by Logan Finney, Idaho Reports
Gov. Brad Little announced in July that Idahoans will see roughly $300 million in property tax relief this year, with just under $100 million of that amount coming from a budget surplus eliminator.
The relief package was part of House Bill 292, lawmakers’ signature tax legislation this legislative session. This action on property taxes followed several rounds of income tax rebates over the past few years.
The question that now remains four months later is how much of a credit homeowners will see on their individual property tax bills this fall and into the future, and how much that will vary county by county.
Where is the money going?
The bulk of the relief comes to taxpayers through two channels: schools and direct tax credits. But the exact amount going to taxpayers in different parts of the state isn’t yet clear.
“We don’t have numbers to offer at this time,” said Alan Dornfest, property tax policy bureau chief for the Idaho State Tax Commission. “We wouldn’t be able to calculate any sort of thing until November when all the levies are set. No taxing district at this point in time has its actual amount it’s going to be charging set in such a way that we can compute a rate, which we need to do in order to move forward.”
On one side of the equation, funds will be distributed to school districts for payments on existing bonds and to offset existing tax levies, which should directly reduce property taxes in some parts of the state.
The State Department of Education does not yet have an estimate of how much funding districts will see from the legislation.
“We’re awaiting a couple of numbers to make those determinations,” spokesman Scott Graf told Idaho Reports.
Districts without any bonds or levies will still receive funds. The legislation allows them to save the money for future building construction and renovations. They could also use the funding stream to secure construction bonds in the future rather than going to property taxpayers.
“Even though the buy down of the school bonds and levies will help the homeowners, it will also reduce the tax burden for commercial, agricultural, mining and forest timber owners when the majority of them have been recognizing savings as the home values have been sky rocketing,” Shoshone County assessor Jerry White told Idaho Reports.
The other side of HB292 is a tax credit for Idaho residents who qualify for the homeowners exemption.
Those funds will be divided among all the property taxes on homes that receive the exemption, except for taxes that are the result of voter-approved funding measures. That distinction is meant to keep the relief distributed evenly across areas that have bonds and levies and those that do not.
“We rely on the Idaho State Tax Commission for our programs that administer our tax and assessment notices. They are currently programing the changes,” White said.
Because the most recent fiscal year ended with an additional $99.1 million in the general fund, the first year of the property tax relief package will provide a total of $317.4 million this fall.
Where is the money coming from?
Little originally vetoed HB 292 in late March, citing its complexity and the fact that it eliminated an important school election date. That move led to a brief showdown between the two branches, in which lawmakers mustered the two-thirds majority needed to overturn the veto. They also passed follow-up legislation to address some of the governor’s fiscal concerns. Little took the opportunity to declare collective victory on tax relief – veto override and the spring election date notwithstanding.
The exact amount of relief is uncertain because HB 292 included a three-year surplus eliminator. That means revenue above the amount lawmakers projected in the state budget will go to property tax relief. The mechanism was written to absorb up to $150 million in each of the three years.
The first $50 million of budget surplus will go toward homeowners, while the next $100 million will be divided between the school districts and all property taxes, not just those on homeowners’ primary residences.
“It’s very complex. It is not an easy programming task,” state tax commission IT Resource Manager Janet James said. “We’re still working on programming, and then we’re going to spend a lot of time testing it before we release it to the counties.”
According to the General Fund Budget Monitor for June 2023 published by the Legislative Services Office, “FY 2023 finished $81.3 million ahead of the DFM revised forecast and Legislature approved tax relief from the 2023 legislative session. Further, a net of $17.8 million went unspent from authorized appropriations… resulting in a $99.1 million budget surplus and $416.4 million of unobligated General Fund moneys to start fiscal year 2024.”
“In accordance with House Bill 292, the budget surplus was distributed three ways: $50 million to the homeowner property tax account and the remaining $49.1 million is split evenly between the school district facilities fund and for additional property tax relief,” the budget monitor notes.
“In total, H292 provided $317.4 million in property tax relief this year. Of that amount, the homeowner property tax account received $186.6 million, the school district facilities fund received $106.2 million and $24.6 million went to all property taxpayers. Statewide, homeowners are 51% of property taxpayers which means homeowners received 80% of the $317.4 million of property tax relief.”
By its very nature, a surplus is not guaranteed. In addition to the surplus eliminator mechanism, lawmakers tapped leftover money that had been set aside for prior income tax rebate checks, and they also drew from the general fund to get the relief structure started.
The following year, those funding streams for homeowners and schools will receive a dose from the state’s longstanding sales tax distribution formula. Depending on sales tax collections and the surplus that year, the package should provide between $122 million to $272 million in total relief.
Beginning in the final year of the surplus eliminator, HB 292 begins to pull money for schools from the Tax Relief Fund, an account that holds sales taxes from certain online purchases. Lawmakers have used that fund in recent years to raise the grocery tax credit and to help establish the first rebate checks. It also sends some money back into the general fund each year to offset the income tax rate reductions that accompanied the income tax rebate checks.
After the surplus eliminator expires in the third year, the sales tax distribution formula would continue to send money toward school districts and homeowners into the future. A portion of online sales taxes would also continue to flow to school districts.
Boiled down, the legislature committed to using sales tax revenues to add funding for school buildings and to offset local property taxes, and they used the budget surplus to boost the first three years of it.
“We’re dealing with what’s in front of us. Give us an amount, and we’ll watch that the subtractions occur. We’ll ensure that the proper notices and information goes out in the tax bills,” Dornfest told Idaho Reports. “Next year, we’ll do the same with whatever they tell us is the dollar amount.”
Editor’s note: This article was updated 8/10/2023 to include information from the LSO General Fund Budget Monitor.
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.
