State Politics

Taxes, schools, health care and his legacy shape Gov. Otter’s final State of the State

Key takeaways from Otter's final State of the State

In his 12th and final annual address to the Legislature on Monday, Gov. Butch Otter called for tax relief, dramatically reshaping how Idaho runs its colleges and universities, and new proposals for delivering health insurance to this state’s resid
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In his 12th and final annual address to the Legislature on Monday, Gov. Butch Otter called for tax relief, dramatically reshaping how Idaho runs its colleges and universities, and new proposals for delivering health insurance to this state’s resid

In his 12th and final annual address to the Legislature on Monday, Gov. Butch Otter called for tax relief, dramatically reshaping how Idaho runs its colleges and universities, and new proposals for delivering health insurance to this state’s residents.

[Read Otter’s full speech here.]

But near the end of three terms, the governor’s legacy also occupied his mind. He emphasized the ways in which he believes Idaho has improved over the past decade and called for political cooperation to nurture what he described as Idaho’s self-reliant, conservative strain of politics.

“We must not waste the opportunity that relative prosperity now affords us to invest in the future,” Otter said. “We must strive to be the kind of leaders who go beyond rhetoric, because sustaining what we have set in motion will require more than lip service.”

The State of the State is the governor’s annual chance to describe his budget proposal to House and Senate lawmakers. They may choose to adopt his suggestions, or to go another way entirely in the final budget.

Lawmakers Monday watched quietly and politely throughout Otter’s 55-minute speech, with periodic applause.

The governor proposes spending $3.68 billion for the fiscal year starting in July 2018, up 6.62 percent from the year before. His proposed budget assumes possible tax revenues as high as $3.78 billion in that same year.

He spoke of two overall goals, to make healthcare more accessible and affordable, and to ensure that employers in the state have educated and skilled workers.

One of his biggest proposals this year calls for almost $95 million in net tax relief to Idahoans. Under Otter’s plan, the state’s corporate tax rate and income tax top rate, both 7.4 percent, could each drop to 6.95 percent.

Overall, his proposed tax relief package totals $192.1 million. But off-setting this will be a $97.4 million increase in state collections due to the state conforming with the new federal tax reform law, which includes doubling the standard deduction and eliminating the tax exemption for dependents. To negate this, Otter wants to implement a nonrefundable $85 tax credit for dependents.

His requested changes would also provide $115 million in unemployment tax relief over three years for Idaho employers.

On health care, he repeated proposals — including one just announced Friday — to let insurers sell private insurance plans that don’t comply with elements of the Affordable Care Act, and to seek two federal waivers: one that would shift people with expensive illnesses onto Medicaid, and one that would allow people who are poor but don’t qualify for Medicaid to buy private insurance with federal subsidies.

Otter says he has repeatedly come to the Legislature with healthcare proposals that proved to be unsuccessful.

“No longer should this body use my agreement not to act alone on Obamacare issues as a way to stop progress that will benefit Idaho citizens,” he said. “We can no longer wait for Congress. This issue is too pressing, and it’s in our hands.”

Otter requests the state provide $17.4 million from the general fund and $11.4 million from the Millennium Fund to implement the Idaho Health Care Plan.

The Medicaid waivers, he argued, would stabilize Idaho’s healthcare insurance market and give more working Idaho families the ability to purchase affordable coverage.

“The Idaho Health Care Plan gives us the opportunity to be both conservative and compassionate,” Otter said. “It will enable those with the most costly, medically complex conditions to move their coverage to Medicaid during the course of their illness. That in turn will enable insurance companies to reduce their premium rates for the majority of people who remain in the individual marketplace.”

Idaho has a longtime goal of seeing 60 percent of Idaho’s young adults obtain a post-secondary academic degree or professional-technical credential. The goal was set in an effort to improve graduation rates and to fill the thousands of open jobs in Idaho that residents currently cannot work without the appropriate education.

But this state hasn’t made progress against that goal. So last year, Otter took a page from his approach to K-12 schools and formed a Higher Education Task Force to re-examine the problem.

The task force, said Otter, concluded it will be impossible to reach the 60 percent under the state’s current system. So its members pitched 12 recommendations to the governor to alter how Idaho approaches higher education, including ways to focus on students and consolidate resources.

Otter requested funding to allow the Idaho State Board of Education to hire an executive officer to coordinate certain things currently being done school-by-school at Idaho’s eight community colleges and universities. The position, which would cost around $270,000, is a role to help manage system-wide consolidation of higher education support operations and the board’s continuing policy functions — not, Otter said, a route to a chancellor system like seen in other states.

Among other solutions, Otter wants a statewide digital campus.

“Here’s a staggering metric: the Task Force found that state income tax collections in Idaho will increase by $500 million a year — with no change in population — when the state reaches our 60-percent achievement goal, compared with today’s 42 percent,” Otter said.

He also requested another $5 million for the Opportunity Scholarship program, some of which would go to adults who already have some credits and who are returning to college. “That’s not a program for subsidizing dropouts,” he said.

Other goals set by Otter include:

▪  Designating $2.6 million to fund three more behavioral health crisis centers, located in the Lewiston, Canyon County and Pocatello areas. The state currently has behavioral health crisis centers in Ada County, Twin Falls, Idaho Falls and Coeur d’Alene. Law enforcement and hospital officials have been longtime supporters of crisis centers, in an effort to keep people in need of immediate help out of county jails and emergency rooms.

▪  Otter lauded several examples of what he said are improved federal partnerships on environmental and lands issues. He cited fire protection agencies that train farmers and ranchers to help respond to wildfires, and federal emergency funds provided during last year’s extreme snowfall and flooding. And, he asked to add eight new positions at the Department of Lands to expand the Good Neighbor Authority program, working with federal agencies to more quickly implement land and watershed improvements on U.S. Forest Service lands.

▪  Providing $2.7 million for more bed space for Idaho inmates, including 99 new prison beds this current year and 95 beds in the fiscal year starting in July. Speaking to reporters after his speech, he said Idaho Department of Correction Director Henry Atencio told him Monday morning IDOC would have to send 250 prisoners out of state in March due to overcrowding. Also regarding prisoners, Otter suggests spending $9.1 million to buy an inmate community re-entry center in Twin Falls that IDOC had leased before the recession forced its closure.

▪  Two years ago, the state implemented an early literacy intervention program for kindergarten through third-grade students who face severe reading challenges. Otter wants to put $6.5 million into expanding literacy intervention efforts.

▪  Using $5.5 million to consolidate the state’s information technology staff under one office at the Department of Administration. The goal, he said, is to continue standardizing cybersecurity efforts at the state level, under the direction of Jeff Weak, a former Air Force cybersecurity expert who is this state’s first director of information security. “Under his leadership, state agencies have adopted rigorous national cybersecurity standards,” Otter said. “Critical internet security controls have been put in place, and a comprehensive cybersecurity training program now is mandatory for every state employee.”

▪  He spent significant time reflecting on his career in politics, particularly as governor. Otter spoke of having a more “nuanced” view of government now: “I’ve come a long way from the brash young revolutionary who served in this chamber and ran for governor with big ideas but precious little perspective.”

And he issued a call to reclaim the label “progressive” from “nanny state” liberals, invoking the populism of the early 20th century.

“Progress makes a comeback when people start believing again — believing in their own abilities; believing that they can make a difference; and believing that government alone is not, never has been and never will be the answer,” he said.

▪  Also in Otter’s post-speech remarks, he said he would sign Marsy’s Law — a set of new constitutional protections for crime victims being proposed in states across the country — if it reaches his desk.

This story has been updated to clarify Otter’s overall proposed spending and budget increase.

Cynthia Sewell: 208-377-6428, @CynthiaSewell


Critiques from other parts of the political sphere trickled in over Monday afternoon and evening. Idaho Freedom Foundation President Wayne Hoffman dubbed Otter’s budget plan a “liberal agenda” and said the Medicaid waivers were simply “to bail out health insurance companies.” United Vision for Idaho said Otter’s Friday effort on private insurance plans undercut the waivers, criticized lowering corporate tax rates, and urged lawmakers to both find a better solution for Idahoans in the Medicaid gap and to increase the minimum wage. Boise businessman Tommy Ahlquist, one of the GOP contenders to replace Otter next year, criticized Otter’s focus on his years in office, saying “The same old same old is not good enough for the families of Idaho.”

Idaho Democratic leaders, gathered for their annual minority rebuttal to the address, said Otter’s tax cuts are not responsible tax relief, but come “on the backs of families and children.”

“An $85 nonrefundable tax credit for children, that is laughable. Eighty-five dollars is one day of a babysitter for most families,” said House Minority Leader Mat Erpelding, D-Boise. “If we had a refundable tax credit of $250 you would see families benefiting substantially in Idaho.”

For more on the Democratic response, click here.

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