House Revenue and Taxation Committee Chairman Steven Harris presents the tax cut and education funding bill during the 2022 special session of the Idaho Legislature. (Clark Corbin/Idaho Capital Sun)
The Idaho Legislature’s 2022 special session got off to a quick start Thursday morning with the House Revenue and Taxation Committee only needing nine minutes to introduce a $1 billion bill to cut taxes and increase education funding.
By 5:30 p.m. later that day, the measure had made its way through the legislative process in the House and Senate. By 6:30 p.m., Gov. Brad Little had signed the bill into law.
The Idaho House passed the bill on a 55-15 vote, while the Idaho Senate passed the measure 34-1, with Sen. Christy Zito, R-Hammett, as the Senate’s lone dissenter. The 14-page bill was the only bill on the agenda for the special session, and the Legislature adjourned in a single day.
“Returning the people’s money is the right thing to do, and the education investments support families, help us keep up with growth, enhance our quality of life, and prepare a workforce to meet the changing needs of employers,” Little said in a statement Thursday. He will hold events around the state next week to celebrate its passage, the statement said.
The bill does four things, said House Revenue and Taxation Committee Chairman Steven Harris, the Meridian Republican who presented the bill Thursday morning.
- It spends $500 million of the state’s record $2 billion budget surplus on tax rebates for all Idahoans who filed 2020 taxes. The rebates are for a minimum of $300 per individual or $600 per married couple who files jointly.
- It reduces the income tax rate from 6% to 5.8% and creates a new flat tax rate for all filers. It also exempts the first $2,500 of income for all filers.
- The bill transfers $330 million annually from sales tax collections to a K-12 public school fund.
- It directs $80 million a year to a new fund for in-demand careers, where the money could be directed to career-technical education programs, community colleges or four-year colleges and universities.
How the money will be specifically distributed will be decided during the 2023 legislative session, which begins Jan. 9.
Although most legislators ultimately voted in favor of the bill, few seemed truly pleased with all aspects of the legislation.
Some argued it didn’t offer enough tax relief to Idahoans struggling under high property taxes and crushing inflation. Others argued the state is in such a hole when it comes to education funding from previous economic downturns that the education funding portion of the bill is only a start to paying teachers more and fixing dilapidated school infrastructure.
Many lawmakers also argued that the bill went against the state’s Constitution by including multiple topics in one piece of legislation.
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Idaho Gov. Brad Little calls for special session due to massive state budget surplus
Little called for the special session last week, saying the state should return a large portion of the $2 billion state budget surplus to Idahoans who are facing high gas prices, high housing costs and inflation.
Harris served as one of the bill’s sponsors and said he agrees with Little’s rationale for calling the session.
“Why a special session?” Harris asked as he presented the bill. “From my point of view, we have a boatload of money that needs to be dealt with appropriately.”
The bill legislators introduced Thursday includes one change from the draft bill Little presented last week. The new bill does not include an automatic 3% increase in the money directed to K-12 public schools, which was put in to address inflation. One of Little’s aides told the Idaho Capital Sun that the 3% annual increase was not scheduled to take effect until the 2025 fiscal year, so there was no need to handle that this year during the special session.
During an afternoon debate on the Idaho House floor, a handful of the more conservative Republicans in the House tried to derail the bill or separate the tax cut provisions of the bill from the education funding proposal.
Rep. Heather Scott, R-Blanchard, made an unsuccessful motion to suspend House rules.
Scott said schools have already received big funding increases over the past two years.
“I do not believe that our schools need another dime until we stop teaching critical race theory, until we remove the explicit sexual content from our libraries and the books in our libraries I don’t feel comfortable giving any more money,” Scott said in floor debate.
Rep. Tammy Nichols, R-Middleton, also made an unsuccessful motion to send the bill out for amendments.
Some of the more conservative members of the Legislature voiced support for the tax cuts in the bill but opposed the increases in education funding. Others argued against the special session procedures, saying the Legislature needed to do more to assert its independence rather than follow Little’s lead.
“This bill and this entire process is very disrespectful to our Constitution, to our voters, to our taxpayers and to the incoming class (of legislators),” Rep. Judy Boyle, R-Midvale, said in floor debate. “We are telling them we do not trust them to make decisions, and we don’t want to listen to their ideas on what they think about school funding.”
On the other hand, Rep. Greg Chaney, R-Caldwell, said he supports the bill and was not swayed by other arguments alleging the bill is unconstitutional because it addresses more than one different subject.
“It seems like one subject to me, and that subject is revenue,” Chaney said on the floor. “This isn’t on the line, this is well inside the line.”
Rep. John McCrostie, a Garden City Democrat and public school music teacher, said Idaho schools have produced great results despite finding limitations. He said he supports the bill because schools across the state have teacher shortages and also struggle to recruit substitute teachers.
“If we continue to attack public education, we will not continue to see those types of results,” McCrostie said in his floor debate.
Rep. Laurie Lickley, a Republican from Jerome, said Idahoans are struggling with high costs and still support their local schools.
“My voters, my constituents, across the board are asking for help and I think this bill, House Bill 1 does that,” Lickley said.
In the end, the House voted 55-15 to pass the bill following a two-hour debate.
Idaho Senate debates constitutionality of House Bill 1
Legislators in the Idaho Senate discussed the bill for roughly 90 minutes before voting 34-1 in favor of its passage.
Mirroring the debate in the House of Representatives, several senators from both parties said they did not like that the tax changes included in the bill were paired with education funding.
Two senators, including Zito, thought the combined bill was unconstitutional because it addressed different subjects. Earlier in the day, Harris, the bill’s sponsor in the House, said an opinion from the Idaho Attorney General’s Office stated it was not unconstitutional.
Sen. Regina Bayer, R-Meridian, said during the Senate Local Government and Taxation Committee meeting before the floor vote that she received many emails opposing the bill, but she ultimately couldn’t bring herself to vote against a tax cut.
“I think, had this been discussed in a general session where we have more time, we would have had more (attorneys general) opinions or things along that line, because I do believe this is throwing too many issues into one bill,” Bayer said. “And it’s forcing us to vote in support of one and vote for another one, even though we would rather not, because who doesn’t need tax relief at this point?”
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Bayer, who is retiring from the Legislature at the end of her term this year, added that she challenges the incoming 2023 legislators not to “fall for the line that we have done tax relief” with the special session bill.
“I have had umpteen people say they need property tax relief, or sales tax relief — I’ve never had one say they need income tax relief,” Bayer said. “So please, tackle that early.”
Zito said the legislation was written to put legislators between a rock and a hard place, and she would be violating her oath of office by voting for it because she believed it was unconstitutional.
“I cannot violate that oath that I made when I came in here, no matter if it has good parts or bad parts,” Zito said. “My heart tells me it’s unconstitutional.”
Sen. Steve Vick, R-Dalton Gardens, said he was concerned about having multiple topics in one bill, but not enough to make him worry about violating his oath of office. Vick said he did not like other aspects of the bill, but his desire for Idaho to move to a flat tax outweighed them because he has wanted a flat tax system for the past 10 years he has been in the Legislature.
Sens. Grant Burgoyne and Melissa Wintrow, both D-Boise, said they voted yes because of the education funding, but Burgoyne, who will not be in the Senate by January, cast doubt on the idea that the funding would go anywhere with the incoming Legislature.
“I won’t be surprised if the education money here never really materializes,” Burgoyne said. “If the next Legislature decides, ‘Well, that means we can take $410 million less out of the general fund,’ then we really haven’t gotten anywhere. The investment remains the same.”
Fate of Reclaim Idaho’s Quality Education Act unclear heading into November
The bill passed by the Legislature on Thursday is designed to repeal and replace the Quality Education Act education funding initiative that will also be on the Nov. 8 general election ballot. Reclaim Idaho organizers and volunteers gathered signatures to qualify the Quality Education Act for the Nov. 8 general election, saying their initiative would raise $323 million annually for K-12 education funding by increasing the corporate income tax rate from 6% to 8% and creating a new top income tax rate of 10.925% for individuals earning at least $250,000 per year.
Little’s aides have told reporters the special session bill is written so it would take effect Jan. 3, two days after the Jan. 1 date the Quality Education Act would take effect if voters pass it.
Luke Mayville, co-founder of Reclaim Idaho, said in a statement that the bill was clearly intended to subvert the Quality Education Act and the tax provisions overburden the middle class while giving unneeded tax breaks to large corporations and the wealthy.
“Nevertheless, even as this bill aims to subvert the Quality Education Act, it hands a major victory to Reclaim Idaho’s thousands of volunteers and supporters,” Mayville said in the statement. “It’s clear that an investment in education on this scale would never have been considered by this Legislature before the Quality Education Act earned a place on the ballot.”
In the lead up to the special session, Sen. Janie Ward-Engelking, D-Boise, told the Sun that she feels legislators would not be considering such a large education funding proposal right now if it wasn’t for the Reclaim Idaho volunteers and the more than 70,000 Idahoans who signed petitions to get the initiative on the ballot.
Ward-Engelking said she signed on as a co-sponsor because of the education funding component.
“The reality is, my Democratic colleagues and I have pushed for increased education funding for years, and this is a way to get it done right now,” Ward-Engelking said last week.
Special legislative session comes less than 10 weeks before Idaho’s general election
Under the Idaho Constitution, only the governor may call a special session. There have now been five special sessions in Idaho since 2000, with special sessions occurring in 2000, 2006, 2015, 2020 and this year.
The timing and political implications of this year’s special session add another dimension to the tax policy and education funding issue before the Legislature.
All legislators are coming to the end of their terms, with all 105 seats in the Idaho Legislature up for election in less than 10 weeks in the Nov. 8 general election. Nineteen incumbent Republican legislators already lost their primary election races in May and more than 20 other legislators either didn’t run for re-election this year or ran for a different office.
“The people of Idaho expect the executive and legislative branches to work together to move our state forward,” Little said in his Thursday statement. “I deeply appreciate my partners in the Legislature for continuing to show the rest of the country how Idaho does it right – we work together to promote a business-friendly tax and regulatory environment, live within our means, pay off our debt, save for a rainy day, routinely cut taxes, and make investments where they count.”
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