Gov. Otter Rejects Medicaid Expansion, Supports Personal Property Tax Repeal

Aaron Kunz / Boise State Public Radio

Gov. Otter delivered his State of the State and Budget Address this afternoon.

Today, Gov. C.L. “Butch” Otter told lawmakers and the public that he wants to repeal the state’s tax on business personal property, which generates roughly $140 million for local government each year.  He also said he does not support an expansion of Medicaid eligibility in Idaho, at least not at this time.  StateImpact talked through those two significant policy points with Boise State Public Radio host Samantha Wright.

  Here’s the full transcript:

Q: Let’s get right into it and start with the personal property tax.  First of all remind us what this is.

A: Sure.  This is Idaho’s tax on business personal property.  It’s a tax on all of the tangible things that businesses use to go about their business.  That means it’s a tax on everything from desks and chairs to computers and large, complex machinery.

Most states in the U.S. do have this tax, but there’s been a lot of criticism of it here in Idaho.  One of the problems with doing away with it is that money generated by this tax goes to local government.  So local governments have cried foul about losing what is, for them, a substantial revenue source.  The personal property tax brings in about $140 million dollars each year.

Q: What did Governor Otter say the state should do?

A: He didn’t tell lawmakers how to get rid of it.  He didn’t say whether they should get rid of it all at once, or phase it out.  What he did say is that he’s set aside $20 million in his budget to – as he puts it – ease the transition.  And the governor had something more to say.  I think we have some tape on that.

Gov. Otter: My preference is for granting local-option taxing authority that will enable county voters to decide for themselves how to address their most pressing needs.

He’s proposing to let cities and counties levy taxes.  That’s a pretty big deal, because the legislature has come down against local-option taxing authority in the past.  I talked to Dan Chadwick, who heads the Idaho Association of Counties.  He says that was definitely an olive branch.  He also said that the 20 million dollars that the governor wants to make available is good news.  It makes him hopeful that the state could begin to phase out the tax without doing a lot of harm to local government.

Q: What about the Medicaid expansion?

A: On the Medicaid expansion, there’s some background information to remember here.  An expanded Medicaid program was originally part of the federal Affordable Care Act.  But when the Supreme Court ruled on Obamacare in June, it told states they could decide whether or not to opt into the expansion.  Governor Otter is saying the state should not opt in, at least not at this time.

Q: How many people would the expansion cover?

A: The expansion would give health care to about 100,000 low-income adults in Idaho.  It would cover people who live at or below 138 percent of the federal poverty level and who don’t currently qualify for Medicaid.  In other words, it would be a significant expansion of Idaho’s Medicaid rolls.  But the lion’s share of the costs would be paid by the federal government.

Q: Now, there’s been some discussion about whether the state might actually save money through the Medicaid expansion, is that right?

A: That’s right.  A consulting group hired by the Department of Health and Welfare says the Medicaid expansion would allow state and county government to spend less on the Catastrophic Health Care Fund.  Right now that fund eats up about $40 million dollars in state revenue each year.

Not long ago, a working group appointed by the governor unanimously supported expanding Medicaid eligibility.  So it’s a little bit of a surprise that the governor has come out strongly against it.

Q: What does he say the state should do?

A: The governor is asking Department of Health and Welfare Director Armstrong to help create a plan for changing Idaho’s Medicaid system.  He also mentions that the state doesn’t face an immediate federal deadline with respect to Medicaid.  I think we’ll have to wait and see just what all of that means.

Q: Molly, thanks for joining us.

A: You bet, Sam.