Eight years ago, when then Governor Dirk Kempthorne left to take over the Secretary of the Interior position, Jim Risch took over Idaho’s top state job. During his short time as Governor, before becoming Senator, Risch called a special session of the legislature in the dog-days of August and rammed through a bill that reduced property taxes statewide by $260 million. To make up the reduction in property taxes, he also pushed through a one-cent sales tax. This overall net reduction of an estimated $50 million was supposed to give tax relief to the citizens of Idaho.
Some argued that the tax changes gave rich landowners a tax break while the lower economic classes saw an increase in sales taxes. Risch himself saw his property taxes reduced by about $4,000 on his bill.
In effect, what Governor Risch did was take a progressive tax (the more property value you have, the more you would pay) and changed it to a regressive tax, a sales tax. Regressive taxes are not tied to income and impact middle and lower income families to a higher degree because everyone, high and low income, has fixed costs and purchases. Middle and low-income families spend a higher percentage of their income on cost of living. It is estimated that unless you were earning more than $135,000 per year in 2006, you probably ended up paying more in sales tax than you would have in property taxes with the change. Clearly, the tax relief benefitted large property owners more.
Unfortunately, just a couple years later with the recession triggered by a real estate bubble, the state’s coffers dried up. Not did Idahoans see property values shrink, which ironically reduced their property taxes to some degree, but with tightening household budgets not much was being spent at stores either. This double whammy on state taxes resulted in the Idaho legislature cutting budgets statewide, including reducing the school budget for the first time in state history.
School districts, however, still had the same number of students, the same number of buildings to maintain and the same expenses. Many schools, Kuna included, tightened up budgets and cut expenses. In order to avoid firing teachers and staff, resulting in increasing class sizes and lowering the ability to educate children, school districts statewide put supplemental levies on local ballots.
A decade ago, in 2004, just 52 school districts (44 percent) used supplemental levies to help with their budgets. It was even lower in the 1990s. In 1999, just 35 percent of Idaho school districts passed supplemental levies. The numbers of districts with supplemental levies has increased every year since 2006 when it was 48 percent. In 2014, 94 districts, 80 percent, passed levies, the most ever. But it wasn’t just the recession that has impacted education funding. The last 14 years has not been good for education funding in the state of Idaho.
According to a report put out by the Idaho Center for Fiscal Policy, during the 1980s and 1990s public school funding remained steady at 34 percent of the total spending by the state. Over the next 14 years, however, education funding has dropped dramatically, by 11 percent. According to the report, in 2013, public education funding was just 26.4 percent of the total spending by the state. Beginning in 2000, the state legislature has systematically lowered state taxes. The state government lowered the corporate tax rate, the individual income tax rate and swapped out property tax for a one-cent increase in the sales tax. The hope was that with lower taxes, Idaho would be more attractive to business, and, in turn, increase the tax base. It didn’t work. When the recession hit, Idaho was hit a little harder than other states.
What impact this has had is to require school districts to look for other funding besides the state. Districts have few options and look to local taxes to make up the difference through property tax levies. Ironically, this increases property taxes at local levels raising them back up to pre-2006 levels. And, while local residents now have a say in their property taxes, the burden of paying for education is no longer spread out across the state.
Unfortunately, the pain isn’t over. With the grocery rebate scheduled to increase over the next two years, there will be less tax collected for the education fund, an estimated $130 million less. At least those families with many children will benefit from the grocery credit as the rebate helps lower and middle-income families the most. And, while education funding was increased slightly this year by the legislature, school budgets have not returned to pre-recession levels after the state cuts six years ago. It is unlikely that without a serious reconsideration of education funding priorities by state legislators, school districts in the state of Idaho will continue to ask their residents for more money.