Key takeaways from Otter's final State of the State
Deserved or not, the assumption in election years is that Idaho lawmakers want to keep things simple: Steer clear of big, controversial issues, quickly wrap things up and get back to their districts to start campaigning.
But 2018 is shaping up to be a gangbuster political year for Idaho, for two particular reasons.
The election landscape this time is rare. In November, Idahoans will elect their first new governor in 12 years, first new treasurer in 20 years and first new lieutenant governor in 10 years. One of Idaho’s two U.S. House seats is also open, and there won’t be any incumbents for a number of legislative seats — some of which have not changed hands in decades.
Second, an unexpected guest — in the form of federal tax reform — could turn the legislative session that starts Monday from low-key to high-key.
“It is going to be a very dynamic year,” said Sen. Cliff Bayer, R-Meridian.
Federal Tax Cuts and Jobs Act
This latecomer, signed into law by President Donald Trump on Dec. 22, likely will be the biggest topic of the session. State financial and tax analysts are poring over the 1,097-page overhaul and crunching the numbers to determine what it means for Idaho.
“That will be the first thing I will want to know when I get over there,” said Sen. Jeff Siddoway, R-Terreton.
Why is this important? The number-crunching could determine whether Idaho, too, will try to cut taxes.
If the new federal law does not dramatically affect the state’s bottom line, Siddoway said he would like to “seriously look at a reduction in sales tax.”
“We are poised for some tax relief,” said Senate Pro Tem Brent Hill, R-Rexburg.
Idaho is the nation’s fastest-growing state and its economy is humming along nicely. If the new federal tax plan means a revenue increase for the state, then lowering state taxes becomes even more viable. On the flip side, if the federal tax cuts reduce Idaho’s state tax revenue, lawmakers would face a choice: cut spending or find new dollars to maintain the status quo.
State tax officials so far believe the first scenario is more likely. Idaho taxpayers could end up paying roughly $100 million more in the first year of the tax reform law, Ken Roberts, chairman of the Idaho State Tax Commission, told lawmakers Friday during a meeting of a committee focused on economic forecasts. That number, however, is likely to fluctuate as lawmakers begin their work.
“We have really got to break it down. If we are going to talk about tax reductions this year, we better know to what extent we are going to conform with the new federal tax law,” Hill said.
Idaho typically mirrors its tax code with updates to federal tax code. For example, the new law doubles the standard deduction, so Idaho likely would double its as well.
House Speaker Scott Bedke, R-Oakley, said he is concerned federal tax relief could translate into higher state-level taxes for Idahoans.
“I think that Idaho’s families are larger, we are more charitable and we itemize more,” he said.
Doubling the standard exemption, he said, won’t do enough on the state level to make up for the loss of tax incentives tied to those factors, such as the personal exemption for the person filing the taxes and all their dependents.
“If federal changes result in increased revenue to the state, that means somebody is paying more taxes,” Bedke said. “We need to find out who that is and take some steps to at least negate these federal changes.”
One possible solution is adding a child tax exemption at the state level.
Another issue is the new law’s timing, phased in over multiple years. Which provisions go into effect this year? Next year?
Hill said he and his fellow “tax policy geeks are going to be looking at this new federal tax reform and how it is going to affect us and trying to hone that down to as good of numbers as we possibly can, so that our colleagues in the Legislature can make the most informed decisions.”
An even later addition to the session’s agenda came Friday morning at a legislative forum with the media.
Gov. Butch Otter was joined in signing a health insurance-related executive order by Lt. Gov. Brad Little, who is running for governor in 2018. Otter and Little, both Republicans, plan to tour the state over the next few weeks to promote the directive, which paves the way for Idaho to let insurers sell private plans that don’t comply with some requirements of the Affordable Care Act.
Otter defended Little’s involvement in the high-profile announcement because of Little’s previous work and denied that it was part of an effort to boost his gubernatorial campaign. Otter endorsed Little after deciding not to run for a fourth term.
Friday’s order appears to be the duo’s first joint executive order. The Statesman reviewed 11 years of executive orders: Otter has signed 128. Little has signed two others, both last summer while he served as acting governor.
Few immediate details were available on the order’s practical effects, and reporters weren’t the only flummoxed ones in the room. Both Hill and Bedke said they did not know about the order.
“The proposal that was unveiled today, I personally have not been briefed. So, we’ve got questions,” Bedke said.
Bedke said lawmakers will be able to “make a value judgment” once everyone is thoroughly educated on the proposal.
“All the questions that you guys have, all of the questions that we have, all of the ‘what ifs,’ we will need to understand that. From that understanding, we will proceed with a policy,” Bedke said.
Lawmakers also will consider asking the federal government for a Medicaid waiver that would allow some of Idaho’s sickest adults to get insurance through Medicaid, and enable the working poor to buy health insurance plans through Idaho’s insurance exchange. Idaho Republicans have steadfastly refused to expand Medicaid under Obamacare.
“This is not Medicaid expansion,” Hill said. “This is a different approach.”
“There’s an assumption that the federal government is going to give us the waivers we’re asking for,” noted Senate Minority Leader Michelle Stennett, D-Ketchum. That may be a big hurdle, she said. She called the waivers “a path forward, not a total solution.”
And House Minority Leader Mat Erpelding, D-Boise, asked: Will this session’s proposals cause longer-term problems if they don’t solve deeper issues, such as improving mental health care?
Both Otter and Bedke noted during their forum that they know K-12 education is in a better place because reporters have stopped hammering them with questions about the state’s education woes.
They attribute this to lawmakers implementing, and sticking to, a five-year plan to restore funding to Idaho’s K-12 schools. This year, lawmakers will set the fourth year of the plan.
“Over the first three years we increased our public education budget by 23 percent,” Hill said.
Now, some lawmakers, including the governor, are turning their sights to higher education. Otter plans to ask lawmakers to create a “chief education officer” to coordinate Idaho’s higher education system, which comprises four universities and four regional community colleges.
“As I look at the duplication on all eight campuses of higher education, whether it is finance, technology, or asset management, there’s a lot of things we can do on a consolidated basis,” he said.
Additionally, as with taxes, the time may be right for some higher education reforms. Three of the four university presidents have announced their retirement; the fourth was a finalist for the same position at an out-of-state university this fall.
“I think that will be a lively discussion,” Hill said.
Grocery tax showdown
In the final days of the 2017 session, the Legislature voted to repeal the state tax on groceries. Otter vetoed the repeal. A group of 30 lawmakers, led by Reps. Ron Nate, R-Rexburg, and Bryan Zollinger, R-Idaho Falls, challenged the veto in court, saying the governor took too long to act. The high court, in a 4-1 ruling, preserved the veto, but said going forward, the Legislature must present all bills to the governor before lawmakers adjourn for the year.
This year, the grocery tax appears be headed for another showdown.
During a “Liberty Legislators” forum in Meridian on Jan. 4, Zollinger told a packed room of about 250 people: “My prediction is this session the grocery tax (repeal bill) will come early. We will pass the grocery tax. If the governor feels like he should go against the will of the people again, we will override the veto. We have the votes.”
Should the grocery tax emerge unscathed at the end of the session, its survival may be short-lived. At least three GOP gubernatorial candidates — Little, Raul Labrador and Tommy Ahlquist — have said they support its repeal.
‘The O.K. Corral’
The grocery tax discussion may pale in comparison to the potential for showmanship and one-upmanship at the Statehouse during this election-year session.
“It is going to be like the O.K. Corral. There’s going to be a shootout,” Erpelding quipped from the dais during the legislative forum.
Bedke retorted: “ ‘Shootout’ is going to have quotes around it and we are going to conduct it in a very civil way.” He acknowledged that “there will be an elevated level of rhetoric and posturing” as candidates vie for the spotlight.
“We’ve got the people’s business to conduct,” Bedke said.
The turnover in Idaho’s executive branch alone next year is unusual, with the end of the Otter administration and three state-level elected jobs wide open.
But the 105-member Legislature is in the midst of big changes as well. When it convenes Monday, three familiar faces will be absent.
Sen. Bart Davis, Idaho’s newest U.S. attorney, is replaced by Idaho Falls businessman Tony Potts. Rep. Janet Trujillo is now on the Idaho Tax Commission, with her seat filled by Idaho Falls City Council member Barbara Ehardt. And Rep. Brandon Hixon abruptly resigned in October when news broke he is under investigation for sexual abuse; Caldwell city planner Jarom Wagoner is his replacement.
This session will also be the final appearance for at least nine lawmakers. Key retirements include Rep. Maxine Bell, R-Jerome (15 terms); Sen. Shawn Keough, R-Sandpoint (11 terms); and Rep. Phylis King, D-Boise (six terms).
Davis, Bell and Keough are the three longest-serving members of this Legislature. Additionally, Bell and Keough co-chair the esteemed budget-setting panel.
With their departure, House Majority Leader Mike Moyle, R-Star, will be the body’s senior member at 10 terms.
A passel of other lawmakers are leaving their seats to run for higher office: Reps. Luke Malek, R-Coeur d’Alene, and Christy Perry, R-Nampa, are vying for Congress. Rep. Paulette Jordan, D-Plummer, is running for governor. Sens. Marv Hagedorn, R-Meridian, and Bob Nonini, R-Coeur d’Alene, and Rep. Kelley Packer, R-McCammon, are running for lieutenant governor.
While this year’s exodus of legislative experience has political pundits pondering possibilities, Hill is taking it all in stride.
“I think that is the natural order of things. We will miss that institutional knowledge and the wisdom that comes with a certain amount of experience. At the same time, we have got good people who have been preparing” to step up, said Hill.
“There is always that anxiety that goes with change. But it has been working for more than 100 years in Idaho and it will keep working.”
Otter speaks Monday
Gov. Butch Otter will give his annual State of the State address at 1 p.m. Monday.