn’t seem fair to shift such a large amount of taxes from large corporations to residents. The Idaho Legislature of 2008 wisely came to a compromise to allow an exemption for small businesses that will kick in when state revenues grow enough to fill the gap (probably in 3-5 years). This will give 90% of businesses a break but only cost the state around $20 million. The state certainly cannot afford to replace $141 million in revenue to schools and local governments, as Senator Cameron points out.

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