City and County Officials Detail Budget Woes to Lawmakers
by Logan Finney
Idaho Public Radio State Capitol Bureau
UI McClure Center
After three days of hearings and hours of testimony by county and city officials, an Idaho House panel has approved a bill that would temporarily freeze the portions of local government budgets funded by property taxes.
House Bill 409 by House Majority Leader Mike Moyle, R-Star, would freeze those property tax budgets for one year. The House Revenue and Taxation Committee sent the bill to the full House with a do pass recommendation Thursday on a 12-3 party-line vote.
Property taxes make up 54% of county revenues according to the Idaho Association of Counties, and Moyle said that cities fund about 20% of their budgets with property taxes.
The bill prohibits local governments—excluding school districts—from certifying a property tax budget or levy in 2020 that exceeds the amount budgeted in 2019.
“Property taxes have been an issue in the state of Idaho for a long time,” Moyle told the committee. “In 1978, around the same time, the state of California passed Prop 13, the state of Idaho passed what was called the One Percent Initiative.
The 1978 voter initiative limited property taxes to one percent of market value alongside other tax limitation measures. The proposal qualified for the ballot alongside a wave of virtually identical initiatives passed in states that year.
“We basically whited out ‘California’ and typed in ‘Idaho,’” tax reduction advocate Grover Norquist told the Spokesman-Review in 2013.
Unlike in California, however, the Idaho Supreme Court ruled the voter initiative unconstitutional. As a compromise, the Legislature froze property-tax-funded budgets at 1978 levels rather than modifying the taxes directly.
Today, Idaho counties, cities and other taxing districts are allowed to increase that property tax amount of their budgets by three percent every year, in addition to new value generated by new construction or land annexation.
“The Legislature [in 1979] said let’s take a step back,” Moyle said. “They froze the property tax portions of the budget for a year. They had an interim committee where they sat down to discuss the issue to find out a solution that would address the concerns of the citizens.”
Last year lawmakers created a ten-member interim Property Tax Working Group, which Moyle described as more of a learning group.
“There were no solutions talked about,” he said. “As legislators and as citizens, we don’t understand property taxes. A lot of the time was spent on learning how they work, learning the numbers, seeing who was spending what where and when.”
Moyle called for a larger interim committee to continue the work of the study group in partnership with cities, counties and school districts. He intends for this one-year budget freeze to mimic the one four decades ago, as an incentive for local governments to collaborate with the state on more comprehensive plans.
He warned that the state government could lose control of the situation if the problem is not addressed soon.
“If the Legislature does not act, the people will act,” Moyle said. “This is one of those issues that is near and dear to every Idahoan citizen. They will get an initiative on the ballot just like they did in 1978.”
Many of those who testified in favor of the bill were homeowners who have seen dramatic increases in their property taxes. Darryl Ford, a resident of Caldwell, told the committee that new neighborhoods springing up in his formerly rural area were doubling property values—and in turn, taxes.
“I’m on a fixed income now and I’m afraid they’re going to tax us right out of our house. We paid for the house, it’s ours,” he told them. “We’re not going to be able to live those golden years the way you think the golden years should be.”
“I’m even having trouble feeding my horses now,” said Ford.
Also speaking in favor of the bill was Fred Birnbaum of the Idaho Freedom Foundation. “We need to hit the pause button,” he told lawmakers.
A long line of county commissioners and city officials testified before the committee, urging them to vote against a freeze to their budgets.
“This is not a pause or a slow down,” said Commissioner Brent Mendenhall of Madison County. “House Bill 409 is slamming on the brakes on an ice-covered road.”
Mendenhall said his county is struggling to fund enough EMTs and adequate snow plowing. He also had concerns with state plans to appropriate Medicaid Expansion savings that counties had anticipated going to their budgets.
Bill Lewis, Oneida County Commissioner, told legislators about struggles to comply with the Americans with Disabilities Act in his county. He says they’ve failed for twenty years to pass the bonds necessary to fund building upgrades. Lewis described attempts to save small budget amounts here and there to devote to the issue. He said a budget freeze could risk further lawsuits against Oneida County.
“Even after a one-million-dollar judgment against the elementary school this past year, the next bond attempt still failed,” he said. “We carried—I saw it personally, this—we carried two individuals up our stairs into our courtroom because of ADA compliance issues. One of whom was the person who sued the elementary school.”
In information about property taxes and budgets provided to the committee, the Idaho Association of Counties says that 44% of county expenditures are for justice and public safety.
“I need to hire three more prosecuting attorneys,” said Bannock County Commissioner Terrel Tovey. He said a freeze would force his county to eliminate county employees that provide state
functions. “How would I do that? I’m going to get rid of the fair, I’m going to get rid of the fair board, I’m going to get rid of 4-H.”
Commissioner Wayne Butts of Custer County said that the vast majority of land in his area is untaxable, which limits their budget across the board.
“We have seriously had the conversation in our county in the last year,” he told them, “that there’s a possibility that we’re going to have to look at dissolving our county. As a county commissioner, do you know how that makes me feel?”
Urban city officials face the opposite problem of sparsely populated rural counties. The unprecedented growth they’re experiencing has come with a different downside—unprecedented strain on their public services.
“A one-year freeze is a one-year problem with a multi-year impact for us,” said Doug Racine, Nampa Director of Finance. His city is struggling with maintaining infrastructure and staffing their police and fire departments. “Growth brings cost. If I do not have revenues associated with the cost of the growth that means we have to cut services.”
Local governments said that increasing the circuit breaker program and homeowner’s exemption would help shift those taxes to more equitable levels. Moyle argued the opposite.
Canyon County Clerk Chris Yamamoto said that time would be better spent on a comprehensive tax system overhaul. “We’re just freezing the budget, and a bunch of people are going to see their taxes increase, and we’re all going to look stupid,” he said.
Opponents of the bill also questioned the freeze after both sides acknowledged it won’t limit property taxes for all homeowners.
Moyle and Treasure Valley officials alike explained that due to rising market values and tax burdens shifting between classes of property, most of their homeowners would still see an increase in next year’s property taxes in spite of the freeze. Democrats asked why the committee should pursue a freeze if the approach was not guaranteed to help taxpayers.
“We’ve heard a lot of testimony about this not helping with people’s property taxes. I know we’ve had a lot of discussion also about the need for local governments to survive a freeze,” said Rep. Rob Mason, D-Boise. “These are two different conversations.”
The most obvious effects of changes made in response to the 1978 initiative were decreased property taxes. However, Education Week reported in 1982, along with tax relief came dramatic cuts to school budgets that required withdrawals from the general fund and an immediate uptick in supplemental levies.
“With cuts, the schools will never be as good again as they are now,” then-State Board of Education President Cheryl Hymas told the 1982 Joint Finance-Appropriations Committee. “We’ve lost so much by not doing timely maintenance, by not making timely purchases, and by letting the morale of our teachers drop, that even with immediate full funding, it would be decades before we could catch up.”
Moyle had introduced a draft of the bill earlier in the session, then introduced this version—HB409—last week. That bill passed by the committee excludes school district budgets from the
one-year freeze. It also prevents taxing districts from claiming a foregone property tax balance from the year.
If a local government increases its property tax budget by less than the three percent maximum, the State Tax Commission keeps track of the difference. These balances accumulate year after year, and local governments have the right to go back and collect those unclaimed taxes in subsequent budget years.
A bill from Rep. Steven Harris, R-Meridian, that reverses that arrangement passed the House last week and is scheduled for a vote in the Senate. If passed into law, local governments would have to designate a specific dollar amount to keep available for future budgets and notify the public, rather than the state tax commission quietly reserving increases by default.
The taxation committee has not yet scheduled a hearing for another proposal from Moyle, which would require the tax values from new construction and annexation to be included in the three percent maximum instead of being added on top. He did reference the proposal in the hearing, listing a number of scenarios that would account for unlawful, reckless spending.
“Who’s checking to make sure these property taxes are applied correctly?” he asked. “Who’s checking to make sure that the new construction number wasn’t fudged? Who’s checking to make sure that this is all legit? Nobody!”
This drew a laugh from the local government crowd. An audience member stated, “The State Tax Commission.”
“Now, I’ve asked the tax commission to do it,” Moyle said. “Nobody’s looking at it.”
The Idaho Association of Counties and the Idaho Association of Cities both support the reforms to foregone tax balances. Both organizations oppose both of Moyle’s property tax budget bills.
Posted February 15, 2020