(Photo courtesy Idaho Transportation Department)
by Logan Finney, Idaho Reports
Gov. Brad Little issued a surprising veto Monday, rejecting a major property tax bill that lawmakers expected to finally address the years-long cry for homeowner tax relief across the state.
“House Bill 292 is a hodgepodge of policy items,” Little wrote in his veto letter to lawmakers, specifically calling out “significant impacts on election dates, public defense funding, online sales tax collections, local government sales tax distributions, and funding for transportation, and it jeopardizes bonding for critical infrastructure projects.”
March School Elections Off Limits
Officials with the governor’s office told press corps members on Monday that Little’s primary issues with the bill are removing the election date in March for school bonds and levies, as well as transportation funding that has been affected by how the bill would shift sales tax revenues.
School policy leaders and Democratic lawmakers have vocally opposed eliminating the March election.
“House Bill 292 removes the very election most used by school districts that rely on supplemental levies to keep up with record growth and maintain schools for Idaho families, thereby removing local control,” Little wrote. “I do not find it reasonable to permanently eliminate an election date that has become important to so many families and local schools.”
Moving Too Much Money Around
Division of Financial Management administrator Alex Adams told reporters the transportation funding issues brought to the governor’s attention were caused by a “chain reaction” of budget shifts that the bill would make to how the state handles sales tax revenues.
“We’re doing something new here that hasn’t been done in the past, [which] is redirecting some of the sales tax and pushing it back down to the locals to help our citizens – our property taxpayers – get some relief,” co-author and Senate Taxation and Local Government Committee chairman Sen. Doug Ricks, R-Rexburg, said last week before lawmakers gave their final approval of the bill.
HB 292 would have changed the funding negotiated between lawmakers and local governments for public defense last year under HB 735, and it would have eliminated the sunset provision on routing online sales taxes into the legislature’s tax relief fund.
Learn more about online sales tax:
An additional change to balance the books would affect funding for the Idaho Transportation Department’s transportation expansion and congestion mitigation program, or TECM.
Under existing law, 4.5% of sales tax revenue is earmarked for transportation funding. A minimum of $80 million of that goes to TECM and the rest goes to local governments for highway projects. HB 292 would have changed that sales tax transportation earmark to 4.5% or $140 million, whichever is less, and moved the transportation distribution down in priority in the formula.
“Certain H292 changes to the TECM Program’s priority access to sales tax revenue will materially impact the credit structure originally designed to deliver the highest possible credit rating and produce the desired TECM funding amounts,” Idaho Housing and Finance Association president Gerald Hunter wrote to Little in a letter last Friday.
Those credit rating concerns led the finance agency to pause a $400 million bond transaction that was supposed to occur this week. The agency believes any blow to the TECM bond credit rating would also open the state to possible litigation from existing TECM bondholders.
“We have had to pause this transaction due to H292, and if it becomes law as currently written, we will have to completely pull the deal from the market, have ratings re-evaluated, modify security disclosure documents, and re-introduce the transaction at some later date. We would expect, all market conditions remaining constant, the interest cost of the re-introduced financing to be higher,” Hunter wrote.
“In short, House Bill 292 has functionally halted major transportation projects across the State of Idaho,” Little wrote to lawmakers with his veto.
Hunter’s letter, included below under Little’s veto letter, contained a list of eleven transportation projects that were affected.
What’s Next?
HB 292 passed the House on a 63-7 vote and the Senate on a 32-3 vote, which are both veto-proof majorities. The House, which will receive the rejected bill, returns to session at 8 a.m. on Tuesday.
The Senate moved quickly on Monday afternoon to push out a modified version of the bill that addresses Little’s concerns. The veto letter suggests the governor would readily sign a simplified version of HB 292 as long as it did not negatively impact schools or transportation projects.
“The simplest solutions are usually the best solutions, and I believe we can extract the property tax portions of House Bill 292 and deliver a true property tax relief bill this session,” Little wrote. “A property tax relief bill this session needs to be simple and carried out in a way that does not harm public schools, does not hold up needed transportation projects, and does not reveal more unintended consequences.”
Lawmakers have already missed their target adjournment date last Friday as they continue to work on contentious library and abortion policy bills as well as several massive K-12 education budgets.
Logan Finney | Associate Producer
Logan Finney is a North Idaho native with a passion for media production and boring government meetings. He grew up skiing, hunting and hiking in the mountains of Bonner County and has maintained a lifelong interest in the state’s geography, history and politics. Logan joined the Idaho Reports team in 2020 as a legislative session intern and stayed to cover the COVID-19 pandemic. He was hired as an associate producer in 2021 and they haven’t been able to get rid of him since.
