Property tax relief idea heads to House

BOISE — A comprehensive property tax relief proposal is headed to the House floor in the Idaho Legislature, and its proponents said it’s a compromise with components that are all necessary. Others said it will provide relief inconsistently among counties while eliminating a crucial election date for schools.

The House Revenue and Taxation Committee on Monday sent HB 292 to the full House with only Assistant House Minority Leader Lauren Necochea, D-Boise, voting against it.

Co-sponsors Rep. Jason Monks, R-Meridian, and Sen. Scott Grow, R-Eagle, presented the bill, which uses a variety of funding sources to provide a percentage decrease on owner-occupied tax bills and sends money to school districts for bonds and levies.

Monks said while the state doesn’t set or collect property taxes, it can have an impact and residents have been asking for the Legislature to take action.

“We wanted to come up with a solution that would provide meaningful immediate tax relief as well as long-term tax relief for our property taxpayers out there,” Monks said.

In the first year, transfers from the state general fund surplus and leftovers in a fund for income tax rebates will go toward reducing tax bills, resulting in at least $205 million in relief in the first year, according to the bill’s fiscal note. The bill would also increase eligibility for what’s known as the circuit breaker, which is a tax exemption for low-income homeowners.

The relief going directly toward homeowners would be the same percentage decrease for everyone, and it would not be applied to any voter-approved local levies or bonds, Grow said.

Canyon County Controller Zach Wagoner testified that this exemption would differ among residents depending on the school district the taxpayer resides in.

“Those areas, those communities, that have supported education, have supported bonds and levies, the homeowners would get a smaller homeowners’ credit,” Wagoner said.

He also noted that the funding marked for school districts would be based on average daily attendance not on the size of the bond or levy, so some larger districts could get more funding to pay off a smaller bond.

“Potentially, it would increase the disparity between the taxpayers in those respective school districts in the amount of credit that the homeowner receives,” Wagoner said.

The funding that would go to school districts could be used in order of priority, to pay off bonds, then levies, then saved for future construction needs and lastly, for new bonds. The bill would also eliminate the March election dates for school districts to ask for bonds or levies.

Quinn Perry, deputy director of the Idaho School Boards Association, said the group supported most of the bill, but asked that March elections be left in place. She said teacher negotiations with districts are starting earlier, “because the teacher shortage is real,” and districts are required to have budgets completed 28 days prior to their boards’ July meeting.

The March election for levies is used most often by districts, she said, and offered that if an election date needed to be removed, that August would be less impactful.

“As you can imagine, predictability and stability are two key factors in operating Idaho’s public school systems, and we believe that removing this date is removing the one that provides the most predictability and stability,” Perry said.

A news release from the Idaho secretary of state’s office said 46 school districts are running bond and levy elections Tuesday in 40 of the state’s 44 counties.

Monks said he didn’t feel the March election date was appropriate because districts can ask for more funding before knowing what their appropriation from the Legislature will be.

“We wanted to make sure that they had all the information available to them before they went ahead and started asking for more from the property taxpayers,” Monks said.

Monks had previously said he was unwilling to change the bill on either the House or Senate side because it would be a violation of the negotiations on the bill among himself, Grow, House Speaker Mike Moyle, and Sen. Doug Ricks, R-Rexburg.

Necochea said that while she supported a lot of the legislation, she thought the election change was a “poison pill” that she couldn’t support.

The 20-page bill is a combination of two proposals presented by Moyle and Grow, in early February.

The legislation did not include aspects of a third proposal by Rep. Bruce Skaug, R-Nampa, which would have reinstated indexing of the homeowners’ exemption. Necochea has said because it doesn’t address this exemption, it doesn’t do enough to address the shift of tax burden onto homeowners from commercial properties that has occurred since the Legislature capped the exemption and ended indexing in 2016.

Necochea also said that by keeping a cap on the exemption in place, the tax burden shift to homeowners will still be “on autopilot.”

Monks maintained that the bill wouldn’t shift the burden to one group or another and said there’s no right answer on what that ratio should be between commercial property owners and homeowners.

For the first year under the legislation, relief would come from a one-time transfer of $75 million from surplus general funds and approximately $130 million that’s expected to be leftover in the tax rebate fund, used to provide income tax rebates previously implemented by the Legislature.

Starting in fiscal year 2024, 4.5% of sales tax revenues would go toward relief, which would go to residents who qualify for the homeowners’s exemption.

Up to $150 million would come from surplus funds — Idaho ended fiscal year 2022 with a record $1.4 billion surplus. The legislation only includes this transfer, which Monks called the “surplus eliminator,” for fiscal years 2023 through 2025.

Another revenue source would come from online sales tax revenue. The bill would set aside 20% of revenues from this fund for school districts, starting in fiscal year 2025.

As part of changes to the circuit breaker, the household income eligibility would increase to $37,000, up from $31,900 and eligible assessed home value would increase to a maximum of $400,000 or 200% of median assessed valuation in the county, whichever is greater.

The total number of the tax deduction, from both the direct homeowners’ relief and the school district bond and levy relief, would be included on each property taxpayers’ bill, with the label “tax relief appropriated by the Legislature.”

Lawmakers who spoke in favor lauded the ongoing negotiations to produce the bill.

“It’s not perfect for everybody, but a lot of the testimony we heard today is, ‘There’s a lot I like in this,’ but then there’s a couple of exceptions,” Rep. Dustin Manwaring, R-Pocatello, said. “But that’s what you get when you get a big compromise package like this.”

Rep. Kenny Wroten, R-Nampa, said, “If we wait for perfect, it’s just never going to happen. I’m just hopeful that it gets to the point where we’re able to look back and be proud of this. I know that there’s issues ... but ultimately I think we have a good property tax bill.”

Guido covers Idaho politics for the Lewiston Tribune, Moscow-Pullman Daily News and Idaho Press of Nampa. She may be contacted at lguido@idahopress.com and can be found on Twitter @EyeOnBoiseGuido.