Idaho Freedom Foundation Roadmap for Idaho by Idaho Freedom Foundation

Roadmap FOR Idaho A publication by the Idaho Freedom Foundation

Contents Letter from the President 4 Free & Fair Jobs

Health Care

K-12 Education

Higher Education

Property Tax Reform

Idaho Lands

Tax Policy

State Spending

State Employee Benefits 64 Federal Reliance

Good Governance

Cannabis Policy

Small Business

Transportation Policy

Letter from the President Every day at IFF we concern ourselves with the business

What these examples share is what drives me along:

of making Idahoans’ lives better. The stories of fellow

The government is telling these businesses that they

residents inspire IFF to bring about change within our

don’t know how best to run their business. Either with

borders—to take on the barriers to success and happi-

good or bad intentions, the government has stepped

ness that our state and local governments have erected.

between Idahoans and their ability to help others through their businesses.

One such story that has spurred me on involves Lindsay Schram, owner of the North End Organic

This Roadmap for Idaho—outlined in the pages ahead—is

Nursery. The State Department of Agriculture made

meant to guide our state away from counterproductive

her remove vinegar from her shelves, which she sold

and costly infringements like these, and allow our fellow

as an herbicide. The product, the agency complained,

Idahoans to move forward in the pursuit of prosperity.

was not registered with the department. We are talking about a product offered in every grocery store across

In the upcoming pages you will read more of the stories

not just Idaho, but the entire U.S. Offering a healthy,

that inspire me—Sylvia Garcia and the problems she

organic and chemical-free product supposedly created

faces with her local urban renewal agency, the DeBoers’

a danger to the public.

challenges they have faced in finding healthcare, and Dean Neptune, a young entrepreneur who founded a

Another story that concerns me is the tale of Alta Mesa,

business that now has 10 employees, but is kept from

a business that has brought numerous jobs to Idaho

expanding his business by state regulations. I hope

and has pioneered the industry in the state for oil and

that you can find inspiration from these stories and the

gas production. Regulatory red tape adds thousands of

others presented here.

dollars to its operating costs every day: Alta Mesa has to truck clean water from their drilling and production

Unfortunately, the stories in this Roadmap for Idaho

sites rather than injecting it back into the ground—not

are not rare cases across the state. Their challenges are

because it is safer or cleaner for the environment—sim-

echoed among numerous others with our state and

ply because they have not received a permit to do

local governments.

otherwise.

LETTER FROM THE PRESIDENT

To alleviate these problems, IFF has developed policy

ahead into fruition. Finally, I hope that all Idahoans will

solutions in 14 key areas, areas that were chosen for

challenge their government officials to uphold these

their wide-reaching effects on a variety of Idahoans.

ideals.

Some solutions were drawn from the examples set by other states, either because their implementation was

I am proud to be an Idahoan. But my pride does not

successful in bringing about flourishing and we hope to

come merely from what Idaho represents today. I take

emulate the same, or the policies failed their citizens,

pride in where Idaho will be tomorrowâ&#x20AC;&#x201D;in the future that

and we hope to steer clear of the same mistakes. Some

awaits our residents as we enact new policies that will

policies are new, ideas that would put our state at the

allow Idaho to be an even better place to live, play, start

forefront of advancing liberty, prosperity and freedom

a business, and raise a family.

for all Idahoans. My hope is that our current and future governor will lead the charge on these 14 areas, championing policies that will protect the oft-forgotten Idahoans. Further, I hope that our state legislators will bring the policies outlined

Wayne Hoffman, President

LETTER FROM THE PRESIDENT

Free &

Fair Jobs

“

He wants to create more job opportunities,

“

but state regulations stand in his way.

Remove the legal hurdles that block prosperity and hurt consumers By Phil Haunschild

By the age of 24, many young people have finished col-

Idaho Freedom Foundation that the state license

lege and have set off in search of jobs they hope will lead

requirement is akin to McDonald’s requiring its workers to

to successful careers.

hold culinary arts degrees. As concerns the wiring process Smith notes, “It’s not that hard to put colors together.”

Dean Neptune of Boise does things a little differently. He’s an entrepreneur and has created 10 well-paying

Because of this government restriction, Neptune partners

jobs.He wants to create more job opportunities, but state

with local electricians to finish the installations. However,

regulations stand in his way.

that often delays jobs and costs customers big money. Due to a glut of work in the red-hot Boise construction

Neptune owns and operates The Planet Express, an

industry, electricians find themselves stretched thin.

appliance delivery firm that ferries ovens, dishwashers,

Neptune’s jobs, which are small potatoes compared to

refrigerators and other household goods to new homes

much larger work orders, fall to the bottom of electricians’

across the Treasure Valley. The company holds several

priority lists.

contracts with big-box stores, including The Home Depot, Sears and Lowe’s.

When The Planet Express crews can grab an electrician for a job, the company usually forks over $300 for the

While those deals keep his crews hustling each day, he

simple task of putting colored wires together.

knows his firm could do more. In addition to appliance delivery, Neptune would like to offer installation services.

Were the state to ease the regulation, The Planet Express could score more installation contracts and, in turn,

Because Neptune’s employees don’t hold at least journey-

bring on more workers. Further, it would save money for

man licenses as electricians, Idaho’s construction regula-

consumers.

tions forbid the workers from installing certain ovens and dishwashers, which require minimal wire manipulation.

Ending the regulation “would mean a lot more work for us,” Neptune said. “If we could get that regulation

James Smith, a Planet Express deliveryman, told the

changed, it’d change everything for us.”

FREE & FAIR JOBS

the

PROBLEM Dean and his employees find company with nearly one quarter of all Idahoans, who must receive a government permission slip to work.1 In the 1950s, fewer than one in 20 workers was required to have a government license to work in a given field.2 Many of today’s licenses take thousands of hours of education, carry steep fees, and decrease competition by limiting the number of individuals in their professions. In turn, consumers pay higher prices. Some estimates hold that as many as one percent of Idaho jobs are lost to these regulations, and Idaho goods and services may cost as much as 15 percent more.3 Further, there is a conflict of interest issue. Some 89 percent of the licensing boards responsible for implementing these regulations are composed of individuals who compete with the very people they regulate. For example, on boards sit electricians, who determine what kind of work a handyman can do or what homeowners can do on their houses. On the cosmetology board are cosmetologists, who determine who can compete within their industry, and where and how potential competitors 1 IFF Research. May 2016. 2 Morris M. Kleiner, “Reforming Occupational Licensing Policies,” March 2015, Brookings Institution .https://www.brookings.edu/wp-content/uploads/2016/06/THP_KleinerDiscPaper_final.pdf 3 http://www.nber.org/papers/w14979.pdf, https://www.hhh.umn.edu/ file/9441/download

FREE & FAIR JOBS

“

Some estimates hold that as many as one percent of Idaho jobs are lost to these regulations, and Idaho goods and services may cost as

“

much as 15 percent more. may work.4 As a result, licensing boards can be trans-

ends. For example, cosmetologists in the state of Idaho

formed into protectionist barriers, working against new

are required to have 2,000 hours of education before

entrants, and favoring those who have already secured

they can be licensed while certification as an Emer-

their place in a given industry.

gency Medical Technician (EMT) takes just 150 hours.7 If public health and safety is the primary concern, why

The expansion of occupational licensing has been

should a cosmetologist be required to have 14 times

substantial in recent years. Both the total number of

more education than the individual whose responsibili-

boards within the Idaho Bureau of Occupational Licens-

ty is to protect individuals on the verge of dying?

es (IBOL) and the number of individuals licensed have grown by roughly 25 percent in the past decade alone.5

Occupational licensure has frequently turned into a tool

However, the bureau provides just a snapshot of all

for controlling industries, by the state and by compet-

licensed professions: There are nearly as many licens-

itors in the market. From the state perspective, con-

ing agencies that are not overseen by the IBOL. State

trolling licensees provides a steady cash stream through

agencies such as the Board of Medicine, Department

licensing fees. Whereas for those engaged in an in-

of Agriculture, and Racing Commission all oversee their

dustry, licensing gives them the opportunity to use the

own licenses, which cover diverse occupations, from

force of law to keep competitors out, or hamstringed

concessionaire workers to car salesmen, real estate

should they jump the necessary hurdles.

appraisers to anesthesiologists. It is time for Idaho to return licensing boards back to The general perception of licensing boards as “a

protecting the public.

safeguard for public health, safety, and welfare” has become a misnomer; many licenses go far beyond this stated purpose and are now used to pursue alternative 4 IFF Research. May 2016. 41 out of 46 boards and commissions were found to have a majority of active-market participants as defined by the Supreme Court ruling in NC Dental v. FTC. 5 IFF Research. May 2016. For proffessions administered by the Idaho Bureau of Occupational Licenses, the graph indicates this increase from 50,653 in 2007 up to 64,586 in 2017. This outstrips population growth by nearly double. See chart on page 5. 6 Of 54 Licensing Agencies, 30 are with the Bureau of Occupational Licenses and 24 are with other agencies.

7 Idaho Code 54-805 contains the Cosmetology educational requirements while the Department of Health and Welfare approves EMT courses, which are based on competency, not hours. On average, competency takes 150-190 hours. See: http://healthandwelfare.idaho.gov/Portals/0/Medical/EMS/Education/TheIdahoEMSEducationStandards. pdf?ver=2016-07-01-160425-723

FREE & FAIR JOBS

the

SOLUTIONS Sunrise provision and costbenefit analysis for statute and rule changes

from least to most restrictive: •

Market competition

Before new boards or licensed professions

•

Private certification

come into effect and before new rules

•

A specific private civil cause-of-action to remedy consumer harm

are added, it is critical that their impact on Idahoans is given serious review. This

•

A deceptive trade practice act

could be done with the implementation of

•

A regulation of the process of provid-

a sunrise provision, which would require a

ing the specific goods or services to

period of study before these new policies

consumers

or regulations may come into effect. This

•

Inspection

would subject licensing boards, which can

•

Bonding or insurance

be easily captured by the very individuals

•

Registration

they set out to regulate,8 to an additional

•

Government certification

layer of scrutiny with additional time for

•

Occupational license9

public input, and the inclusion of a comprehensive analysis to judge how critical

Idaho boards could utilize the information

these changes are in order to protect

gathered through their cost-benefit analy-

public health and safety. This would weigh

ses to determine which form of regulation

the costs to the public in terms of reduced

may be warranted. It should be noted,

competition, training requirements, and

occupational licenses top the list for most

licensing fees against the dangers to public

restrictive forms of regulation, yet they are

health and safety that may come from

frequently regulators’ default option. Once

inaction.

legislators acknowledge the multiple options available, they can choose the most

Utilize the least restrictive form of regulation

beneficial.

restrictive form of regulation for each pro-

Eliminate and consolidate unnecessary or complementary boards

fession. One such framework is as follows,

Idaho has more than 50 agencies, boards

Idaho would be served greatly by developing a framework for choosing the least

and commissions that require certifica8 See footnote 4. NC Dental v. FTC is a striking example of this outcome, where the FTC came in with antitrust measures to break up the anticompetitive behavior of the Dental Board of Examiners in North Carolina.

FREE & FAIR JOBS

9 American Legislative Exchange Council, “Occupational Board Reform Act,” January, 2016.

11 some agencies oversee as many as 15

Review and replace restrictive licenses

different licenses.10 Consolidating boards

Through executive or legislative action,

with similar missions and those which

a committee should be established to

oversee complementary professions

conduct a comprehensive review of all li-

would ease education and registration

censes, which would focus on the require-

requirements, while providing greater

ments for education and experience, the

economies of scale. Additionally, Idaho

scope of practice in any given industry,

could eliminate boards that negatively

the frequency of disciplinary actions, the

impact the state, as determined through

size of fees, and extra requirements that

a cost-benefit analysis to see whether the

could prohibit individuals from practic-

extent to which they protect the public

ing in their profession. This committee

health and safety justifies the external

would then recommend to the Legislature

costs to the public and consumers.

further action that should be taken to

tions, registrations and/or licenses, while

eliminate undue licenses. The restrictions which have been put in place by elec10â&#x20AC;&#x192;

IFF Research. May 2016.

tricians are one such example, keeping

FREE & FAIR JOBS

the

SOLUTIONS cont. from work. Onsite event makeup artistry

Expand cross-state reciprocity and licensure by endorsement

is another, as artists are prohibited from

Some occupational licensing boards offer

working on movie sets, at weddings, or for

an expedited process to those who have

photo shoots outside of fixed cosmetology

obtained a license in another state. For many

establishments.

occupations, however, this is not the case

handymen and appliance installers away

Eliminate provisions that make a criminal conviction an automatic exclusion from practicing a profession

and a license to practice in another state or country is disregarded. Recognizing the education and experience of all individuals in all professions would incentivize out-ofstate individuals to begin businesses or find

For many of Idaho’s professions, such as

work in Idaho and could simplify cross-state

cosmetology, contracting, and the medical

agreements. This is also a major barrier for

fields, a criminal record can be grounds for

many families who are very mobile, such

denial on an application for a license or upon

as military families. Roughly 35 percent of

renewal. For example, a felony conviction

active service members’ spouses work in

precludes one from practicing as an athletic

licensed professions, and may be prohibited

trainer, a cosmetologist, or a wastewater

from working in Idaho without going through

operator, among others occupations.

a lengthy application process or fulfilling

Additionally, if one is charged with a crime

additional requirements, even while they

that involves alcohol or drugs, a board may

have the necessary experience and training

rescind that person’s license in most medical

to perform their job well.13

professions, in cosmetology, as a massage therapist, or in many other occupations.12

11 Idaho Code 54-3911, 54-2412, 54-816 12 Idaho Code 54-816 and 54-4013

FREE & FAIR JOBS

13 “Occupational Licensing: A Framework for Policymakers,” July 2015. The White House Archives. Pg 4.

“Reducing the scope of occupational licensure in favor of less restrictive regulations will allow for increased economic growth in Idaho, spur job creation, and allow Idahoans to engage in the professions they are drawn to.”

the

BENEFITS Review all licenses and repeal those that have no impact on public health and safety

Reducing the scope of occupational licensure in favor

The stated purpose of the occupational licensing ap-

allow Idahoans to engage in the professions they are

paratus is to protect the public’s health and safety. Yet,

drawn to. Occupational licenses frequently hurt the

there are numerous licenses and regulations that have

most vulnerable, keeping the opportunities these pro-

no relationship to protecting the public. For example,

fessions could provide away from those who cannot

the Idaho Racing Commission licenses all individuals

afford the extensive schooling or who do not have the

working in the horse racing industry, from concession-

time to attend lengthy programs.

of less restrictive regulations will allow for increased economic growth in Idaho, spur job creation, and

aires to custodians, valets to veterinarians. If these 14

licenses, which require an annual fee and can keep

Growing bipartisan concern over occupational licen-

Idahoans out of the industry, are not protecting the

sure has been seen on the national stage and here in

public, they should be considered for repeal.

Idaho, something our politicians need to capitalize on by reforming Idaho’s outdated system.

14 See ISP Website for Racing Commission: https://isp.idaho.gov/racing/applications. html

FREE & FAIR JOBS OCCUPATIONAL LICENSING

Health Care

“Our premiums skyrocketed... We couldn’t justify paying that... We would’ve never used it.”

Mend the market for a healthier Idaho By Samantha Verdell & Fred Birnbaum

“If you like your health care plan, you can keep it,” for-

Faced with Obamacare’s individual mandate, which

mer President Barack Obama uttered time and time

requires all Americans to buy insurance, the couple

again, before and after the passage of his signature

couldn’t simply drop their coverage. Instead, they

health law.

sought coverage through a health-sharing ministry, a low-cost alternative to traditional insurance.

Like hundreds of thousands of Americans across the country, Gary and Tina DeBoer of Nampa found out

Now, the couple pays $300 per month for up to

the hard way just how misleading the president was.

$125,000 in health coverage per incident. Their plan requires them to cover the first $500 of any

Before Obamacare, the Deboers enjoyed a right-sized

health-related spending, including prescriptions and

health plan that protected them from catastrophic

visits to the doctor. And that works for them.

events. They paid a few hundred dollars each month to buy coverage that boasted a $10,000 deductible.

Thankfully, the Deboers found suitable coverage to meet their needs through a health-sharing ministry.

“It worked for us,” Tina told the Idaho Freedom Foundation. “We rarely went to the doctor.”

What if the state allowed the couple, and all Idahoans, more health insurance options? What if Tina and Gary

Then, Obamacare hit.

DeBoer could pay even less or find a plan that better meets their needs by purchasing coverage from a

“Our premiums skyrocketed,” she said. The Deboers’

carrier in North Dakota or Iowa?

new, Obamacare-compliant health insurance plan offered a lower $5,000 deductible, but cost more than

Consumers deserve choice. Idaho needs to, among

$1,000 each month.

other things, open the insurance market to more competition, which will better serve consumers.

“We couldn’t justify paying that,” she explained. “We would’ve never used it.”

HEALTHCARE

the

PROBLEM Idahoans face a daunting challenge

lead to financial ruin. For example,

when it comes to rising healthcare

Kootenai Care Network in Coeur

costs. As in other states, there’s no

d’Alene was created with hopes to

real market force dictating how

improve healthcare affordability and

much any medical procedure might

quality, but has unintentionally taken

cost. At one hospital, knee repair

options away from local residents,

surgery might cost $2100, while at

who could now encounter $50,000

another hospital the same procedure

in out-of-network charges.4

could be $3000 or even $6400.1 Even before considering cost conCompounding the problem is the

cerns, Idaho already has a problem

reality that health insurance, meant

with access to care. Idaho ranks 49th

to financially protect people from

in the nation for active physicians

large expenses such as major surgery

per 100,000 people. In addition,

or life-threatening illness, is no lon-

the Idaho Department of Health and

ger affordable for many Idahoans.

Human Services has identified 256

Premiums have gone up more than

health professional shortage areas,

1.68 times wages.2 The average indi-

as well as 44 underserved popula-

vidual market premium through the

tions.5 Rural communities are most

health insurance exchange increased

affected by this physician shortage

24 percent in 2017, and there will

because healthcare facilities tend to

only be four insurers offering plans

be concentrated in urban areas.

through the exchange in 2018.3 Public sector healthcare is also in Shopping around for health services

trouble. Medicaid continues to con-

is further complicated by restrictive

sume more and more of the state’s

insurance and provider networks

budget, leaving less and less money

that limit the options available both

for programs and services such as

to patients and personnel. Going to

education and natural resources.

the wrong doctor or hospital can re-

Between 2010 and 2015, Medicaid

sult in out-of-pocket expenses that

expenditures rose from 23 percent

“Health insurance, meant to financially protect people... is no longer affordable for many Idahoans.”

to 27.8 percent of the state budget.6 Although Idahoans spend high prices on their coverage, this cost does not ensure quality. By throwing money into Medicaid without addressing underlying socioeconomic and regional barriers, Idaho propagates existing disparities. State healthcare finances would be better spent implementing innovative change to the allocation of medical resources across Idaho in order to improve access to quality services rather than boosting Medicaid coverage that does not guarantee utilization of care. Make healthcare more affordable for Idahoans through free market competition, and individuals will be able to make consumer choices that will help drive the cost down and encourage service quality.

1 New Choice Health lists comparisons of local healthcare facilities and services provided, including ranges of prices to be expected. https://www.newchoicehealth.com/places/idaho/ boise-city/hernia-repair-surgery 2 Data between 2009 and 2014. http://freedompartners.org/wp-content/uploads/2016/03/FreedomPartners_EOPReportUpdate_FINAL.pdf 3 https://www.healthinsurance.org/idaho-state-health-insurance-exchange/ 4 http://www.idahopress.com/opinion/columnists/health-district-s-new-network-looks-like-self-dealing/article_42bf695c-3b3e-549d-9675-91faa09b4354.html 5 http://healthandwelfare.idaho.gov/Portals/0/Medical/MedicaidCHIP/AccessMonitoringReview2016.pdf 6 https://ballotpedia.org/Idaho_state_budget_and_finances

HEALTHCARE

Idaho’s 24% increase in Medicaid

300,000 Source: Medicaid.gov

600

enrollment without 200,000

expansion

Medicaid.gov compares

500

Idaho’s enrollment

400 from the first Expenditures in Millions of Dollars

market period of October 300 2013 with the 200 population as

100,000

of April 2017. The growth is100 even greater

2013

2017

using budget 0 book data.

2007 2008 2

400 Expenditures in Millions of Dollars

2017

500

300

200

Idaho’s Medicaid spending,

Source: Legislative Fiscal Reports 2007-2017

Source: Medicaid.gov

600

General Fund

100

0 2007 2008 2009 2010

2011

2012 2013 2014

2015 2016

2017

2018

HEALTHCARE

the

SOLUTIONS Do not expand Medicaid experienced an average over-enrollment of

Open insurance and provider markets

110 percent, which has led to cost overruns.1

A 1961 Idaho law, not federal legislation,

Oregon expanded Medicaid and now faces a

makes it illegal to buy and sell health in-

$1.4 billion deficit, of which an estimated $165

surance across state lines. Eliminating this

million is due to ineligible enrollees who were

law, thereby opening the Idaho market to

able to skirt Oregon’s messy vetting process.2

additional insurers, would allow Idahoans

This $165 million estimate is based on the ap-

competitive options that would help reduce

proximation of 32,000 unqualified Medicaid

premium costs. Consumers would have

recipients; however, calculations of wasteful

options as to the benefits included or not

spending would be much greater using an

included in their plans. Regardless of na-

approximation closer to the original report of

tional changes to healthcare legislation, it is

115,000 ineligible beneficiaries. Now, Oregon

imperative that Idaho forges a path based

legislators are attempting to pass $600

on market-based principles both within the

million in new taxes in order to maintain

state and across borders. Private markets

its expensive Medicaid program under the

are best-suited to serve the complexities of

deficit.3 If Idaho were to expand Medicaid,

healthcare transactions. The Fenwick-Sugden

the already under-staffed system would be

Healthcare Plan proposes allowing people to

flooded by at least 78,0004 new enrollees.

use stop-loss insurance in conjunction with a

This influx would worsen accessibility issues

health management system that would show,

and foster higher state spending on an inef-

in real time, whether an individual is making

ficient program that is already estimated to

healthy choices. The model saves money that

receive $532 million5 from the general fund in

would have been spent on a health insurance

2018. Worse still, this expenditure would not

policy.6 Idaho should also get the IDHW out

address the actual health barriers of the state.

of SHIP’s private medical practice market.

Do not invest in a program that demonstrates

Giving Idahoans the ability to make person-

no cost-containment and exacerbates exist-

al decisions about what medical or health

ing systemic challenges.

services they want covered and where they

States that have expanded coverage have

access care will drive prices down, making 1 Horton, Ingram. “ObamaCare Expansion Enrollment is Shattering Projections: Taxpayers and the Truly Needy Will Pay the Price.” 2016. TheFGA.org 2 https://www.oregonlegislature.gov/barreto/Documents/Medicaid%20Redermination%20Failure%20Press%20Release.pdf 3 http://portlandtribune.com/pt/9-news/363878-244660-oregonsenate-passes-health-care-provider-tax 4 https://www.healthinsurance.org/idaho-medicaid/ 5 Legislative fiscal reports 2007-2017

HEALTHCARE

healthcare more affordable for all.

6 http://theothermccain.com/2013/11/27/the-fenwick-sugdenhealthcare-plan/comment-page-1/

Disregard Obamacare’s 10 essential benefits

hospitals. All non-profit hospitals receiving

The 10 mandated benefits that all insurance

ly. Doing so would not impose anti-compet-

plans must offer, by federal law, is one of the

itive regulations on medical providers and

factors contributing to high premiums. Indi-

would not expand government. It might,

viduals are forced to purchase policies that

however, open the door to more transpar-

cover services irrelevant to them, removing

ency within the medical profession, giving

choice and hiking price. From a market stand-

Idahoans an online reference compiling costs

point, supply-demand functions successfully

and quality of all state providers, not just

in every other segment of society— why

hospitals, through a uniform price break-

not apply it to healthcare? Allow insurance

down. Providers that offer direct primary care

companies to tailor plans to the needs of

already supply detailed transparency, but this

their consumers, and healthy competition

model could be replicated for all healthcare

will drive these insurers to continue adapting

providers. Transparent billing and updated

policies to garner business. U.S. Sen. Ted

listings of prices allow patients to compare

Cruz’s amendment to the AHCA permits

options and know how much treatment

insurers to offer diverse plans as long as they

costs before insurance, giving individuals the

offer at least one AHCA/ACA qualified plan.

information necessary to “shop around” and

If the revised healthcare bill does not pass,

make informed market decisions.

one might argue that Idaho is legally-bound

these incentives should be audited external-

by Obamacare to provide all 10 benefits in

File a Medicaid waiver request

every plan. However, many states disregard

Though Medicaid waivers under the Obama

federal law as pertains to, for example, mari-

administration were not very alluring, the

juana use. If states can get away with passing

Trump administration has been favorable to

their own regulations that contradict national

free market reforms that carry promise for

legislation on marijuana, Idaho should at-

higher quality care at lower costs. Thus, Idaho

tempt to do the same with health insurance

should consider filing a Section 1115 Waiver

mandates.

that would encourage personal responsibility among beneficiaries while decreasing the

Promote cost transparency

state’s economic burden. Kentucky’s waiver

Many states have enacted legislation that

proposal, for example, adds a high-de-

requires healthcare providers to report cost

ductible HSA to managed care coverage,

and utilization data, which is disseminated

requires sliding-scale premiums on most

to the public.7 However, these strategies put

non-disabled adults, and incorporates a work

government officials between the patient

requirement for Medicaid recipients.8 Cov-

and the healthcare provider. We’d recom-

erage requirements are not altered, and the

mend that the state tie transparency and

vulnerable populations for whom Medicaid

low-cost, high-quality healthcare to the sales

was originally intended are continuously

and property tax breaks currently given to 7 http://www.ncsl.org/research/health/transparency-and-disclosure-health-costs.aspx

8 http://www.kff.org/medicaid/fact-sheet/proposed-changes-to-medicaid-expansion-in-kentucky/

HEALTHCARE

the

SOLUTIONS

cont.

protected. Kentucky’s waiver prepares citizens with the

practice for a broader range of medical practitioners,

knowledge needed to take charge of their own health-

allowing them to see more patients at lower cost.

care decisions, addresses state-level determinants of illness, and engages recipients to help them move

Expand the use of charity care

out of the system over time. The state of Kentucky

Rising out-of-pocket costs for both Medicaid enrollees

estimates it will save $2.2 billion over the course of

and the privately-insured have left many unable to

the five-year waiver. Idaho should submit a similar

utilize their coverage, instead they turn to low-cost or

proposal, which asks for reciprocity from beneficiaries

free clinics for care.12 Again, coverage does not ensure

with the intent to help them be independent health-

access and access does not equate to quality. The un-

care consumers.

insured gap population of Idaho, as well as the insured

who cannot afford co-pays or deductibles, would

Use available resources and innovation

benefit from charity clinics. Idaho could update its state income tax form to allow refunds to go to charity

Senate Concurrent Resolution 113 of 2017 urges Idaho

care, as well as facilitate the partnering of non-profits

hospitals to create more residency programs, as only

to provide charity care, in order to serve the long-term

42 residency openings are available annually in the

needs of disadvantaged populations. Help private

state. Though adding residency positions would

entities establish networks necessary to directly help

positively impact the number of active physicians in

local individuals achieve better health outcomes, rather

Idaho, better allocation of available resources would

than throwing money into Medicaid, a program that

ease the physician burden in a shorter time frame.

fails those who actually need it. Because local groups

Because residency programs must take place near hos-

can provide more focused, individualized care to target

pitals, and hospitals are disparately situated in urban

populations, Idaho should take steps to encourage

environments, the lack of physicians in rural regions

charity-based services that drive Idahoans to self-suffi-

remains. Of Idaho’s 44 counties, 35 are rural. Tele-

ciency. Another basic step the Legislature can take is to

medicine allows rural Idahoans access to affordable

expand charity care liability immunity13 to include free

medical consultations without transportation and time

and sliding-scale services that providers offer at their

hindrances, as well as permitting licensed professionals

own clinics, and provide continuing education credits

to “see” more patients. HB150 established the Inter-

for these provisions. Allow healthcare savings to be

state Medical Licensure Compact; Idaho could enhance

incorporated in Individual Development Accounts14 so

this bill’s impact by including NPs in the clinical scope

Idahoans can build accounts for future health needs.

of interstate telehealth providers. Idaho could also make care more accessible by expanding the scope of 9 https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/ky/ky-health-pa.pdf 10 http://www.idahocom.org/news/2017/5/18/idaho-press-tribune-constructionstarts-on-idahos-first-medical-school 11 http://telehealthcouncil.idaho.gov/

HEALTHCARE

12 http://digital.olivesoftware.com/Olive/ODN/idahostatesman/shared/ShowArticle. aspx?doc=ISM%2F2017%2F06%2F14&entity=Ar01004&sk=C8C49F3F&mode=text 13 Title 39, Chapter 77, Idaho Code. 14 Title 56, chapter 11, Idaho Code.

â&#x20AC;&#x153;

Idaho has to offer choices to her residents so that individuals, as well as the state, can

â&#x20AC;&#x153;

be self-reliant.

the

BENEFITS As government involvement in healthcare has increased, affordability and quality have decreased. Idaho needs to get back to meeting communities and individuals where they are, providing healthcare services and support directly to those in need. Instead of expanding Medicaid, Idaho should expand charity care and utilize the resources and manpower within the state to help Idahoans achieve economic independence. Idahoans can help one another by volunteering at clinics to support their neighbors in accessing healthcare and personal development services. Long-term solutions that build people up, give them a sense of purpose, and address the underlying causes of poverty are more effective than vertical approaches. Charity care, in combination with innovative delivery of medical services, would give Idahoans quality options that transcend economic or regional barriers. Transparency and open markets would allow Idahoans to compare their choices and drive costs down. Overall, Idaho has to offer choices to her residents so that individuals, as well as the state, can be self-reliant.

HEALTHCARE

K-12 Education

Break the one-size-fits-all education mold By Fred Birnbaum For many parents, dispatching their children to the first

side their home. Nevertheless, the local school district

day of school each year brings a mix of joy, hope and,

continues to take the family’s money without providing

after a long summer break, relief.

any return.

For Stephanie Zimmerman of Boise, a mother of nine,

“My tax dollars right now are getting spent on everyone

sending her kids to school each year brought serious

else’s kids but my own,” Stephanie said. “It bugs me.”

angst. A bold policy reform could change that and give fam“Every time the school year would start, I’d get this sick

ilies like the Zimmermans more resources to educate

pit in my stomach,” she told the Idaho

their kids. Were Idaho to adopt

Freedom Foundation. “But, I ignored it

education savings accounts,

because I was afraid of it.” Her dread led her and her husband, Bill, to research alternative education options, including home- schooling. After much consideration and prayer, the parents decided to pull their kids

“My tax dollars right now are getting spent on everyone else’s kids but my own ... It bugs me.”

the Zimmermans could invest in high-quality tutors for their children, buy more books and enjoy more field trips. “Taking this crew to the museum is not inexpensive,” Stephanie said.

from public schools, which they view as deficient for their family’s needs.

Education savings account work like this: After parents take

“The public education system, for all the dedicated

their child out of the public school system, the family

teachers and all the good that can be there, it’s missing

receives access to a portion of the money the gov-

so much,” she said. “And if my kids are going to be gone

ernment would have spent on that child’s education.

from me for six to eight hours a day, I want them to

Then, the family can use the funds—usually with some

be learning something. I do not want their time to be

restrictions—to cover other education-related expens-

wasted.”

es. Home-school families might spend the money on software, computers or science supplies, while other

The Zimmermans charted a new course for their chil-

parents might use the funds to cover private school

dren, one they say allows each child to pursue his inter-

tuition.

ests, work at his own pace and direct his own learning. For the Zimmermans, education savings accounts “The goal from the very beginning is to teach them

would open new doors for educational fulfillment.

how to teach themselves,” she said.

Stephanie asserts, “It would mean more opportunities

The family invests hundreds of dollars each year in

in the long run for these kids.”

books, school supplies and educational activities out-

K-12 EDUCATION

the

PROBLEM To Idahoans of all walks of life,

Spending has no discernable effect on Idaho student success as measured by testing

a quality education consistently ranks at the top of concerns. That’s not just because it’s a con1

ernment function. It’s because a quality education is a driver for so many other outcomes, including upward economic mobility, crime reduction, and dependency on government. Getting education

100% Percent Passing Science Scores

stitutionally required state gov-

policy right is a prime responsibility for the governor and the

80% 60% 40% 20% 0% $4,000

$6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 Spending Per Student

Legislature. Yet, public education has been doing poorly when it

school payrolls but it hasn’t done much to separate

comes to meeting the needs of students. Recent Ida-

high-performing teachers from their under- perform-

ho student standardized test scores have been flat.2

ing counterparts.4

American public schools are not very competitive

Idaho needs to do more. And shoveling wads of

when compared to their foreign peers.3 As a result,

cash in record time is not the answer. Despite school

many states have mainly thrown ever-increasing

districts spending anywhere from roughly $5,500

amounts of money at the problem.

to about $18,000 per student each school year, test results offer no evidence that increased spending

Idaho is no exception. In 2013, Gov. Butch Otter’s

enhances students’ ability to pass Idaho’s basic science

“Task Force for Improving Education (K-12),” included

testing.

20 recommendations, many of which demanded more money, but not better results. For example, a

As the chart above shows, districts that spend mod-

new protocol for improving teacher pay is supposed

estly show the best student results per taxpayer dollar.

to reward the best teachers. Alas, the so-called “career ladder” has increased the money going into 1. Article IX, Section 1 of the state Constitution says, “the stability of a republican form of government depending mainly upon the intelligence of the people, it shall be the duty of the legislature of Idaho, to establish and maintain a general, uniform and thorough system of public, free common schools.” 2. Idaho State Department of Education, Communications Department, 06/15/17 ISAT preliminary summary results presented to State Board. 3. “Global Grade, How Do US Students Compare,” by Marian Wilde, April 2, 2015. Among 57 countries compared, the US was 17th and 24th in science and math respectively, based on Program for International Student Assessment results.

K-12 EDUCATION

4. The Danielson Framework, used in the state’s new career ladder, was developed by Charlotte Danielson as a comprehensive method of evaluating teachers. However, Ms. Danielson did not intend the framework to be used for compensation changes, as it is now. Danielson herself had this to say in a recent forum, “People are justified in being skeptical of how accurate evaluations are because in most states ninety-eight percent of teachers are given the top two ratings, or some unlikely percentage — nobody really believes that’s the case,” Danielson said. “That keeps everybody quiet and nobody is going to complain about that, that’s probably one reason to do it.” This rating methodology is too cumbersome for pay evaluations and the proof is that across Idaho, less than three percent of all 15,571 teachers earned scores below the top two scores of “proficient” and “distinguished.”

This study included 99 Idaho public school districts,

many classes in Idaho’s public schools acknowledge

using 2013 financial data and 2014 testing results.

this or make such training and education a compo-

Spending data includes instructional and support

nent of the K-12 education system? In Idaho, is a

overhead annual outlays per student, based on aver-

parent more likely to find a schoolhouse course on

age daily attendance. Testing results used the scores

band or on computer sciences? These are important

from the 2014 10th grade Idaho Science Test, count-

questions that must be asked.

ing all passing scores of basic or better. Preparing students for the modern, dynamic future Additionally, the state’s public-school funding formula

that awaits them will require an education system that

has not been updated in more than two decades. In-

focuses resources on individual students, who, with

deed, how public schools are funded in Idaho predates

their parents, will select how they learn. Today, rough-

the modern Internet and the ubiquitous use of mobile

ly 6,000 students are on waiting lists to enroll in their

technology. The formula is the method by which state

preferred school.6 This is not real education choice. It

general funds are appropriated to more than 100

would be like a grocery store consumer having to wait

school and charter school districts throughout the

years to switch between Albertson’s and Winco if he

state.

were unsatisfied with the food offerings in one versus the other.

Because so much of the education landscape has changed as rapidly as technology has advanced and

Teachers are overly burdened with extensive admin-

the economy has changed, the old funding formula is

istrative work to comply with federal and state edicts

st century

becoming as useful and as relevant to the 21

and directives. For example, the majority of “Leader-

education system as a 45 RPM record is to the music

ship Premium” payouts were not related to student

industry.

activities or athletics.7

Indeed, Idaho’s education system should be account-

Common Core and SBAC testing have marginalized

able and customizable to the needs of individual stu-

teachers and their ability to use their talents and

dents and their parents. It also needs to be robust and

training to get the most out of students. As a result,

adaptable to modern requirements intended to help

an attractive job filled with promise and potential has

kids become college or career ready, changing and

been reduced to a clerical role with little room for

adjusting at the speed of technological advancement.

creativity, innovation and customization to their own styles and the needs of individual students. Teachers

For example, we know that many future jobs will

also find their voices are stifled by labor unions who

require computer coding and robotics, and yet too few

strong- arm them into obtaining collective bargaining

school districts likely recognize this. Meanwhile, quite

positions with the local school board because, unlike

a bit of research is underway to make blockchain led-

other states that have curtailed union power, Idaho

ger technology a key component of a not-so-distant

requires school boards to negotiate with labor unions

future global frictionless economic system. But how

even if the unions can’t demonstrate having majority membership.

5 The unpublished study about spending per student and percent passing the 10th grade

basic science test was conducted by Tim Oren using publicly available data. At the time of the study, January 2017, the latest comprehensive testing data was for 2014. The dataset and analysis is available for a full public review.

6 Idaho Freedom Foundation survey of Idaho public charter schools, June 2017. 7 Leadership Premium Report, 2015-2016, page 6, (g)

K-12 EDUCATION

the

SOLUTIONS Better define the objectives

Leadership Premiums awarded to teacher based on

Idaho wants 60 percent of Idahoans entering the

the 2015-2016 report were for activities unrelated to

workforce with “some post-secondary degree or

student activities orathletics.8

certificate.” It is not clear why this is an appropriate performing schools, because any high school graduate

Use technology to facilitate learning

can purse a certificate. The goals should be redefined

Technology can aid learning, but officials should

based on student outcomes tied to the specific

not pursue digital learning for its own sake. Instead,

recommendations.

school officials should seek sensible, cost-effective

goal or whether it has anything to do with high

solutions. For example, small, rural districts could use

Write a school funding formula that allows the money to follow the student

technology for open-sourced, online learning.

Craft legislation that allows for true Education Savings Accounts

Coding and blockchain can change the world. Idaho

Legislators can model a savings account bill aftet those passed in Nevada or Arizona. In Arizona, for example, Senate Bill 1431 gives parents access to 90 to 100 percent of the money allocated for their child’s public education, depending on family income, with the

Teach the use and application of technology students need these skills to thrive in the 21st century.

Eliminate the Common Core curriculum and SBAC testing

Drew Catt, director of state research and policy

End the union practice of potentially coerced elections

analysis at EdChoice, says,”ESAs allow parents to pick

Liberate teachers from union coercion; end card

any type of learning environment for their child, which

check and go to secret ballots.

average ESA worth $4,400 peryear.

does include schools, at-home learning, depending on the state, but also tutoring services, and it opens it up for a variety of services that you’re not necessarily going to get at a single brick-and-mortar location.”

Reduce administrative burden on teachers Let teachers teach. For example, 61 percent of the

K-12 EDUCATION

8 Cited in footnote 7, Leadership Premium Report, 2015-2016, page 6, (g)

“

ESAs allow parents to pick any type of learning environment for their child, which does include schools and at-home learning, depending on the state, but also tutoring

“

services...

the

BENEFITS Idaho can be at forefront of education reform or simply accept the status quo. Let’s put our children first; It is time for Idaho to innovate in K-12 education. As stated earlier, a high-quality education is of great importance to most Idahoans. The quality of Idaho’s education has ramifications for decades to come.

K-12 EDUCATION

Higher

Education

Toward affordable and world-class Idaho campuses By Phil Haunschild Night after night, Charles Neal performs the same

As one might expect, working in a prison isn’t an uplifting

mind-numbing routine: He and his colleagues tread well-

experience and Neal explained that the often-vulgar

worn paths inside the dimly lit corridors the Snake River

environment can tax a person’s mind and soul.

Correctional Institute just west of Ontario, Oregon. “You go to work, you don’t do much physically, but when Neal and his fellow correctional officers check inmates’

you get home, you’re exhausted,” he noted. “You’re ex-

cells for contraband, and ensure prisoners haven’t

hausted from all the stuff around you.”

harmed themselves. During his shifts, he often daydreams of building a better, Upon finishing the rounds, a usually bored Neal returns

more fulfilling life for himself and his family. Eventually he

to the prison’s control center and lets his mind wander to

wants to pursue a degree in nursing, a field that will allow

the opportunities the future holds.

him to help people while earning a steady paycheck.

Neal, 31, lives in Middleton and works as a correctional of-

His wife also wants to return to school. She holds a

ficer at the facility and has for the last three years. Though

two-year degree from Boise State University and wants

he earns enough to put food on the table and cover the

to earn a teaching degree so she can contribute to the

mortgage on his family’s home, he is less than thrilled

family’s financial well-being. In the family’s dream sce-

about his work.

nario, Jessica would teach at the same school the couple’s daughter attends.

“No one goes into corrections as the field they want to go into,” Neal told the Idaho Freedom Foundation. “It’s

The Neal family faces significant roadblocks, though. Pay-

always an accident, or they need a job.”

ing for college, with its ever-increasing price tag, is among the challenges. “We’ d like to keep costs down,” the young

Shortly after returning home from a mission for the

father said. “But, we might have to bite the bullet.”

Church of Jesus Christ of Latter-day Saints, Neal married his then-fiancée, Jessica. A few months after that, the

The clan would like to avoid going into debt to finance

couple became pregnant with their daughter, who’s now

college, as it’d take years to unbury from that. “I don’t

four years old.

want to put that burden on my family,” he added. Despite the oncoming hurdles, Charles stands firm in his

The reality of fatherhood—primarily the duty of providing

resolve to do all in his power to escape his prison trap.

for one’s family—sent Neal, who doesn’t hold a college de-

“Me and my wife don’t want grand things, like a big

gree, on a job hunt. Eventually, he landed with the Idaho

house,” he explained. “We want to give our daughter at

Department of Correction. He stayed there for two years.

least a comfortable life.”

Then, to boost his paycheck, he left the Idaho system and accepted a job at the Oregon prison. HIGHER EDUCATION

the

PROBLEM Idaho’s public colleges and universities are at an

bring it about.2 Part of this is that Idaho students are

inflection point. The governor’s Task Force on Higher

not seeing a corresponding increase in the value of

Education has acknowledged that the state will not

the education as compared to the price they must

reach its targeted 60 percent of 25- to 34-year-olds

pay to attend. Idaho’s four-year colleges and univer-

holding a postsecondary degree or certificate.1 The

sities increased tuition 3.17 percent annually over

State Board of Education, the governor’s office, and

the past 4 years, even while the appropriations they

the Legislature had all set out to reach this goal by

have received from the General Fund increased by

2020, but their acknowledgement that this is not

6.1 percent over the same period. This is in stark

attainable should spur larger reforms statewide.

contrast to the declining enrollment figures; a 1.7

The 60 percent goal has been in place since 2010,

percent total decrease across the four schools.3

but even with heavy investments and a concerted

Even apart from this increase in appropriations, in

effort, the state’s strategies have not been able to

FY 2017 Idaho’s four public universities were granted

1 https://www.idahoednews.org/news/higher-ed-task-force-stares-new-dauntingnumber-40000/

2 https://boardofed.idaho.gov/research_stats/documents/fact-sheet/2015/2015_Final_Fact_Book.pdf 3 Legislative Budget Book 1-53-4

60,000

46,000

45,000

44,750

30,000

43,500

15,000

42,250

2010

2011

State and Gov. Grant

HIGHER EDUCATION

2012

2013

Tuition and Fees

2014 Attendance

2015

2016

41,000

Attendance

Million $

Revenue sources and attendance

“

At this point, Idaho has the opportunity to tread a new path, to reform the state’s public university

$35 million through the Permanent Building Fund

system and make it

for new facilities. Yet, the universities maintain a combined $196 million in cash reserve balances,

more accessible to all

funds which are free to be spent on these projects.4

“

This is in addition to the substantial portions of

Idahoans.

endowment funds which these universities can use for building projects. However, the management of their finances is not the only problem with these universities; the atmosphere on college campuses has serious problems. Boise State University faced a lawsuit in 2014 for its policies prohibiting free-speech on campus. The university deterred a Young Americans for Liberty event, under the auspices of security risks. As a result of IFF’s response and others, the University agreed to change its policies and allow student groups the freedom of expression on campus, free of restrictive and discriminatory “security fees”.5

tent policies across its universities. The Foundation for Individual Rights in Education has found policies at each of Idaho’s four major public colleges and universities that infringe upon the First Amendment rights of students and faculty.6 At this point, Idaho has the opportunity to tread a new path, to reform the state’s public university system and make it more accessible to all Idahoans.

This, however, has not ended the prohibition of free speech on campus, as Idaho does not have consis4 Legislative Budget Book. Pg 1-56 and 6-25. 5 http://idahofreedom.org/bsu_yal/

https://www.thefire.org/?s=lewis+and+clark+state+college

HIGHER EDUCATION

the

SOLUTIONS Pursue innovative solutions for cost reduction

that comes with it. The average cost for these coding

Institutions of higher education have opportunities

$92,852 bill a student would pay for a four-year Com-

before them to reduce the cost of providing educa-

puter Science degree at a university such as Boise

tion to a wider scope of individuals. Online courses

State.10

boot camps is just under $11,500,9 a far cry from the

are one such example; their introduction has allowed countless people, in Idaho and elsewhere, access to

As this example indicates, career-specific educations

education that they otherwise would not receive. Ac-

can save students enormous sums of money. Any

cording to a 2015 study, over 60 percent of students

initiatives taken by the State Board of Education or

enrolled in CSI and CWI required remedial courses

other public agencies to encourage continuing educa-

in Math and/or English.7 Intercollegiate collaboration

tion must do so without preference for the traditional

would help ease the additional cost burden that these

4-year brick-and-mortar baccalaureate degree over

students face, potentially increasing the low 18.1 per-

that of career-technical education programs. Students

cent graduation rate from Idaho’s two-year colleges.8

should be able to pursue the education that best fits

There is no feasible reason why students should con-

their career path, their skills, and in the timeframe that

tinue to pay more for courses at Idaho’s institutions of

works for them. State policies must now catch up with

higher education, even while accessibility continues to

new innovations, and use these advancements to

increase for diverse opportunities from schools of all

reverse the tide of increasing university costs.

calibers.

Teaching skills such as computer coding in a “boot

Require the use of reserves and endowments before additional appropriations are given out

camp” form, short and intensive, provides students

The Governor should require universities to use their

with an opportunity to get a relevant education

funding sources to develop facilities on their campus-

without a full four-year commitment or the price tag

es prior to receiving additional appropriations for this

Skill-oriented courses are another such innovation.

purpose from other state sources. State universities 7 The percent of unprepared students attending these two community colleges is much higher than at Idaho’s 4-year institutions. BSU and UI have a 12 percent and 14 percent remediation percentage, and ISU and LCSC have a reported 37 percent and 56 percent, respectively. https://public.tableau.com/profile/idaho.slds#!/vizhome/IdahoPostsecondaryRemediation/RemediationStory 8 http://collegecompletion.chronicle.com/state/#state=id&sector=public_four

HIGHER EDUCATION

9 https://www.coursereport.com/reports/2016-coding-bootcamp-market-size-research 10 https://admissions.boisestate.edu/cost/- based on Cost of Attendance for Boise state at school year 2017-18 rates adjusted for a similar 3.17 percent annual increase

are building up increasingly large balances in their reserve funds, most of which remains unbound and free for a variety of projects. From 2010 through to the universities’ requests for FY 2018, there has been a 371 percent increase in the total balance of these reserve funds.11

Protect free speech on college campuses Idaho should enact policies to ensure there is a diversity of viewpoints represented on campus and in public discourse. One such comprehensive policy, from Tennessee SB 723, ensures that each public institution “shall be committed to maintaining a campus as a marketplace of ideas for all students and all faculty in which the free exchange of ideas is not to be suppressed.” This law ensures universities do not impose limitations through “free-speech-zones,” security fees for speakers, or by disinviting speakers. Idaho legislators must champion similar policies, protecting the constitutional right of those attending Idaho’s public universities.12

Eliminate (or do not expand further) state scholarship programs The state Board of Education administered scholarships and loan forgiveness programs totaling

11 LBB 1-58 12 http://www.capitol.tn.gov/Bills/110/Amend/SA0333.pdf

HIGHER EDUCATION

the

SOLUTIONS

cont.

$11,663,000 for students at Idaho’s universities in

2014/15 term. Thus, an estimated $1.1 million of Op-

FY 2017, up 75 percent from just 3 years prior. The

portunity Scholarship money went to students who

continual expansion of federal and state scholarships,

did not go on to their second year.

loans, and grants has been a major driver in increasing have noted. Subsidizing the education for the few

Reform community college taxing districts

recipients of these scholarships has the unintended

Idaho’s community colleges are each located within

effect of further increasing tuition for all. If Idaho is to

taxing districts which subsidize the costs of education.

better control the inflating costs of public higher edu-

In each case, the taxing districts consists of the one or

cation in the state, these subsidies must be ended.

two counties where the main campuses are located.

tuition across the United States, as many economists 13

The effect of these taxing districts is that they place Furthermore, investing in students who may not

the burden on local residents, even while many of

complete their post-secondary education wastes

the students come from outside of the taxing district

state finances. The graduation percentages for higher

boundaries. The College of Southern Idaho takes 56

education in Idaho are much lower than national

percent of its students from outside of Twin Falls and

averages across the board. From a four-year college

Jerome counties, the boundary for its taxing district.

in Idaho, 41.4 percent of students graduate within 6

For North Idaho college and the College of Western

years while the national rate is 57.6 percent. Recip-

Idaho, they have 35 percent and 12 percent respec-

ients of the Opportunity Scholarship were slightly

tively of their students from outside of their districts.

more likely than non-beneficiaries to enroll in their

These local taxpayers are stuck footing the bill for

second year of undergraduate study in a four-year

out-of-district students; for those in CWI’s taxing

college, but nevertheless, 21 percent of the recipients

district, that was $16 per $100,000 of value, while

did not continue their schooling. According to the

for those in the districts for CSI or NIC, they paid

Idaho Opportunity Scholarship Report, approximately

roughly $100 for the same value.16 Idaho needs to

1,500 students were given an average $3,513 for the

develop a system for distributing the costs more

effectively so that residents are not saddled with 13 https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr733.pdf 14 Chronicle of Higher Education: Idaho. http://collegecompletion.chronicle.com/ state/#state=id&sector=public_four 15 Opportunity Fund Report 2016. Recipient retention rate was 79 percent versus the 75 percent rate of attending the next year of college for non-scholarship Idaho students. https://boardofed.idaho.gov/research_stats/Idaho%20Opportunity%20Scholarship%20 Report%202016%20-%20full%20report.pdf

HIGHER EDUCATION

heavy payments. 16

Based on 2016 Numbers. Tax Commission Data

the

BENEFITS Idaho has the capacity to bring public higher education back to the citizens it was meant to serve. Each year, more Idahoans find themselves unable to afford higher education, but this does not have to be the case. Reducing the cost of tuition for traditional programs and providing new non-traditional affordable options would bring state education back to those from whom

“

Idaho needs to develop a system for

it has been taken. Making postsecondary degrees more affordable and adding more than just programs for traditional degrees would enable the 40,000 more students to obtain their postsecondary certificates and degrees which the state needs to reach its 60 percent goal.

distributing

Additionally, colleges and universities thrive on civil

the costs more

the spectrum and allowing them to explore varied

effectively

discourse. Introducing students to ideas from across opinions throughout their time at college will greatly increase the value and efficacy of Idaho’s institutions of higher education. Guaranteeing faculty have the

so that

ability to explore new and old ideas freely will ensure

residents are

majority or the administration.

not saddled

Access to the best of ideas and a system of higher

with heavy

populace.

that research-in-the-making is not censored by the

education that fits their needs can only benefit Idaho’s

“

payments.

HIGHER EDUCATION

Property Tax Reform

Protect property owners from unsustainable tax hikes

“While leaders laud their shiny new plaza facelift, some in the town go without the necessities that make cities livable. “

By Phil Haunschild Joel and Sylvia Garcia of Caldwell feel slighted.

make cities livable.

Joel Garcia is a longtime resident of Caldwell, having spent

Joel and Sylvia know because they own a modest rental

his last 40 years in the up-and-coming western Idaho

home on Madison Street in Caldwell that sits adjacent to

town. He has observed the city’s transformation from a

a dirt road. The road, for the most part, also lacks gutters

regional agricultural center to a municipal hub focused on

and cement sidewalks. The family has tried for years to

building its downtown core.

draw attention to the small strip of dirt, to no avail.

It is that effort—the revitalization of Caldwell’s epicenter—

The urban renewal district gobbles up the biggest share of

that leaves Joel and his wife Sylvia feeling ignored by local

that abode’s property tax bill—some 56 percent in 2016.

government.

That year, the Garcias paid $1,899 in property taxes for their Madison Street home, of which the urban renewal

In April 2017, city and business leaders donned shiny

agency grabbed $1,077.

hardhats, grabbed ceremonial shovels and broke ground on the renovation of Indian Creek Plaza, a $7 million

The unfairness of it all irks Joel and Sylvia.

project officials and business owners hope will draw more economic activity to the downtown area. Expected to

“We are asking for little things that we need, and they

cross the finish line in late 2018, the updated plaza will

can’t give them to us,” Sylvia told the Idaho Freedom

feature an ice skating rink, splash pads, a concert stage

Foundation. “Just clean [up the street] and put in some

and more.

sidewalks for the kids.”

Caldwell’s urban renewal agency coughed up $6 million

A repeal of Idaho’s urban renewal laws wouldn’t immedi-

for the project and the city covered the rest.

ately lower taxes for people like Joel and Sylvia. Nor would

Though Joel and Sylvia appreciate the the plaza’s facelift, they wonder if the city or the urban renewal district will ever get around to providing some of the basics for Caldwell residents—urban staples such as paved roads, gutters and sidewalks. That’s right: While leaders laud their shiny new plaza facelift, some in the town go without the necessities that

repeal immediately lay pavement on that dusty road in Caldwell. However, repeal would return taxpayer dollars to government entities that are directly accountable to the people. Those units of governments, including cities, counties, school districts and others, could then lower taxes or spend the funds on vital projects.

PROPERTY TAX

the

PROBLEM Property taxes are the single largest source

separate projects across the state.3 Statuto-

of revenue for Idaho state government

rily, these projects are established to “raise

and local units. Revenues from this source

revenue for the finance and economic

totaled almost $1.7 billion in 2016, account-

growth and development of urban renewal

ing for nearly one-third of state and local

areas and competitively disadvantaged bor-

revenue, the vast majority of which went

der community areas” and “to encourage

towards schools, city services, and coun-

private development and investment in the

ties. That figure represents an increase of

same areas.”4 Yet, urban renewal districts

33 percent since 2007, even though there

can be found everywhere, from the poorest

are statutory prohibitions on property tax

to the wealthiest areas of the state, and in

increases. The restrictions on property tax

any geographic area, not just within border

collections do not mean property owners

communities.

benefit from them; most property owners have grown accustomed to property tax

Urban renewal districts raise their money

bills that grow by percentages in the double

through Tax Increment Financing (TIF), a

digits annually, attributable to increases in

process that takes any growth in property

market valuations, even if nothing changes

tax revenues and uses that money to fund

with their property. Because of the large

the urban renewal agencies. The process

impact which property taxes have on

for TIF works by first determining the total

numerous Idahoans, and for their especial-

value of property within the boundaries of

ly immense impact on local government,

the district. For the life of the urban renew-

property tax policies need to be reex-

al agency, property tax revenue is divided

amined and any shortcomings must be

into two streams. The first stream comes

reformed.

from the original assessed value and goes towards the original services, such as fire,

One of the most glaring failures of Idaho’s

city, and schools. The second stream flows

property tax policies is the 24 urban re-

to the urban renewal agency. Thus, any in-

newal agencies, which currently oversee 79

crease in property values goes towards the second stream for urban renewal agencies. Though TIF is often sold as “free money”

1 “2016 Annual Report,” Idaho Tax Commission. https://tax.idaho.gov/ reports/EPB00033_12-06-2016.pdf 2 “County Property Tax Budgets: Public Records Request,” Idaho Tax Commission, 2017.

PROPERTY TAX

3 “Urban Renewal Agency Registry,” Idaho Tax Commission, 2017. 4 Idaho Code 50-2902

“

The money the agencies spend can be put

towards pet-projects in the municipality ... all at the expense of other services provided by fire districts, schools and other

“

government entities.

that pays for itself, it truly strips money away from

Urban renewal agencies are just one of the many

these other services, preventing their growth. Urban

pieces which make the property tax system too

renewal agencies have become largely unaccount-

complex for many Idahoans to understand. The

able recipients of $62 million.

system is established upon taxing districts, for which

there are more than 30 different types, totaling more Those who manage the agencies are not elected,

than 1,000 districts.8 Each of these taxing districts

nor are they held accountable to the public through

receives tax dollars that go toward a specific source,

any direct routes. While some city council members

be it a city government, local highway construction,

take on this role on the urban renewal board as well,

a community college, or an urban renewal agency.

this is entirely on a case-by-case basis. There is a

Where the complexity comes is in the intersection of

public vote when these districts are established, but

these districts as there are more than 3,271 separate

for the remainder of the life for these agencies, up to

and unique “tax codes,” which are defined as the

20 years, there never again needs be a public vote.

combination of taxing districts that each property

The money the agencies spend can be put towards

owner pays to.9 The enormous number of districts

pet-projects in the municipality, which has been

can make it difficult for Idahoans to fully under-

shown to foster cronyism and subsidize major de-

stand just where their dollars are going and with the

velopment corporations, all at the expense of other

numerous borders drawn, one homeowner may be

services provided by fire districts, schools and other

paying far more in property taxes than their neighbor

government entities.

across the street, even though they receive the same

services. 5 “Statewide Urban Renewal Agency Budgets: Public Records Request,” Idaho Tax Commission, July 2017. 6 For example, from some of the state’s larger cities; Twin Falls and Sandpoint have no city council members on their Urban Renewal Agency Boards, while Nampa, Caldwell, Rexburg and Boise all do have shared members. 7 Randal O’Toole, “Theft as Urban renewal: Why Idaho Should repeal the Local Economic Development Act,” Idaho Freedom Foundation, 2011.

8 “GIS Taxing Districts Maps and Data,” Idaho Tax Commission, 2017. 9 “2016 Annual Report,” Idaho Tax Commission. https://tax.idaho.gov/reports/ EPB00033_12-06-2016.pdf

PROPERTY TAX

the

PROBLEM

cont.

In another failure of state policies, Idahoans

increase of three percent each year discon-

are subject to rapid increases in their prop-

nects the district’s budget from the sources

erty tax rates without warning. The combi-

of the revenue. This in turn ensures the

nation of two practices makes this possible.

permanent increase of rates to justify the perpetual expansion of budgets.

First, local governments have the authority to raise property tax rates by up to three

For this reason, county budgets have grown

percent annually. However, if they choose

by a third in the decade 2007-2016.10

to forego a portion of this rate increase

Even throughout the December 2007-

one year, the remainder can be stashed

June 2009 recession, counties continued

away for a future use, in what is known as a

to increase their budgets by 6 percent over

foregone balance. If they increase property

the previous year in 2008 and 4 percent in

taxes by, say two percent, the remaining

2009.11 Because taxing districts can statu-

one percent increase can be saved in-

torily increase the amount they collect by

definitely. This allows a city or county to

a full three percent, plus any foregone bal-

increase property tax rates by significant

ances, in addition to a growth factor for any

amounts – greater than three percent - all

new construction or annexation, there is no

at one go. This comes as a financial shock to

tie to the economic wellbeing of individuals

many property owners as they see their tax

within the community. When business-

bills skyrocket from one year to the next, all

es and households tighten their budgets,

without forewarning or explanation. Those

taxing districts continue to increase theirs,

who rent property, whether for a business

putting higher taxes on many when they

or as a home feel the strain as well as their

can least afford it.

rent rises in response to the increased costs for the landowner.

As property taxes are a significant annual expense for many Idahoans, and as they

Secondly, allows taxing districts to contin-

are central to state and local funding, Idaho

ually increase property tax assessments,

needs an effective mechanism for reining in

which allows their budgets to grow at an

its property taxing system.

incessant pace. Taxing districts can increase their total assessment by up to three

Reduce the Number of Taxing

percent each year as well as an additional increase for any new construction within a taxing district. Allowing the permanent

PROPERTY TAX

10 “County Property Tax Budgets: Public Records Request,” Idaho Tax Commission, July 2017. 11 “County Property Tax Budgets: Public Records Request,” Idaho Tax Commission, July 2017.

the

SOLUTIONS Reduce the number of taxing districts and adjust district borders

the state closer to establishing sensible district bound-

The taxing districts, which number more than 1,000,

towards rational districts.

should be reduced and their varied and often complex

aries, however there is much more progress to be made

agencies look more like gerrymandered districts than a

Phase out urban renewal projects across the state

logical distribution of the costs for a service. Those who

The urban renewal projects, which have been formed

are serviced by a district should be the ones who pay into

across the state, are established on a 20-year timeline.

it, and not the other way around. Take, for example, the

State policymakers should prohibit the formation of any

Caldwell Urban Renewal District, where the borders have

new urban renewal agencies or the renewal of those that

been redrawn such that they capture specific segments

are already established. This would keep districts from

of the city, enwrapping some properties without adding

changing their plans and in so doing, reset their tax base,

them to the district. In 2011, the Idaho Legislature did

effectively beginning over with a new 20 years. Once a

pass House Bill 95, which prohibited the expansion of

project has been completed that urban renewal agen-

some urban renewal districts, and specifically stated that

cy will terminate, and the taxation that has been going

“contiguity [for a district] cannot be established solely by

towards the urban renewal district will go back towards

a shoestring or strip of land which comprises a railroad or

the services that were prevented from growing.

borders should be simplified. Many of the urban renewal

public right-of-way.” Legislation such as this has moved

460,000,000

425,000,000

390,000,000

355,000,000

320,000,000 2007 2008 2009 2010 2011 Year to Year Increase (Percentage)

All County Property Tax Budgets

Percentage

Increase in county property tax budgets

2012 2013 2014 2015 2016 Total Property Tax Budgets

PROPERTY TAX

the

SOLUTIONS

cont.

At a minimum, however, urban renewal proj-

be eliminated in its entirety, to protect

ects should be used to combat urban blight,

property-owners and renters from ambush

which they were originally established to do,

property tax hikes.

and all money should go towards public projects, not towards subsidizing private devel-

However, completely eliminating this ability

opers. In choosing the locations and types of

may perversely incentivize local govern-

projects urban renewal agencies fund, there

ments to raise property taxes annually by

should be fair competition among developers

the maximum amount allowed and simply

and between projects, rather than the current

bank the excess revenue for a later day.

methods, which often pick winners and los-

Thus, to further protect taxpayers, local gov-

ers. Lastly, there should be greater account-

ernments could be allowed to store these

ability and transparency, including complete

excess revenues, but prior to increasing the

buy-in from local governments. Further,

budget coming through property taxes by

urban renewal agency expenditures should

more than three percent, they must put the

be included in the general local government

increased budget up for a vote within the

accounting so that residents know where their

district. This would ensure that the public

property tax dollars are going and know what

has a say in their property tax hikes, and that

comes from them.

residents would not be caught off-guard by

Eliminate the use of foregone balances Taxing districts should not be able to postpone and store up credits, or foregone balances, thereby allowing a district to geometrically increase the amount hike they can increase taxes with each passing year. This process was modestly reformed during the 2017 Legislative Session with the passage of a bill that allows local government officials to waive storing up these foregone balances. However, all counties can still hold onto these foregone balances as a safety measure, continuing to build up immense sums.12 This ability to stockpile tax increases should 12â&#x20AC;&#x192;

PROPERTY TAX

House Bill 207. 2017 Session

unusually large, out-of-the blue increases.

Reform school district bond and levy votes Four times a year, school districts are able to put up for a vote the bonds and levies they use for supplemental income. If a bond or levy vote fails one month, the district can put the measure back up for election just a few months later, perpetually requesting money from their constituents until they do receive it.13 For example, in 2014, residents of the Wendell School District were asked six times to pass bonds 13â&#x20AC;&#x192; Not only can school districts indefinitely put up a vote, Idaho Code 33-802(5) allows districts to request a levy which goes on perpetually until it is voted down by a school board. This is an additional dubious practice which ties the hands of future residents.

and levies, several of which were

es, and that their dollars go towards

for identical amounts. Similarly,

the projects when they have paid

Bonneville School District placed

for them.

before voters four bonds and one levy within the same year.15

Repeal the personal property tax

Additionally, school districts can

The state taxes both real and

request money from their residents personal property; the former before they begin putting it towards included assets such as buildings any use. For example, a district can

and the land they are built on, the

collect a levy from taxpayers for a

latter is anything else that is not

few years before they even begin

qualified under real property, such

performing the work the levy was

as furnishings, computers and

dedicated to.

appliances.16 The first $100,000 of personal property owned by

Policymakers should protect tax-

any single taxpayer is exempt,

payers by limiting the frequency

as well as household items and

of school district bond and levy

personal effects. The process for

elections and by requiring that the

cataloging and assessing varies by

money from a levy election goes

county, however, for all counties it

immediately towards the purpose(s) can create a substantial strain on it was specified for at the time of

businesses. Each year, this forces

the election. There is currently an

businesses to take an accounting

incentive for school districts to put

of all property, determining the

their funding requests on the ballot

fair market value of all that they

well before the funds are needed

own and whether this exceeds the

and, if the vote fails, to continue

$100,000 exemption.

trying every three months until they do succeed in getting voter

This tax should be repealed, as the

approval. Limiting the number of

value of personal property has no

votes within a year would ensure

bearing on the services which stem

Idaho residents are protected from

from the property tax revenues.

perpetual elections for tax increas-

If a company buys a new set of

14 “School Districts Bond and Levy Research,” Idaho Freedom Foundation. January 2017. 15 Ibid.

Idaho Code 63-201

PROPERTY TAX

the

SOLUTIONS

cont.

computers, this should not increase their

is no increased demand for services, there

payment to a mosquito abatement district,

must be a limit to what the districts can levy.

for water and sewage, or for general city or county services.

Reform the tie between budgets, property assessments and levy rates

rent measure that allows a district to continue to increase its budget beyond the three percent, might indicate an increased demand for the services which fire, sewer, and

Local governments can perpetually in-

water districts provide. However, these two

crease spending regardless of the economic

measures cannot serve as a proper mea-

situation or the value of the property in their

sure for the services of all taxing districts. In

districts. Property taxes are the only form

addition, the state has misguided policies

of taxation that can increase year-upon-

regarding what is and is not new construction,

year, regardless of whether there is more

as when property simply changes hands it

assessed property, or less, whether property

can qualify as new construction, even though

values are going up or down, or whether the

there was no change to the physical property.

economy is growing or contracting. Though

Property valuation is also used as a measure for

the state budget starts with a fixed revenue

distributing the property tax equally. However,

and legislators budget within that, local

this does work as a universal measure, either.

governments work the opposite; they pick

Property owners are often stuck paying very

the amount they want to spend, then charge

different amounts on their property taxes from

property owners whatever they need to

year to year, regardless of whether their use of

reach that figure.

public services increases or decreases.

Policymakers should instigate a serious review to examine ways to protect property owners from this pervasive growth in their property taxes to ensure that property owners are paying for the services which they use. There needs to be a more direct tie-in between taxing district budgets and the quantity and quality of the services they provide. When services increase, budgets should be able to increase, but when there

PROPERTY TAX

New construction and annexation, one cur-

“

Tying local budgets to the growth in real property would ensure that residents are not stuck footing an ever-increasing government

“

budget

the

BENEFITS Good policies for property taxation would ensure that the revenue is going to the right places, and that property owners feel secure in their property and with their expectations for the future. This would ensure that property taxes do not skyrocket from one year to the next, and that they do not continue to increase at an unsustainable rate, pushing homeowners out of their homes and increasing the costs of doing business in the state. Eliminating the use of foregone balances would protect from ambush property tax increases. Further, tying local budgets to the growth in real property would ensure residents are not stuck footing an ever-increasing government budget, taking larger and larger chunks of their personal budgets. Eliminating the Urban Renewal Agencies would provide funding which has been stripped from other public services. For schools, this could mean an additional $18.5 million, for fire districts another $2.5 million, and for highways nearly $4 million.17 Taxpayers could rest assured that their property taxes are going towards the services they expect, not towards feeding crony-capitalists taking advantage of lucrative government contracts to build unnecessary projects in the name of “redevelopment.” Finally, ensuring that property taxes do not continue to rampantly increase and that individuals feel confident in the steadiness of their property taxes for the future, could inspire more people to purchase and develop property within our borders. This could greatly benefit Idahoans as local economies would be strengthened and an ever-increasing group of Idahoans could enjoy the benefits of ownership, taking part in the flourishing and growth of the state.

17 Based on urban renewal funds distributed to services per breakdown in Tax Commission’s 2016 Annual Report.

PROPERTY TAX

Idaho

Lands

Those who best know Idaho lands should manage them

claimed 25 cows. Ted told the Idaho Freedom Foundation that the cows were worth $1,800 to $2,200 each. At the pinnacle price point, the fire had cost the Blackstocks $55,000. But, the carnage didn’t end. Through the fall, winter and spring, the family lost another 15 cattle to unknown causes. Ted attributes the deaths to the fire’s secondary

By Fred Birnbaum

effects, primarily smoke inhalation.

The 2015 Soda Fire caused minor and temporary irrita-

After officials declared the fire out in early September

tion for most of the 660,000 who call Idaho’s Treasure

2015, the Bureau of Land Management closed the federal

Valley home. Smoke-filled skies made breathing difficult

ground, including the Blackstocks’ grazing allotment. That

for many.

closure forced Ted and Mary to find new areas for their cows to graze, a nearly impossible task for a 200-cow

For Ted and Mary Blackstock, fourth-generation cattle

herd.

ranchers from Marsing, the fire threatened their very way of life and the heritage the couple works so hard to

Luckily, through word of mouth the family secured grass-

maintain. And long after others have forgotten about the

land near Bruneau, nearly 100 miles from the family’s

blaze, Ted and Mary still feel its lingering effects.

Marsing home. For the past two grazing seasons, the family has spent untold hours ferrying cows and water

In August 2015, the lightning-ignited fire quickly raged

from the ranch to the temporary pasture.

out of control. High winds eventually fanned the flames toward the Blackstocks’ grazing areas: their private ground

Those 200-mile roundtrips have added up. In 2016, the

plus their federal allotment. For five days, Ted and Mary

Blackstocks spent $8,000 on fuel just to travel between

watched the flames engulf the rolling hills near their

Marsing and Bruneau. The BLM started reopening some

country home—the same hills the couple use to graze

of the affected areas in August 2017, and Ted and Mary

their cattle each spring and summer.

began to return to the way things were prior to the fire.

For five days, the couple hoped and prayed their cows

Though one could easily blame Mother Nature for starting

would survive the raging wildfire.

the blaze, Ted and Mary point their fingers squarely at the federal government. They say that overly stiff regulations

On the sixth day, Ted, Mary, their kids and neighbors

emanating from Washington, D.C. leave local officials

mounted horses to search for surviving bovines. As the

unable to properly reduce fuel loads of federal lands. That

horses trotted across miles of blackened hillsides, the

leads to hotter, larger fires.

search posse recovered a sizable portion of the herd. Still, the riders found charred cow after charred cow.

Ted offered a single solution for improving land manage-

“It was like riding up to a funeral,” Mary said.

ment practices. “Land management needs to be local,” he said. “The more [the federal government] manages it,

The fire, which scorched more than 280,000 acres in all,

the worse it gets.”

IDAHO LANDS

the

PROBLEM The federal government owns and controls more

in wildland fires. Acres burned on USFS and BLM land

than 62 percent of the land within Idaho’s borders,

now account for more than 80 percent of the acreage

or more than 32 million acres. Included in this total

burned in Idaho, a higher percentage than the amount

are more than 20 million acres controlled by the US

of land these agencies manage.

Forest Service and more than 11 million acres of BLM land. The significance of this control and its impact on

For those who point to climate change as the cul-

Idaho cannot be overstated. On USFS and BLM land,

prit, there exists a simple question: If hotter and

for example, timber harvest has declined about 90

dryer summers are creating dramatic fire conditions,

percent from the 1970s (see below, Chart 1). Concur-

wouldn’t more thinning and logging—not less—be the

rent with this harvest decline in Idaho has been the

solution that could be implemented immediately?

impoverishment of rural communities and the surge

Finally, it must be noted, in addition to the decline

in timber harvests, federal agencies have reduced 1 Data from the U.S. Bureau of Economic Analysis reveal Idaho’s per-capita income as a percentage of national per-capita income was more than 90 percent in the mid-1970s (the last year it was more than 90 percent was 1976—long before right-to-work legislation was enacted) and has never been that high since. In 2013 Idaho’s per-capita income was 80.8 percent of national per-capita income.

access and use across a broad swath of public lands, which has impacted ranchers, miners, recreational-

Idaho’s timber harvest on federal lands 1,200,000

Harvest in MBF, Scribner Scale

10% 1,000,000

800,000

600,000

85 400,000

200,000

1947 1951 1955 1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 Source: Bureau of Business and Economic Research

Federal refers to BLM and USFS

IDAHO LANDS

ists, and many ordinary Idahoans who simply seek to earn a living in

Breakdown of acres burned in Idaho, 2002-2016

rural communities. For example,

State

the EPA claims that small-scale suction dredge miners violate the

10%

Clean Water Act by suggesting that

Federal

removing minerals from rivers is akin to adding pollutants.

Other

85% Source: National Interagency Coordination Center end-of-season reports 2002-2016 Note: Federal includes BLM and USFS. Other includes U.S. Fish and Wildlife Service, National Park Service and Bureau of Indian Affairs, in addition to different agencies and private land.

987 1991 1995 1999 2003 2007 2011 2015 Source: Bureau of Business and Economic Research

the

SOLUTIONS Protect water rights

Avoid expanding tribal lands

Propose legislation that requires Idaho state agencies

Insist to the federal government that the Indian Re-

to support policies that don’t relinquish water rights

organization Act of 1934 be implemented in accor-

that originate on federal lands, including those both

dance with the Carcieri v. Salazar U.S. Supreme Court

on USFS lands and BLM lands – those associated with

decision and not expanded per the Obama Adminis-

grazing allotments for example. State control and own-

tration’s 2014 memo, “The meaning of ‘Under Federal

ership of water within its borders has long been recog-

Jurisdiction’ for Purposes of the Indian Reorganization

nized through numerous U.S. Supreme Court decisions,

Act.”

including United States v. New Mexico in 1978.

IDAHO LANDS

the

SOLUTIONS Resist wilderness study area expansion Insist that neither the U.S. Department of Agriculture nor the U.S. Department of the Interior designate any additional lands in

“

Idaho as “wilderness study areas,” pursuant to section 603 of the

It is time for a

Federal Land Policy and Management Act (FLPMA).

rebalance of

Hold the Bureau of Land Management accountable

the relationship

Now that Congress and the Trump administration have repealed

on public lands

the state should insist that the BLM adhere to the requirement

in Idaho—

with Idaho’s state and local government agencies.

no longer

the BLM’s Resource Management Plan rule, known as BLM 2.0, that its planning and management programs be fully coordinated

Seek course correction on Sage Grouse Require that no updated Sage Grouse Management Plan be

should Idaho

implemented unless it is reviewed by the Idaho governor’s office

simply be an

memorial.

administrative unit of the

and secures approval by the Idaho Legislature through a joint

Map federal land use restrictions County commissioners should detail access and use restrictions on federal lands that are not in accordance with FLPMA and seek redress.

federal land

Improve fire management practices

agencies.

between state and county officials and local landowners—require

Fire protection and management requires better coordination that the BLM update its policies per the issues that surfaced during recent fire seasons in Owyhee County.

“

Keep BLM out of land disputes Insist that the BLM not take sides in private land survey boundary disputes as chief cadastral surveyors, in contravention to Section

IDAHO LANDS

the

BENEFITS 3-135 of the BLM’s Manual of Sur-

Idaho is a state blessed with natural beauty and abun-

veying Instructions (2009).

dant natural resources. According to a 2014 Univer-

Speak up

sity of Idaho report, forestry and logging jobs pay an average of $51,000 per year, wood products manu-

Give state input on any decision to

facturing nearly $50,000 and paper manufacturing

change the status, size or manage-

$83,000. These wages compare favorably to a state

ment plan of Craters of the Moon

average wage of $37,957.2 Thus, it is clear: if we grew the

National Monument.

number of forestry and logging jobs, this would have

Champion logging increase

significant benefits in terms of higher wage jobs in the Gem State.

Instead of merely promoting the

Federal management and oversight has not allowed

Good Neighbor Authority for USFS

Idahoans to strike the appropriate balance between

lands, require that the USFS pro-

preserving these lands for generations to come and

vide actual targets for logging, as

allowing multiple use for all Idahoans. It is time for a re-

measured in millions of board feet

balance of the relationship on public lands in Idaho—no

harvested.

longer should Idaho simply be an administrative unit of

Defend dredge miners Instruct the Idaho Department of Water Resources to update agency

2 Kyle, Zach. “Idaho Logging, Wood Product and Paper Industries Hang Steady.” Twin Falls Times-News. October 25, 2016. Accessed September 12, 2017. http://magicvalley. com/business/idaho-logging-wood-product-and-paper-industries-hang-steady/article_b1a1f074-bd6c-5366-8c4e-bc7ef726407e.html.

rules and facilitate permitting of suction dredge mining, particularly on the South Fork of the Clearwater River Basin. Seasonal restrictions should only be imposed using publicly available, scientifically based, biological and fishery spawning data. Honor mining claims and do not treat commercial small-scale suction dredge miners as recreational miners.

IDAHO IDAHOLANDS LANDS

Tax Policy

Give Idahoans a pay raise through significant tax relief By Fred Birnbaum Politicians love to boast about Idahoans like Semele Freeman-Hall of Boise. Freeman-Hall is hard-working, industrious, and she is pulling herself up by her bootstraps. Like thousands of Idahoans, she holds down two jobs to make ends meet. She cuts hair at a Boise salon and sells real estate when she can. Some years are profitable for her. Others, not so much. Also like thousands of Idahoans, she’s self-employed. Because she chooses to live and work in Idaho, she faces the state’s high income-tax rate of 7.4 percent—the second-highest in the region. Freeman-Hall neither qualifies for nor requests government assistance. All she seeks is the opportunity to create a better life. And government only adds to her challenges, by taking from her income to fund bloated programs and deliver ultra-generous benefits to state workers. “We’re taxed to death,” she says. “We’re taxed from every single angle.” Piled on top of Semele’s already hefty tax load is the Obamacare penalty the federal government imposes on her for not carrying health insurance. Last year, she paid the $695 fine because she couldn’t afford monthly health premiums. She carries a heavy burden and feels every ounce heaped upon her back. “I’m just trying to survive,” she notes. Semele casts herself as apolitical, an innocent bystander in the partisan conflicts that typify government. She holds no interest in joining the political extremes, but would rather that politicians find solutions that do right by Idaho’s forgotten class—the average worker trying to put food on the table, kids in college and some savings in the bank.

TAX POLICY

the

PROBLEM Semele Freeman-Hall and people like her haven’t

state Department of Commerce to give tax breaks to

seen significant tax relief for years, despite the state

businesses that hire 20 employees in a rural area and

coffers overflowing with cash. In fact, the last major

50 employees in an urban area.3 The department is

tax-related policy change was an increase in gas tax

solely responsible for deciding who gets the tax break

and registration fees back in 2015. During the 2017

and who doesn’t. In the end, however, such targeted

legislative session, the General Fund appropriation in-

tax breaks have been found to do more harm than

creased by 9.1 percent, nearly $300 million, from the

good.4 Additionally, small businesses (and indeed sole

previous year, crowding out any room for a meaning-

proprietors) are forced to pay higher taxes to pay for

ful tax cut. Through May of 2017, FY 17 revenues were

the special breaks granted to larger companies. Other

8.1 percent higher than the previous year for the same

tax policies, such as the investment tax credit, reward

time period—which is higher than the official forecast.

companies for making certain kinds of investments,

However, even using the conservative forecasting as-

while companies that can’t make a government-spec-

sumptions for FY 18, revenues continue a multi-year

ified investment end up absorbing the entire burden

compounded growth rate trend of 5 percent, which

of the state’s high tax rates. While some policy makers

suggests the official FY 18 revenue forecast of 4.6

insist that tax rates don’t matter as much as spending

percent will again underestimate tax revenues.

on education or training, they might examine the

economic success of states like Texas with no income Against this revenue backdrop, Idaho’s tax rates are

tax compared to states like New York and California -

not competitive regionally, according to the Tax Foun-

both states have high rates and large public expendi-

dation’s “State Business Tax Climate Index.” Idaho is

tures. Texas’ GDP grew 3.9 percent in the first quarter

ranked 20th nationally in terms of taxes on business-

of 2017, versus .1 percent for California and .3 percent

es. This is clearly worse than Montana at 6th best,

for New York.5

Wyoming at 1st (meaning lowest in the country), Utah at 9th, Nevada at 5th, and Washington at 17th and Oregon at 10th. Idaho has relied on tax relief that is narrowly targeted to connected interest groups, rather than applying tax relief broadly to everyone. An example of targeted tax relief is the Tax Reimbursement Incentive. That incentive, approved in 2014 by the governor and the Legislature, allows the

1 FY 2018 Executive Budget, Budget Summary – General Fund Revenue and Expenditure History, Section A-7 2 The Tax Foundation, founded in 1937, publishes an annual State Business Tax Climate Index. While Idaho ranks roughly in the middle of the pack nationally, it is not competitive in this index regionally. The elements of the rating: Corporate Income Tax, Individual Income Tax, Sales Tax, Unemployment Insurance Tax, and Property Tax.

TAX POLICY TAX POLICY

3 Details on the TRI are available on the ID Department of Commerce website. http:// commerce.idaho.gov/incentives-and-financing/incentives/idaho-tax-reimbursement-incentive/ 4 Article on effectiveness of TRI’s by Dr. Peter Crabb, referencing National Bureau of Economic Research and CBO data. http://www.idahostatesman.com/news/business/ business-insider/article156741774.html 5 Bureau of Economic Statistics, Gross Domestic Product by State: First Quarter of 2017. https://www.bea.gov/newsreleases/regional/gdp_state/qgsp_newsrelease.htm

How Idaho’s income tax rates compare to surrounding states

4000

OR ID

3500

MT UT

3000

CO 2500

WY WA

2000

NV 0

Source: taxfoundation.org

1500

’00

’02

’04

Idaho’s General Fund revenue 4000

3500

3000

2500

2000 10

undation.org

1500

’00

’02

’04

’06

’08

’10

’12

’14

’16

Source: dfm.idaho.gov and legislature.idaho.gov

TAX TAXPOLICY POLICY

’06

the

SOLUTIONS Prioritize tax relief over agency spending requests

Idaho needs a tax policy plan and target

In Idaho, tax relief is an afterthought. With the reve-

One of the problems facing the state’s tax policies

nue estimate provided, it is possible to detail the tax

is that, for years, there has been no specific plan for

reform proposals at the beginning of the legislative

reducing the state’s tax burden. In fact, the Otter

session and determine how much revenue is available

administration has presented inconsistent goals for

for tax relief versus new spending. Additionally, the

the state’s tax structure. Otter first proposed lowering

governor’s office, along with the Legislature, should

the state’s top marginal tax rate by 0.1 percent each

use dynamic modeling to calculate the impact of tax

year, but then never putting forward legislation to do

relief on the state general fund. Under current practic-

so. Eventually, Otter swore off tax relief entirely, a

es, both branches of government view tax cuts always

move followed by pledging to again reduce the taxes

as having a linear impact, resulting in a net reduction

by 0.1 percent. Idaho needs a defined tax policy goal

tax collections. In reality, tax cuts tend to result in

that should be connected to a particular outcome, for

greater spending in the economy. A dynamic model

example, getting rid of the income tax or having an

of tax relief would allow the government to more ag-

income tax that is less than surrounding states.

gressively cut taxes because it considers the economic repercussions of changes to tax policy.

Eliminate special interest tax breaks and seek low taxes for everyone

Get rid of the state’s progressive income tax Ideally, the state would do well to get rid of the income tax entirely. The economic outlook of every

The Tax Reimbursement Incentive is problemat-

state ranked higher than Idaho has either no income

ic because it rewards companies arbitrarily and it’s

tax or a top rate lower than Idaho’s 7.4 percent.6 In re-

only available to businesses based on the number

viewing economic performance of states for the peri-

of employees it has or plans to recruit. There are

od 2005 – 2015, 3 of the top 10 states had no income

myriad ways companies contribute to the economy,

tax, which is disproportionate given that over that time

and those contributions are not singularly tied to the

period, only 7 of the 50 states had no income tax. 7 At

number of people on a business’s payroll. Tax policy

minimum, the state should get rid of the progressive

changes should be constructed in such a way that tax

income tax which contains seven brackets, the top

policy is uniform and fair for all taxpayers, and does

bracket kicking in at just about $11,000. That means

not favor certain industries, businesses or economic

even taxpayers earning minimum wage can quickly

sectors. The tax reimbursement incentive, investment

find themselves in the state’s “wealthiest” tax bracket.

tax incentive and other special interest tax breaks should be eliminated so that everyone can benefit from broad, lower and uniform taxes.

TAX POLICY

6 Rich States, Poor States, 10th edition, American Legislative Exchange Council, Laffer, Moor, and Williams, State Economic Outlook Rankings, page 1. 7 Rich States, Poor States, 10th edition, American Legislative Exchange Council, Laffer, Moor, and Williams, State Economic Outlook Rankings, page 2.

“

Tax policy

changes should Collapsing the seven brackets

be constructed

down to four or fewer and ultimately moving to a flat income

in such a way so

tax would serve Idahoans well.

that tax policy

Seek opportunities to lower and eliminate other taxes

is uniform

Semele Freeman-Hall’s experience

and fair for all

with taxes cannot be overstated:

“

She and other Idahoans face all

taxpayers

measures of taxation, be it sales, income, property, electricity and other taxes. Finding ways to eliminate classes and categories of taxes would serve the state well. Personal property taxes are particularly problematic for companies, which are required to produce an inventory of equipment and belongings, for which they are

the

which are themselves examples of

BENEFITS

tax favoritism.8

Idaho is in a great position to reverse the recent

required to remit a property tax payment once the value of the equipment exceeds $100,000, subject to certain exemptions –

spending splurge while maintaining services that are important to citizens and providing meaningful tax relief that will allow Idahoans to prosper. However, there is no opportunity for tax reform if the governor requests and the Legislature appropriates the whole 8 See Idaho Tax Commission webpage for additional details on personal property taxes. https://tax.idaho. gov/i-2008.cfm

state revenue stream to cover the entirety of agency spending requests.

TAX POLICY

State Spending

Open opportunity’s door: restrict government’s growth By Fred Birnbaum

Mason Clark isn’t like a lot of other 17-year-olds.

As of this writing, the Middleton teen is almost halfway to his goal. In the coming months, he aims to work

While others his age spend their days in public school

12-hour days and spend as little as possible. That, he

classrooms, Mason, a home-school student, often finds

projects, will put him over the top.

himself installing sprinkler lines, mowing lawns or ferrying thousands of pounds of landscaping rock around his

If Mason works all the hours he plans to this year, he

employer’s job sites.

will find himself in Idaho’s top income tax bracket. That bracket, which takes 7.4 percent of

In 2017 alone, the Middleton teen

a worker’s pay, kicks in at just more

estimates he lugged more than

than $11,000.

50,000 pounds of decorative rock using only his strong back and a steel wheelbarrow. “I do a lot of grunt work,” he joked. Mason is a driven young man. He toils each day in the punishing elements with a goal firmly in his mind. By the end of 2018, he hopes to stockpile more than $12,000.

“In other words, the state of Idaho’s progressive tax structure regards Mason as wealthy and taxes him accordingly. “ ”

In other words, the state of Idaho’s progressive tax structure regards Mason as wealthy and taxes him accordingly. Mason doesn’t see himself as rolling in the dough, but rather only as an industrious young man who wants to make something of himself. That, he knows, requires sacrifice.

Why? He wants to serve a mission

He rarely devotes time to leisurely

for the Church of Jesus Christ of

pursuits, and he spends less time

Latter-day Saints. A mission, which

with friends and family than he

will take Mason to another state or even out of the

would prefer.

country, doesn’t come cheap. He can’t earn money while he serves, and male missionaries are required to

The state could ease Mason’s burden, but that would

pay the church $400 a month for two years to cover

require serious fiscal discipline. Reducing spending, or at

their expenses.

least restricting government’s growth, would open the door for dramatic tax reductions.

On top of that, Mason will need another $2,000 to purchase suits, dress shoes, shirts and other essentials

Meaningful tax relief, in turn, would allow Mason and

that missionary service requires.

others to achieve their personal goals faster and live more prosperous lives.

STATE SPENDING

the

PROBLEM While Idaho’s government grows by leaps and bounds, Idaho’s governor and lawmakers

8,000

often give too little consideration to lowering the tax burden state residents carry.

7,500

In fact, Idaho is growing state General Fund 7,000

spending faster than personal incomes, which are growing about five percent.1 That’s a rate faster than most states in the nation—the

6,500

Fiscal Year 2018 projected national average of state general fund growth is one percent.2

6,000 2012

Further, during the 2017 legislative session 2013

2014

2015

2016

True Idaho Total Funds Growth (6.11%) Projected Idaho Growth at Compound Annual Growth Rate of other 49 states 1 Idaho Economic Forecast, Division of Financial Management, April 2017, pages 6-7. 2 National Association of State Budget Officers, The Fiscal Survey of States, Spring 2017, table 6.

Idaho state spending: growing faster than the 49 other states 6.11%

Idaho

4.05%

49 states, ex Idaho

1.75%

3.5%

Source: National Association of State Budget Officers, State Expenditure Report. Note: Data is proprietary to NASBO

STATE SPENDING

5.25

Idaho added $500 million of new debt to the

as campus building and was not shown in the

state’s balance sheet.

General Fund spending line. The result depicts a

lower spending-growth rate than in reality, 5.4 General Fund (GF) appropriations include gim-

percent vs. the true 9.1 percent increase, which

micks such as moving money to other spend-

is visible when the transferred money is added

ing funds, shifting upcoming-year spending to

back to the General Fund.4 In sum, since FY 12

the prior year, and hiding spending by claim-

Idaho has increased GF spending by about $1

ing it as a revenue reduction. For example,

billion, with no meaningful tax relief offered.5

with regards to moving money in the 2017 legislative session, $52 million was appropri-

Although Idaho ranks well on the American

ated for emergency road and infrastructure

Conservative Union’s Family Prosperity Index,6

repairs due to the harsh winter. Even though

its lowest rankings are in economics and family

the bulk of this spending will occur in FY 18,

self-sufficiency, things that could be addressed

the appropriation was made as a transfer for

with better tax and fiscal policies. Simply put:

FY 17. Similarly, a $2 million supplemental

Allowing families to keep more of their own

was appropriated in FY 17 to move the Tax

money would support self-sufficiency, but that

Commission to a new building that had not

won’t happen when government grows faster

even been purchased as of the time of the ap-

than personal incomes.

propriation and was still not purchased at the close of FY 17. Finally, another $50 million was transferred to dedicated funds for things such

3 The $500 million reflects the collective borrowing impact of S1206 = $300 million, SCR 105 = $90 million, and HCR 29 = $110 to $140 million; all passed and signed into law during the 2017 session.

4 The 5.4% growth in spending is as reported by LSO in the April 2017 Sine Die Report. The 9.1% figure was calculated by the author adding back fund transfers and FY 18 spending appropriated for FY 17. 5 2017 Idaho Legislative Fiscal Report, page 49. 6 The 2016 Family Prosperity Index is published by the American Conservative Union Foundation. The Index looks at economics, demographics, family structure, family self-sufficiency, family culture, and family health to derive its rankings. Although Idaho ranks high overall, the lowest rankings are driven by low household personal income, a low private sector share of personal income, and relatively high welfare utilization.

What if Idaho grew at the rate of the other 49? 8,000

7,500

7,000

6,500

6,000 2012

2013

2014

2015

2016

True Idaho Total Funds Growth (6.11%) Projected Idaho Growth at Compound Annual Growth Rate of other 49 states

STATE SPENDING

the

SOLUTIONS Allow time for analysis

and other investments touted as increasing

The governor’s budget is presented in

efficiency. Agencies should be required to

January during the first week of the legisla-

review base-level spending trends since the

tive session. Instead, the budget should be

2009 recession ended, and departments

completed a month earlier so the Legisla-

with the highest base-level growth rates

ture has more time to review it. Also, the

should undergo a detailed review lawmak-

agencies’ and governor’s budgets should be

ers and the governor’s office.

posted online in a spreadsheet format so a proper analysis can be done by indepen-

Verify savings claims

dent parties.

Agencies will often state that IT modernization will increase staff efficiency—like

End budget gimmicks

the claim made by the Secretary of State’s

The Legislature and governor should end

office as part of its FY 18 IT modernization

the practice of depicting lower General

project. However, these agencies rarely

Fund spending by transferring money to

demonstrate staff or operating cost savings

other accounts. It may be appropriate to

after these projects have been completed.

transfer the funds, but if they originate as

That should be a requirement or the claim

General Fund revenues the spending in-

should not be made.

crease should not be “hidden” using transfers and revenue reductions. One option

Prioritize spending requests

would be to show the percentage increase

All requests for new spending should be

with and without the transfers in a side-by-

ranked by priority rather than considered

side comparison.

in isolation. Thus, additional spending for each agency should be considered in the

STATE SPENDING

Review base spending

context of overall limits on spending and,

Lawmakers should complete a review of

in comparison to other agency requests.

the base spending, which comprises more

Currently each agency’s budget request is

than 90 percent of each year’s budget

considered in isolation, so there is little to

request. A performance-based review of

no prioritization across the different func-

the base budget should be a routine part of

tions of government. In sum, it is simply a

the budget process with agencies required

comparison of current year to prior for that

to justify the base—not just new spending.

agency. Cross-prioritization of agency re-

Special scrutiny should be given to agen-

quests would make is easier to implement

cies that previously requested and received

an overall spending cap without jeopardiz-

one-time spending for IT modernization

ing priorities.

“

A little fiscal discipline now will pay off in the

“

Limit spending growth

long term.

The Legislature and governor should restrain the growth in appropriated spending to: For any fiscal year that commences on or after FY 19, the maximum annual percentage change in state fiscal year spending should be the lesser of the following rates, calculated for the average of the two fiscal years immediately preceding the regular legislative session: (1) a rate equal to the sum of: (a) the rate of growth of Idaho’s population (1.5% for 2017 and 20187; and (b) the rate of price inflation (CPI estimate for FY 17 and 18 is 2.2%8) ; or, (2) the rate of growth of personal income of Idaho’s residents (estimate, average for FY 17 and 18 is 4.2%9).

Slow state hiring The state workforce, including higher education, has increased by about 10 percent since the recession ended in 2011 (through FY 18—estimated).10 Slow the growth in hiring and/or use attrition to reverse this trend. A hiring freeze would be appropriate for agencies whose work is not a budget priority.

the

BENEFITS Low spending leads to low taxation. Idaho’s government need not cut the budget, but merely restrict spending growth. Doing so would pave the way for much-needed tax relief. Lawmakers cannot cut taxes if state agency budgets gobble up the whole state revenue stream each year. This need not be a herculean task. If budget writers hold growth to four percent or less each year, the state would realize more than $70 million in savings annually. That amount would compound and lead to even more dramatic savings in the future. Had lawmakers adhered to the four-percent limit between 2012 and 2016, state spending would have been $300 million lower than it was, as illustrated in Chart 1. Those millions could have provided serious tax re-

7 Data on population growth from the Idaho Department of Labor, average growth from 2016 to 2018-forecast 8 CPI from the Idaho Economic Forecast, Executive Summary, April 2017, page 7. 9 Personal Income Growth from the Idaho Economic Forecast, Executive Summary, April 2017, page 7. 10 The headcount tracked by the State Controller’s Office is different from the Full-Time Positions reported by the Legislative Services Office (LSO). The Comprehensive Annual Financial Report, 2016, schedule 14, page 171, shows headcount through 2016, 2017 – 2018 were estimated based on LSO reporting.

lief, fixed many miles of roads or built more than a few bridges around the state. A little fiscal discipline now will pay off in the long term.

STATE SPENDING

State

Employee Benefits

Protect public employees’ benefits and lighten the taxpayer burden By Fred Birnbaum Alan and Andrea McCrae of Homedale carry a heavy

Alan, a realtor, suffers from a chronic illness that has

parental payload.

spent the last two decades ravaging his body. The McCrae’s have sunk thousands of dollars into surgeries

And the state of Idaho compounds the Mcraes’ hefty

and medicines. Alan, once bedridden for nearly two

burden.

years, has lost significant amounts of income due to his condition’s debilitating effects.

Though the McCraes are empty-nesters who are barreling toward their retirement years. As a close-knit

And, like nearly every other Idahoan, Alan and Andrea

family, Alan and Andrea often help their adult chil-

face rising healthcare costs that stretch their budget.

dren. These pressures strain the family’s finances, and For a while last year, Alan and Andrea welcomed two

restrict their ability to save money for a rainy day

of their daughters—the couple have seven children

or build a retirement nest egg. Still, Andrea remains

in all—back home. Those daughters, accompanied by

optimistic that she, her husband and her offspring will

husbands and kids, needed housing during a period of

endure.

temporary unemployment. Alan and Andrea welcomed the two families.

“If you have faith, it doesn’t matter how much is in your bank account,” she told the Idaho Freedom

Recently, their son, a young father of three and a law

Foundation.

student at the University of Idaho in Moscow, asked Alan and Andrea for a few thousand dollars to replace

Part of the pressure they feel stems from Idaho’s cost-

the blown transmission in his family’s car. The couple

ly mismanagement of its resources. While Andrea and

extended their assistance.

Alan struggle to cover their own retirement and health costs, they pay dearly so state workers can enjoy

One of their daughters, a welder, who suffers from

overly generous insurance packages and guaranteed

chronic pain, recently bought a home to establish her

retirement plans that cost more and more to under-

independence. She wanted to undertake a renova-

write.

tion of her Treasure Valley home. As with many close families, she sought help from her mom and dad, who

Reforming Idaho’s pension system and asking state

gladly provided some of the funds to complete the

workers to pay a little more for their health coverage

remodel.

would save hardworking taxpayers millions and allow Idahoans like Alan and Andrea McRae to live fuller,

These kind deeds come even as the couple face their

more prosperous lives, retire independently and hand

own trials and challenges.

down more of what they earn to future generations.

STATE EMPLOYEE BENEFITS

the

PROBLEM Superficially, Idaho’s public employees’ pension and

as to how Idaho manages healthcare and pension

health benefits programs appear to be both well man-

benefits which would provide employees with stable and

aged and generous. Accordingly, many government

sustainable benefits. Sensible reforms would also protect

employees view their overall benefits as well as their

taxpayers from the kinds of fiscal raids we are seeing in

total compensation as two of the top five drivers of job

other states and municipalities.

satisfaction. Idaho’s public employee benefits, particularly 1

the healthcare and pension components, face increasing

Healthcare

funding uncertainty as overall costs continue to soar. This,

For a classified employee3 in Idaho with an average

in turn, requires heavier burdens on taxpayers and the

salary of $44,033, benefits make up 40 percent of the

employees themselves in the form of higher contribu-

cost of the employee’s total compensation package.4

tions and less take-home pay.2 There are possible reforms

Increasingly, we see a lopsided healthcare package that is completely out of alignment with the experience of

1 Change in Employee Compensation and Benefits, FY18, presented to ID legislative CEC committee on January 10, 2017, report page 11, data from Society for Human Resource Management. 2 PERSI, Comprehensive Annual Financial Report, June 30, 2016, page 61. Contributions as a percentage of covered payroll have been steadily increasing.

Idaho’s small business community. Further, the benefits are even more generous than other state and national government plans. For example, an Idaho state employee with an individual PPO healthcare plan

How Idaho’s employer-sponsored health plans compare to national data

paid a monthly premium of $47 in FY 17.5 This is far lower than the average paid by other states’ government employees (with more than 500 plan participants)

500

and national government plans. Those

Monthly Employee Contribution

average premiums, respectively, are $126 400

and $132 per month.6

300

200

100

Individual PPO Idaho

STATE EMPLOYEE BENEFITS

Individual Individual Traditional High Deductible Gov 500+

Family PPO

Family Traditional

State Gov 500+

Family High Deductible

National 500+

3 Average annual salary is described in report: Change in Employee Compensation & Benefits, FY 18, presented to the Idaho legislature on January 10, 2017, page 4. Idaho Statues, 67-5302.”Classified officer or employee” means any person appointed to or holding a position in any department of the state of Idaho, which position is subject to the provisions of the merit examination, selection, retention, promotion and dismissal requirements of chapter 53, title 67, Idaho Code. 4 Change in Employee Compensation and Benefits, FY, presented to ID legislative CEC committee on January 10, 2017, report page 4 5 PPO is an acronym for “Preferred Provider Organization,” which is a type of health plan that encourages participants to use a network of providers, requires higher charges for providers outside of the network, and generally does not require referrals to see a specialist in the network. 6 Mercer’s National Survey of Employer-Sponsored Health Plan, 2016. Presented during State of Idaho Benefit Strategy Development, June 2, 2017.

Further, though Idaho state employees typically pick

appear sound, at this point, it reflects a projected market

up less than 10 percent of the cost of their premium,

return of 7.1 percent, net of investment expenses. 12 This is

individuals and those that work for small businesses have

risky optimism given market volatility.

no such protection. A 45-year-old, self-employed person in Idaho would pay $541 per month, more than 11 times

This pie-in-the-sky hoped-for return is made worse by

the premium a similarly aged state employee pays. The

the increase in the number of public employees, who

upshot is that to maintain the current style of plans for

also expect a generous retirement benefits package.

state employees the total medical plan costs will increase

In FY 16, PERSI added 7,509 new members.13 As, the

$105 million from FY 15 to FY19.8 For FY 17 to FY 18, the

public employee base grows the importance of PERSI’s

estimated increase in medical plan costs is projected to

long-term solvency is paramount to those employees

be 11.3 percent.

and Idaho taxpayers —as taxpayers are ultimately on the

hook to guarantee payments. As the chart below demonstrates, the funding level of any defined-benefit pension

institutions with a large employee headcount, does not

plan is dependent on the investment return assumption,

follow the self-insured healthcare model. According to a

commonly known as the discount rate. The projected

November 2013 Milliman report, a shift to fully self-in-

return that PERSI uses is reasonably consistent with the

sured health care coverage could save about $11 million

long-term returns associated with its mix of investments,

annually, with a larger up-front savings. Large organiza-

70 percent equities/30 percent bonds. However, these

tions, whether private companies or public-sector organi-

returns are not guaranteed.

zations are generally self-insured, meaning that they fully cover the costs and losses of their population and simply

Were state officials to project a safer, more predictable

use a third party to administer the plan. 12 PERSI, Comprehensive Annual Financial Report, June 30, 2016, page 15 13 PERSI, Public Information Officer, Jenny Flint, June 26, 2017, email inquiry response

Retirement

500

Monthly Employee Contribution

Finally, Idaho, unlike many other private and public

400

300

200

100

PERSI, Idaho’s public employee pension program, is

Assuming high returns for guaranteed benefit payouts is risky

available to state and local government workers. As of June 30, 2017, PERSI’s base plan net position as a percentage of the total pension liability was just more than 91.1 percent. This is commonly referred to as 11

0.9

assets can cover 91.1 percent of the expected outlay of the future payments to retirees. Though this might 7 Regence Platinum 500 plan for 2017 for a 45-year-old person. 8 Presentation by the Department of Administration, Office of Group Insurance, CEC Committee, January 12, 2017, page 16 9 Presentation by the Department of Administration, Office of Group Insurance, CEC Committee, January 12, 2017, page 17 10 Milliman Client Report, Self-Funding Analysis, November 26, 2013, page 1 Executive Summary. Milliman is an internationally recognized actuarial and consulting firm. Milliman’s primary business includes consulting practices in employee benefits, healthcare, investment, life insurance and financial services, and property and casualty insurance. Clients include a spectrum of business, financial, government, union, education, and nonprofit organizations. 11 PERSI board meeting minutes, July 18, 2017, executive director comments

Funding Ratio

91.1 percent funded. This implies that current funds or

0.75 0.6 0.45 .03 2.34% U.S. Treasury Bond Return

7.5% PERSI Projected Gross Return

Discount Rate

STATE EMPLOYEE BENEFITS

Individua PPO

Idaho

the

PROBLEM

cont.

rate of return, Idaho’s pension funding gap would widen

The point of reforming Idaho’s retirement system is to

significantly. The American Legislative Exchange Coun-

avoid the fate of so many public pension systems around

cil envisioned such a scenario for Idaho and found that

the country that ultimately will fail taxpayers and em-

if PERSI utilized the 2.34 percent return U.S. Treasury

ployees themselves if the promises made cannot be kept.

bonds provide, the system’s funding ratio would drop to

State employees need a system that does not depend

about 47 percent, as shown in the previous chart.

upon future taxpayers and gives them the choice to

secure their future. 14 American Legislative Exchange Council, “Unaccountable and Unaffordable,” October 2016.

the

SOLUTIONS Gradually increase the employee percentage paid of the health plan cost to match that of other state government healthcare plans

stay on the existing plan. Enhance the current Choice

Some of the overall cost could be offset by switching to

ing the reform recently adopted by Michigan, as one

self-insured healthcare coverage at the state level. The

model, would give state employees more flexibility

November 2013 Milliman report suggested $11 million

about what they want to contribute to their retirement,

per year in ongoing savings after the first four transition

reduce the liabilities of future taxpayers, and eliminate

years.

the chance that promised pension benefits would have

401(k) Plan by adding an employer (State of Idaho) match in lieu of the traditional PERSI base plan. Begin this transition with new hires starting in 2020. Us-

to be curtailed should a fiscal crisis occur. For example,

Add a health savings account (HSA) component to the high-deductible plan offered to state employees

the Michigan plan has the state contribute four percent of an employee’s salary into the 401(k) plan as a starting point. The plan then matches employee contributions, dollar for dollar, up to three percent, for a state maxi-

Shift future state employees and school staff to a defined-contribution plan Exempt public safety officers (police and fire), who will

STATE EMPLOYEE BENEFITS

mum contribution of seven percent. In Idaho the state contributes 11.38 percent of an employee’s salary and

69 the employee contributes 6.79 percent of their pay.15 Assuming a savings of four-percent-of-payroll contribution from the state, based on the above example, for each new PERSI member, with 7,000 new members joining per year with an average salary of approximately $40,000, this would equate to savings of $11.2 million per year. That yearly savings would grow as more state workers join the more

“

Taxpayers simply cannot afford to pay for the own healthcare and retirements and platinum-level benefits

sustainable retirement plan.

for government

During the years following the

employees.

“

2009 recession, taxpayers nationwide suffered a one-two punch to the wallet. Not only had the market catastrophe blown a hole in Americans’ nest eggs, governments across the land had to turn to those suffering taxpayers to make up the losses in defined-benefit pension plans. Officials either raised taxes or cut services to backfill the guaranteed pension payouts.

the

BENEFITS

To handle its pension funding gap,

Idaho’s state and local government workers deserve

PERSI decided to up the contribu-

competitive benefits—attracting and retaining talented

tion rate for all government em-

workers demands that. That said, officials must erase

ployers and employees. In turn, the

the inequity in the system that places taxpayers on

state, school districts, cities counties

the hook for ever-increasing benefit costs. Taxpayers

and all other government entities

simply cannot afford to pay for their own healthcare

that take part in the program had

and retirements, as well as platinum-level benefits for

to pour more cash into pensions,

government employees.

which took money from classrooms, road repairs and other vital government services.

15 The Idaho percentages, respectively, reflect the actual employee contribution as reported in exhibit 8, page 111 of the 2016 PERSI CAFR and exhibit 9, page 112 of the same report. The Michigan examples come from a bill analysis of S.B. 401, dated 6/30/17

STATE EMPLOYEE BENEFITS

Federal Reliance

Assert statehood: end dependency on Washington, D.C. By Fred Birnbaum Federal dollars cannot last forever. Idaho

25-percent payments.

County Commissioner Mark Frei can attest to that.

Mountain View School District, headquartered in Grangeville, saw its federal allocation drop

In September 2017, Frei and his fellow com-

from more than $1 million in 2016 to about

missioners held their noses and voted to raise

$56,000 in 2017.

property taxes by more than $600,000. The new money, a projected increase of $120 per

The SRS reductions will affect some Idaho

$100,000 of a property’s taxable value, will

County taxpayers immediately, but Frei warns

fund road and bridge repairs. “This is going to

that the biggest impacts will be felt in two to

be a huge tax blow for some individuals,” Frei

three years when local governments’ reserve

told the Idaho Freedom Foundation.

funding runs dry.

The reason for the hike? Congress did not

“It’s going to put us in a financial crisis here

renew the federal Secure Rural Schools (SRS)

soon,” Frei cautioned. Taxing districts, including

program, which assisted local units of govern-

the 11 local highway agencies in Idaho County,

ment harmed by declining timber revenues

will have to slash services or, like Frei and his

from U.S. Forest Service lands. In 2016 the

colleagues, spike taxes in dramatic fashion.

program provided more than $23 million to local governments in Idaho.

Though Frei hopes Congress will restore the SRS funding, he’s not getting his hopes up.

Now, those local governments will receive so-

“The best way forward is to get logging up in

called “25-percent payments,” or one-fourth of

our national forests,” the commissioner said.

the timber revenues generated on USFS lands

That would deliver more 25-percent funds to

within Idaho borders.

government entities.

Governments in Idaho County, including the

Idaho County’s is a cautionary tale for all other

school district, highway districts and the county

elected officials willing to rely on federal dollars

itself, received more than $6.5 million in SRS

to fund vital state and local programs.

money last year. With the 25-percent payments, that sum drops to about $330,000.

“You just can’t get people to see the consequences to make action happen now,” Frei said.

Idaho County itself, Frei said, lost more than

He concluded that only when federal dollars

$1.2 million in SRS money. In its place, this year

vanish will people understand the danger of

the county received just less than $70,000 in

relying on D.C. cash. FEDERAL RELIANCE

the

PROBLEM federal funding of education is about eight percent per Reliance on federal funds to support state programs

state,4 nearly 14 percent of Idaho’s public education

threatens Idaho’s long-term autonomy and leaves

budget relies on the federal government. This reli-

Idahoans vulnerable to changes in federal spending

ance creates opportunity for coercion that limits state

policies. Between 2007 and 2018, Idaho’s depen-

decision-making. For example, the U.S. Department

dency on federal dollars increased by about $1 billion,

of Education threatened to remove $100 million of

growing from an appropriation of about $1.8 billion to

federal grant funding from Indiana schools if the state

nearly $2.8 billion. Here’s another way to look at it: In

refused to adopt Common Core.5 Regionally, Idaho

a given budget year, federal dollars comprise about

receives five to ten percent more federal revenue per

one-third of all state spending.

student than other Western states.6 In other words,

current funding of education puts Idaho children The Tax Foundation ranked Idaho 19th nationally, us-

at the mercy of federal legislation and bureaucratic

ing FY 14 data, regarding federal aid as a percentage of

edicts.

state general revenue. In other words, only 18 states 2

are more reliant on the federal government as percent

The Idaho Transportation Department’s FY 18 budget

of total state spending than Idaho.

is more than 40 percent funded by federal resources, of which the majority is allocated towards highway

Idaho needs to reduce its dependency on D.C. before

construction. In FY 16, 63.8 percent of the depart-

the next fiscal downturn, or the state may find itself

ment’s highway spending came from federal funds,

unable to maintain core programs. As Idaho’s public

and 67.3 percent of the highway money in FY 17 is

education, social welfare, and transportation depart-

federally sourced.7

ments have the greatest dependency on federal funding, they are most susceptible to reductions in D.C.

The Idaho Department of Health and Welfare also re-

dollars. Idahoans are also vulnerable because federal

lies heavily on federal funding. More than 62 percent

money comes attached with many strings, subjecting

of its $2 billion budget comes from federal revenue

Idaho to the whims of federal oversight.

to support programs like Medicaid, Child Welfare, and Disability Services.8 In 2016, 82 percent of IDHW’s

The Idaho Department of Education annually receives

federal funds went to Medicaid, which was 63.5 per-

more than $260 million in federal funds to support

cent funded by the national government, when you

public schools. Though the national average for 3

1 Legislative Fiscal Reports, prepared by the Legislative Service Office, 2008 and 2017 2 Tax Foundation, Facts & Figures, 2017 edition, Table 9. Idaho ranked 19th with 33.8% of total revenue coming from the federal government, the national average was 30.0%. 3 Legislative Budget Books, Historical Summaries. In FY17, approximately 13.72% of Idaho’s public school appropriations were funded by federal revenue.

FEDERAL RELIANCE

4 U.S. Department of Education. “The Federal Role in Education.” 5 Austin Hill, “Common Core Ties to Federal Funding Pop Up in California, Indiana.” IdahoReport.com (June 2014). 6 “Reliance on federal funds could imperil public education in Idaho.” 2014. Idaho Freedom Foundation. 7 Legislative Budget Book 2017, Historical Summary. 8 Legislative Budget Book 2017, Historical Summary. 62.31% of FY16 IDHW appropriations were federally-funded; FY17 estimates a similar 62.16%.

include state administrative costs. Budgets for Child

tive session. The Legislature was told that it had no

Welfare, Services for the Disabled, and Public Health

choice but to approve Senate Bill 1067, the Uniform

Services agencies are more than 50 percent federally

Interstate Family Security Act, assenting to the 2007

funded. If these agencies were not as dependent on

Hague Convention on the International Recovery of

the federal government, and hostage to the strings

Child Support. When the Idaho Legislature balked, the

said funds entail, Idaho could better target funding

federal government threatened to cut off Temporary

toward strategies that help citizens achieve economic

Assistance to Needy Families, among other things, if

independence.

Idaho did not pass the bill. The Legislature was called back into special session on May 18, 2015 and on May

As it stands, reductions in federal funding would harm

19, 2015 House Bill 1, version nearly identical copy

the impoverished and needy Idahoans who have be-

of Senate Bill 1067, became law—with Idaho backing

come reliant on state and local programs carried out

down from a confrontation with the federal govern-

with federal money.

ment when funds were at risk. The federal government’s power of coercion was on full display in this

Reliance on federal dollars can create uncomfortable

example. Another takeaway is that federal programs

tension when the state finds itself at odds with the

are constructed with Idaho simply acting as an admin-

whims of D.C. bureaucrats. The federal government

istrator with no power to independently guide people

isn’t afraid to coerce states into going along with

away from dependency on these programs.

Washington’s agenda. If you believe that federal coercion is unlikely, think back to the 2015 legisla-

FEDERAL RELIANCE

the

SOLUTIONS Idaho obtains funds for a myriad of smaller

Make it our premise not to further Idaho’s dependence on the federal government

programs and agencies that don’t provide

This means, Idaho should not seek addi-

dollars.11 Idaho officials should consider

tional program money from the federal

eliminating this program, or should seek

government. For example, expanding

private funding for this office.

Medicaid to cover able-bodied adults would increase Idaho’s dependency on federal dollars from about 35 percent of total spending to 40 percent.9

Avoid borrowing against future federal money

major services. For example, the Office of Drug Policy is 89 percent funded with D.C.

Press the case for greater harvesting of timber and mining of mineral assets on federal lands Federal lands comprise about 62 percent of Idaho and timber harvests on federal lands

For example, the 2017 Idaho legislature

are down about 90 percent from their

passed Senate Bill 1206,10 a transportation

peak.12 Greater use of these resources could

bill that authorized the state to borrow

make rural communities more self-suf-

$300 million by issuing bonds in anticipa-

ficient and less dependent on federal

tion of future federal transportation fund-

programs like Payment in Lieu of Taxes and

ing—commonly known as GARVEE bonds.

Secure Rural Schools – both of which were

One problem is that these bonds assume

designed to bolster rural economies in Ida-

that the federal Highway Trust Fund will re-

ho and the west to offset economic losses

main solvent and retain the same payment

from declining timber harvests.

formula well into the future to match the long-term maturity of the bonds.

Review existing programs Re-examine with the understanding that large scale programs like Medicaid, federal road funding, and education can’t be changed in the short term. However, 9 Data is based on Milliman Client Report, dated January 8, 2016. 2015 Financial Impact of the Medicaid Expansion on the Idaho Medicaid Budget Including State and County Cost Offsets. 10 Details on S1206 are available on the Legislative Website https:// legislature.idaho.gov/sessioninfo/2017/legislation/S1206/

FEDERAL RELIANCE

11 2017 Legislative Fiscal Report, page 6-33 12 University of Idaho, College of Natural Resources, Policy Analysis Group, Issue Brief 15, 10/09/13. Wildland Fire Management: Are actively managed forests more resilient than passively managed forests? Jay O’Laughlin, page 15.

“

It is critical that Idaho begin reducing its dependency on federal money in order that we retain our autonomy as a

“

sovereign state.

the

BENEFITS The federal government is more than $20 trillion in debt and that amount grows with each passing year. It is critical that Idaho begin reducing its dependency on federal money in order that we retain our autonomy as a sovereign state and not merely function as an administrative ward of the federal government. Joint federal-state programs don’t allow for the flexibility that state and local solutions, tailored to the needs of local people, can provide.

FEDERAL RELIANCE

Good Governance

“

Lindsey learned an uncomfortable truth: City officials used public funds to sway

“

voters toward a pricy tax hike.

The Idaho declaration of a level playing field By Phil Haunschild In late 2016, slick campaign mailers bearing

Lindsey was outraged. “It didn’t seem right

the city of Fruitland’s return address landed

that [the city council] had the liberty to spend

in Rachel Lindsey’s mailbox. That’s when the

taxpayer money on not one, but three mailers

mother of five started digging into the city’s

they felt were necessary to ‘educate’ citizens

business.

about a bond they were hoping to pass,” the Fruitland mom said. “I feel that was wasted

Through a records request submitted in

money which should’ve, and could’ve, been

partnership with the Idaho Freedom Founda-

put to much better use.”

tion, Lindsey learned an uncomfortable truth: City officials used public funds to sway voters

In a quest for equal opportunity, the stay-at-

toward a pricy tax hike.

home mom asked Fruitland officials if the city would fund a flier opposing the bond. The city

In 2016, the Fruitland City Council asked

quickly rebuffed the request.

voters there to approve a multi-million dollar bond to transform the old, vacant high school

“The scales were clearly tipped in one direc-

into an expansive city hall. To lubricate the

tion, and they’d been tipped unfairly using

pitch, the city of Fruitland spent $16,000 in

taxpayer money,” Lindsey said. “It wasn’t right

taxpayer funds on marketing consultants,

and it clearly wasn’t fair.”

postage, mailers and door-hangers—all to persuade voters in the small southwestern Idaho

She’s correct, of course. Local governments

town to approve the bond.

shouldn’t interfere with elections using taxpayer resources. Doing that is an affront to all

Two mailers landed in Lindsey’s mailbox, and

residents, especially to those who oppose a

off-duty police and fire officials, for whom the

government’s position and don’t want their tax

bond would also fund new digs, attached a

dollars funding public relations campaigns.

flyer to her front door. GOOD GOVERNANCE

the

PROBLEM The voices of Idaho residents such as Rachel

State licensure boards, such as the Board

Lindsey are consistently drowned out by

of Dentistry and the Board of Licensure of

large corporations, special interests and an

Professional Engineers and Land Survey-

ever-growing bureaucracy. The message of

ors, have hired private lawyers to serve as

these citizens, who cannot be heard over

lobbyists on their behalf.2 Over half a dozen

the others which are larger and often more

urban renewal agencies have contracted

organized, is hijacked, and as a result the

with private lobbyists at the Capitol. Funding

interests of the politically connected groups

lobbyists for state agencies unnecessarily

have been placed well above that of other

increases the cost of managing the gov-

Idahoans. Many of Idaho’s business elites,

ernment. The policies they lobby for also

politicians and government officials have

increase their agency’s regulatory scope and

found ways to manipulate the system in

enlarge their budgets. This is all largely di-

their favor, using state laws to further protect

vorced from the interest of the government

themselves, rather than the ordinary Idaho-

to protect the public’s common good. These

an.

lobbyists and others can also hide behind a

Cities and school districts continue to use

veil as they give gifts to legislators, some-

public money to fund campaigns in bond

thing which they do not have to report and is

and levy elections across the state, just as

not prohibited under current state law.

they did in Fruitland. These efforts can swing

To serve their own interest, policymakers

the vote in their favor, undermining the

have crafted exemptions, or loopholes, that

validity of elections. For example, in the fall

place themselves above other Idahoans.

of 2016, the College of Western Idaho led a

The first is found in the open meetings law,

$300,000 marketing campaign leading up

which excuses agencies established by exec-

to a vote for a $255 million bond to benefit

cutive order from abiding by the law which

the school.

all other public meetings must abide by.3

Idaho’s public universities have taken part in

This exemption allows these 28 agencies to:

another effort to sway political outcomes.

call meetings to order without notice to the

The University of Idaho, Idaho State Uni-

public; prohibit some Idahoans from partici-

versity and Boise State University each paid

pating in the meeting; neglect to publish the

$146,453, $108,659, and $123,469, respec-

agenda or the meeting’s minutes, and more.4

tively, for their directors of government

The secrecy with which these meetings can

relations, who lobby state policymakers on behalf of their universities.1 1

GOOD GOVERNANCE

State Controller Salary Check. transparent.idaho.gov

2 Idaho Secretary of State Lobbyist Registration, p.22. Michael Kane, of Michael Kane & Associates, is listed as the lobbyist. sos.idaho.gov/elect/ lobbyist/2016/lobemp.pdf 3 Idaho Code 74-202 4 The full list of requirements under the Open Meetings Law can be found in Idaho Code 74-203

79 be conducted is a direct affront to govern-

2012 and 2015 found that the average spike

ment accountability.

was 574 percent.5 To show the self-serv-

The second handcrafted exemption is found

ing nature of this perk, even similar part-

in the Public Employee Retirement System,

time elected officials, such as mayors or

which allows politically well-connected

city-council members, do not receive the

legislators to spike their pension payouts

same treatment. This benefit has been con-

when they take on a full-time position

structed solely by legislators and the benefit

with the state government. The formula is

does not extend past their chambers.

calculated differently for legislators than for

Lastly, Idahoans are endangered by the trou-

any other public officials. Take for example

blesome practice of civil asset forfeiture, by

a legislator who leaves the legislature after

which law enforcement officials seize assets

10 years of service for an agency direc-

from people prior to a criminal conviction.

torship. The legislator serves for at least

An Institute for Justice report gave Idaho’s

three and a half years in this new position,

civil asset forfeiture laws a D- for their lack of

which pays a much higher salary. When this

transparency, poor protections for victims of

person retires and the state calculates their

asset seizures, and for the fact that property

pension, it is as though the ten years the

could be taken without a prior conviction

individual spent in the legislature they were

of the individual.6 This practice is especially

paid the whole time at the same rate as the

alarming, as it promotes a perverse incentive

agency directorship. A 2016 IFF actuarial report detailing eleven ex-legislators who availed themselves of this perk between

5 IFF Actuarial Report: Politician Pension Payoff Study. July 2016. idahofreedom.org/wp-content/uploads/2016/07/Final-pension-study.pdf 6 Institute for Justice. “Policing For Profit: The Abuse of Civil Asset Forfeiture.” 2015. ij.org/report/policing-for-profit

Estimated yearly pension payouts after spikes 1200000 1000000 800000 600000 400000 200000 0 Ken Roberts

Dean Joyce Elliot Cameron Broadsword Werk

Eric Anderson

Before Spike w/COLA

Bob Geddes

Debbie Field

John Tippets

Lawrence Denney

Joe Stegner

Bill Deal

After Spike w/COLA

GOOD GOVERNANCE

the

PROBLEM

cont.

for law enforcement agencies: they keep the profits of

For each of these issues, taxpayer dollars have been

any item or money they seize, which is a simple way

diverted from the services they are meant to provide,

to pad their budgets. Idaho’s law enforcement agen-

as state and local agencies dedicate more and more

cies are not required to keep record of any seizures

to their own expansion, rather than to the flourishing

they make, making it impossible to discern how large

of the state and its residents. Idahoans need their

a problem this is in Idaho. Suffice it to say, families

state government to take the focus away from them-

and individuals across Idaho have lost their savings

selves, and to make the public interest their priority.

and property to law enforcement agencies, even when they are never convicted of a crime.

the

SOLUTIONS Prohibit the use of taxpayers’ money in elections Taxpayer dollars should not be used to sway public

Prohibit the use of lobbyists on staff at, or on contract with, state agencies

opinion about bonds or levies. Doing so puts state

The governor must require all executive agencies to

and local governments in a position where tax collec-

cancel all contracts with lobbying firms and to elimi-

tion and expanding their own function is put above

nate the positions within state agencies that lobby for

anything else. The end goal of Idaho’s governing

individual public entities. Again, having state agencies

powers should not be to further their own interests,

lobby state policymakers to the agencies’ benefit sets

but rather to further the public’s interests. Swaying the

them in a position to serve their own interests rather

outcome of a ballot initiative, a bond or levy vote, or

than the public’s, spending taxpayer dollars all the

anything else at the ballot box unfairly tips the scale

while.

in favor of those who support bigger government, effectively stealing the vote from many Idahoans.

GOOD GOVERNANCE

Prohibit lobbyist gifts to legislators

issue of constitutionality, that legislators cannot

House Bill 506 from the 2016 Session would have ef-

determine their own compensation. However, the

fectively eliminated this problematic practice. In sum,

Office of the Attorney General gave its opinion on

to reduce potential conflicts of interest while conduct-

the matter, stating that the passage of House Bill 100

ing the business of their office, legislators should be

was within the prerogative of the Legislature.7

prohibited from receiving gifts from lobbyists.

Eliminate the practice of pension spiking

Eliminate or reform the practice of civil asset forfeiture As a tool to be used by law enforcement, civil asset

Idaho policymakers must prohibit this practice and

forfeiture is questionable at best. But, as it is current-

eliminate the exemption in the pension system that

ly utilized in Idaho, residents are not given the due

has been designed solely to benefit Idaho’s legislators.

process of law. The most effective way to protect

Several bills have been brought to the Legislature to

Idahoans would be to eliminate entirely civil asset

do just this, such as House Bill 100 from the 2015 Legislative Session. Some legislators have raised the

7 Brian Kane. “Opinion on House Bill 100- File No. 15-50730,” March 2015. https:// legislature.idaho.gov/wp-content/uploads/sessioninfo/2016/interim/160601_ comp_06_AGOpinionOn2015HouseBill100.pdf

GOOD GOVERNANCE

the

SOLUTIONS

cont.

forfeiture. Thus, no longer could an Idahoan’s property be seized prior to him or her being convicted of

the law enforcement agency.

whereby a criminal’s assets, which were used in per-

Require agencies established by executive order to follow the open meetings law

forming a crime or received from criminal activity, are

All 28 of the governor’s committees, councils and

seized subsequent to a conviction.

commissions should be governed by the same laws

a crime. Eliminating this practice would still leave the less controversial practice of criminal asset forfeiture,

as other public agencies. As the Open Meetings Law In the event lawmakers can’t muster the courage to

states, “The people of the state of Idaho in creating

eliminate civil asset forfeiture policies, reform is es-

the instruments of government that serve them, do

sential. This reform must have the following elements.

not yield their sovereignty to the agencies so created.

First, it should divorce the proceeds of the seizure

Therefore, the legislature finds and declares that it is

from the agency that seizes it. This would eliminate or

the policy of this state that the formation of public

greatly reduce any perverse incentives for an agency

policy is public business and shall not be conducted in

to seize property for its own benefit. Second, to pro-

secret.” These 28 agencies are no different, as they are

vide a level of accountability, agencies must keep re-

still established to serve the public, which should have

cords of and report each seizure. Third, there must be

the authority to follow their proceedings.

no seizure of property until after a criminal conviction has been rendered and the property seized must be directly associated with the crime committed. Finally, when property is seized unjustly the owner should not bear the costs of the seizure nor the attorney costs of

GOOD GOVERNANCE

“Eliminating these dubious practices would ... [ensure] that those in public service are truly serving the public, not themselves or the agencies they represent.”

the

BENEFITS Listening to the voices of Idaho’s taxpayers and providing them more accountability for their property and taxes would have several benefits to Idahoans across the state. State agencies could put more resources towards helping the public, rather than spending money for rent-seeking. Both sides of issues could be heard in elections across the state, rather than just the side that receives support and funding from the local governments for its campaigns. Idahoans would see that those who take on roles as public servants, be they legislators, law enforcement, or governor-appointees, are all subject to the same laws. While none of the aforementioned issues are large drivers of Idaho’s rampant budget growth, they are indicative of a growing inclination among public officials to promote their own interest above that of the citizens. Eliminating these dubious practices would help bring the state government back to the people, ensuring that those in public service are truly serving the public, not themselves or the agencies they represent.

GOOD GOVERNANCE

Cannabis

Policy

“

Unfortunately for Scout, who suffers from intractable epilepsy ... Idaho forbids anyone

“

from possessing or consuming CBD.

Suffering Idahoans should not be made criminals By Phil Haunschild In his short life, 9-year-old Scout Bunderson has un-

Across the country, at least 16 states have specifically

dergone four brain surgeries, including one procedure

legalized CBD oil for medicinal purposes. It’s also

wherein surgeons removed malformed portions of

available in the 26 states that have legalized cannabis

his brain. That surgery, which Scout underwent at the

for medicinal or recreational purposes.

tender age of six, could have left him blind, deaf or, in the worst case scenario, dead.

In 2015, Idaho lawmakers passed legislation to more or less decriminalize CBD, but Gov. Butch Otter vetoed

His parents, Bryce and Holli Bunderson of Montpe-

the measure. Otter’s rejection nearly crushed the

lier, believe their precious son could have avoided the

Bundersons, who had tirelessly lobbied lawmakers to

invasive and risky surgery through the use of cannabi-

pass the bill.

diol oil. The substance, also known as CBD oil, calms or even stops seizures in patients who suffer from in-

“Heartbreak,” Holli said of the veto. “[We] just felt ut-

tractable epilepsy. The oil is derived from the marijuana

terly defeated.” Otter, through executive order, directed

plant, but produces no psychoactive high for users.

state funds to support a clinical trial of a medicine that contains CBD. That trial initially allowed only 25 kids—

Unfortunately for Scout, who suffers from intractable

now 38—access to experimental treatments.

epilepsy—as well as autism and cortical dysplasia—Idaho forbids anyone from possessing or consuming CBD.

Scout was not one of the 25. Even had he been, weekly trips to Boise to meet with doctors would have cost the

The prohibition stands in contrast with the states that

family too much.

surround Idaho: All border states allow the purchase and consumption of CBD oil. Were the Bundersons

The Bunderson family is out of options, all because

to pick up and move a few miles south to Utah, Scout

Idaho criminalizes suffering kids and adults. Yet, Holli

could have and take CBD oil. The same is true if the

and Bryce remain faithful and pray daily that Scout will

family moved to Wyoming, slightly more than 20

eventually live something close to a normal life. “Faith

miles to the east of their southeastern Idaho home.

is stronger than fear,” Holli said. “I just know whatever happens, it will be OK.” CANNABIS POLICY

the

PROBLEM The Bunderson family epitomizes the negative impact that Idaho’s cannabis policies have on its residents. Prohibiting medical marijuana throughout the state has hurt numerous Idahoans, sending many across state lines,

Reason for cannabisrelated arrests in Idaho 2005-2012

either to return with the medicine they need or to stay permanently. The bordering states to the east have allowed for the full or partial use of medical marijuna, while those to the west, Oregon, Washington and Nevada, have legalized the medicinal and recreational use of marijuana. This has had impacts on Idaho’s border communities, as evidenced by the Idaho State Police’s 2012 report showing that five of the six counties bordering Washington state have some of the highest arrest rates for marijuana possession.1 As a recent report published by the Idaho Statesman has shown, marijuana shops in Huntington, Oregon, the closest city to the Treasure Valley with legalized marijuana, may have more customers from Idaho than from Oregon.2 From 2005-2012, some 45,267 Idahoans were arrested for marijuana, accounting for 63 percent of all drug related arrests.3 91 percent of these arrests were for the mere possession or consumption of marijuana. This sheer volume of law enforcement cases necessary to enforce 1 “Idaho Drug and Alcohol Related Offenses and Arrests: 2005-2012.” Idaho State Police, Idaho Statistical Analysis Center. 2013. p. 7 and 9. 2 Sven Berg, “Legal Weed, Idaho Customers Breathe Life into Tiny Oregon Town, irk Otter,” Idaho Statesman, March 2017. 3 “Idaho Drug and Alcohol Related Offenses and Arrests: 2005-2012.” Idaho State Police, Idaho Statistical Analysis Center. 2013. p. 7 and 9.

CANNABIS POLICY

Idaho drug arrests 2005-2012 37% Other

63%

Marijuana

Posessing/Concealing Using/Consuming

Idaho’s cannabis policies diverts resources from other as combatting violent crime or keeping our highways

criminal record. Furthermore, many of those who make Selling/Distributing this single mistake are also precluded from receiving some government support, such as SectionTransporting/Importing 8 housing,

safe,

Culivating/Manufacturing or a partial ban on receiving TANF (Temporary Assis-

areas where law enforcement is critically needed, such

However, the costs go far beyond budgetary concerns.

5 tance for Needy Families) support or food stamps. This Buying/Receiving

puts these individuals at a substantial disadvantage for

Those who are convicted on minor marijuana pos-

the remainder of their lives. The Pew Charitable Trusts

session charges face harsh punishments. If someone

found that incarceration and the record it leaves can cut

is arrested with any amount of marijuana, however

these convicts’ lifelong earnings in half.6 The American

miniscule, they could be punished by up to a year in jail,

Pediatric Association opposes these harsh penalties for

a $1,000 fine, and a lifelong criminal record. Possession

adolescents and young adults due to the blight that it

of three ounces or more is a felony, punishable by up to

can impose upon their future prospects.7

five years in prison and a $10,000 fine. Holding more than a pound is a felony punishable by $50,000 and

But, Idahoans do not even have to possess, use, distrib-

up to fifteen years in jail.

ute, or manufacture marijuana to face some of these

harsh penalties. The mere proximity to marijuana can For many, paying a hefty fine and facing incarcera-

be grounds for an arrest under Idaho’s frequenting laws.

tion are not the greatest challenges. The most puni-

Young Idahoans who are caught with others who use

tive aspect is the lifelong criminal record from these

marijuana can face many of the same penalties, even if

misdemeanor and felony charges. This record can bar

there is no proof that they have anything to do with the

them from future employment, as all employers are

marijuana.8

free to check into prospective employees’ criminal background. Further, a full quarter of the professions licensed by the state can bar any individual with a

4 These categories can be found under the Idaho Uniform Controlled Substances Act: Idaho Code 37-2732, 37-2732B.

5 Eli Hager, “Six states Where Felons Can’t get Food Stamps,” February 2016. https:// www.themarshallproject.org/2016/02/04/six-states-where-felons-can-t-get-foodstamps#.y8APiNT1z 6 “Collateral Costs: Incarceration’s Effects on Economic Mobility,” Pew Charitable Trusts, 2010. http://www.pewtrusts.org/~/media/legacy/uploadedfiles/pcs_assets/2010/ collateralcosts1pdf.pdf 7 American Academy of Pediatrics. ‘The Impact of Marijuana Policies on Youth,” March 2015. 8 Idaho Code 37-2732(d)

CANNABIS POLICY

the

SOLUTIONS Legalize CBD Oil

to accept the growing body of research that

Senate Bill 1146a from 2015, though vetoed,

demonstrates the value cannabis extracts

sought to legalize CBD oil for those with

can have for medicinal purposes. Doctors

intractable epilepsy and provides the frame-

and physicians would be able to prescribe

work necessary for legalizing CBD oil across

products for those whom it would medically

the state. CBD oil, though extracted from the

benefit. Reclassifying marijuana follows the

cannabis plant, contains little THC, the psy-

recommendation of the American Coun-

choactive ingredient in marijuana. Legalizing

cil of Pediatrics, as it recognizes the value

CBD should cause no fear among Idahoans,

which marijuana can have for “children with

and is not necessarily a step toward the le-

life-limiting or severely debilitating condi-

galization of marijuana for general use. CBD

tions and for whom current therapies are in-

oil has nothing but medicinal uses, so there

adequate.”11 This would also facilitate further

is no possibility of its misuse or abuse.

research into the benefits and drawbacks of the medicinal use of marijuana.

Reschedule marijuana and cannabis-derived products at a lower classification

Eliminate “frequenting” laws

Oregon followed this strategy in 2010, which

stances Act, any person “at or on premises of

paved the way for more common-sense

any place where he knows illegal controlled

cannabis policies. Schedule I drugs, which

substances are being manufactured or culti-

cannabis is currently classified as, must have

vated, or are being held for distribution, trans-

“high potential for abuse” and “no accept-

portation, delivery, administration, use, or to

ed medical use in treatment in the United

be given away” is guilty of a misdemeanor and

States or [lack] accepted safety for use in

can be subject to a $300 fine and 90 days in

treatment under medical supervision.” Con-

jail.12 This is the definition of a “frequenting”

versely, the less restrictive Schedule II drugs

law, which criminalizes the mere proximity to

acknowledge a “ currently accepted medical

illicit substances. There is no place for overly

use in treatment in the United States, or

broad and vague criminal frequenting laws in

currently accepted medical use with severe

Idaho, statutes that can be easily abused as a

restrictions,” even while recognizing that “the

catch-all to punish Idahoans who cannot be

abuse of the substance may lead to severe

convicted of anything more.

Under the Idaho Uniform Controlled Sub-

psychic or physical dependence.”

Rescheduling cannabis would allow Idaho

9 Idaho Code 37-2704 10 Idaho Code 37-2706

CANNABIS POLICY

11 American Academy of Pediatrics. ‘The Impact of Marijuana Policies on Youth,” March 2015. 12 Idaho Code 37-2732

the

BENEFITS Decriminalize the use of cannabis

For numerous Idahoans, the legalization of medical

As a general principle, a criminal

able levels. For countless others, decriminalization could

penalty should correspond with its

save them from the lifelong blight a criminal record

conviction. Decriminalization, as it

causes, even for the mere possession of small amounts

has been implemented in 21 other

of marijuana.

states, would reduce the penalty

Many have opposed lessening penalties for personal

for first time offenders from a

marijuana use on the grounds that it will hurt youth ed-

criminal charge to a civil penalty

ucational outcomes, spike the use of marijuana through-

such as an infraction and a fine. At

out the state, and create an upsurge in the use of other

a minimum, all first-time offenders

drugs. As the number of states that have decriminalized

should not be punished by incar-

the possession of marijuana increases, we can study

ceration. This would constitute

the results of such policies. After decriminalization and

decriminalization in Idaho.

subsequently legalization in Colorado, Washington, and

cannabis could improve their quality of life at unfathom-

Oregon, there has been no spike in the use of marijuana By contrast, Oregon, Colorado,

beyond the preexisting trends.13 Nor have prices plum-

Washington, and Nevada and sev-

meted in any of these states, as many predicted, thereby

eral others have legalized marijua-

encouraging the more widespread use.14 Rather, sales

na, allowing for its open (although

came out of the black market and into legalized retail

regulated) sale. Decriminalization

shops.

would not allow for this open sale,

While some assert that decriminalization of cannabis

use, or recognition of marijuana in

or the legalization of medical cannabis would wreck the

Idaho as marijuana would remain

state, the data just don’t bear that out. would have are

illegal. Decriminalization provides

negligible. Student testing scores, youth IQs, drug and al-

a moderate step for Idaho, which

cohol use, violent crime rates, adolescent use of marijua-

would reduce the costs of polic-

na, and general economic impacts, among others, have

ing, prosecuting and incarcerating

not generally diverged from preexisting trends. How-

minor offenders, all while bringing

ever, the positive effects which decriminalization would

penalties in line with the minor

provide are concrete: young people will no longer see

severity of the crime.

their futures upended by an unnecessary criminal record, those suffering from intractable epilepsy would finally reap the benefits of medical canabis, and the state could devote limited law enforcement and correctional institution resources to areas where they are most needed. 13 Angela Dills, Sietse Goffard, and Jeffrey Miron. “Dose of Reality: Policy Analysis Number 799,” Cato Institute, September 2016. 14 Angela Dills, Sietse Goffard, and Jeffrey Miron. “Dose of Reality: Policy Analysis Number 799,” Cato Institute, September 2016.

CANNABIS POLICY

Small Business

“My tax dollars are being used to pay for training my competitor’s employees”

Create a business-friendly Gem State By Phil Haunschild Idaho business owner George Gersema has had enough of Idaho state government handouts

“I now have to compete with them for talented

and corporate welfare.

staff, which they do with a direct subsidy,” he said. “How do I combat that?”

“Where does the corporate welfare end?” a frustrated Gersema asked the Idaho Freedom

Then, the Idaho Department of Labor piled it

Foundation.

on. In 2016, that state agency awarded Paylocity a $1.2 million grant to cover the firm’s training

In 1985, Gersema and his wife Mary founded

costs.

the human resources company Employers Resource and has kept the firm in its Boise head-

The training grant came from the Workforce

quarters since launching operations. Through

Development Training Fund, which derives

more than three decades in the Treasure Valley,

some of its cash from a portion of the unem-

the Gersemas have employed hundreds and

ployment-insurance taxes businesses—in-

likely generated millions in tax revenue.

cluding Employers Resource—pay. That insults George Gersema.

How did Idaho repay the couple’s loyalty to the Gem State? By subsidizing a direct competitor

“My tax dollars are being used to pay for

in the name of economic development.

training my competitor’s employees,” Gersema rightly noted.

In late 2015, the Idaho Department of Commerce awarded Paylocity, an Illinois-based

Battered by the one-two punch from the state

firm that directly competes with Employers

agencies, Gersema wondered what else the

Resource, a 15-year, $6.5 million tax break on

state could do to boost Paylocity’s prospects.

income, sales and payroll taxes. “Hell, what’s next?” he asked. “[Is the state] Gersema questioned the deal’s fairness shortly

going to add a little profit to their bottom line?”

after the state announced the deal.

SMALL BUSINESS

the

PROBLEM Entrepreneurs in Idaho are often treated as prob-

Idaho businesses have more than 600 different pro-

lems, not as agents for solving them. This treatment

grams, permits, or applications which they might have

subjects Idaho businesses to a web of laws, rules and

to apply and or pay for at the local, state, or federal

regulations that hinder their ability to flourish.

level before opening their business.2 The number would vary for each business depending upon the

The Pacific Research Institute ranks Idaho in the mid-

industry, scope and type of business. But, for exam-

dle of the nation, at 24th place, on its Small Business

ple, a restaurant serving alcohol would have to file at

Index, which reviews and compares state regulations

least 30 forms with 21 different agencies. Compare

that impact the cost of doing business. Such policies

this to individuals seeking benefits from the state, be

include start-up and filing costs, insurance and other

it unemployment insurance or workers compensation,

requirements for employee benefits, as well as state

where they must only go to one or two agencies.

minimum wage policies. Idaho ranks poorly at 37th for the cost of workers’ compensation programs, and at

Once businesses have begun operation, they must

45th for unemployment insurance programs, which

pay annual filing costs with the agencies that regu-

means our state requires employers to pay more for

late different businesses, of which there are 63 such

these services than most every other state.

agencies in Idaho.3 Many of these agencies have broad

statutory authority to conduct audits or inspections of Small and new businesses pay heavily for these poli-

businesses, from tax audits to employment audits to

cies. All businesses less than 1.5 years old, are required

compliance inspections, all of which create additional

to pay a 50 percent higher unemployment insurance

work at the expense of these businesses and their

tax than most established employers. Further, the

employees. This raises the cost of doing business in

mandatory workers’ compensation policy places a

the state and, in turn, increases costs for consumers.

substantial burden on small businesses, as all businesses must pay $2 per $100 of payroll on average.

Small businesses are stuck subsidizing some of the largest companies in the United States, such as Dow

These are just two of the many programs that hurt

Chemical and McCain Foods. The Tax Reimbursement

Idaho businesses and, subsequently, employment

Incentive, granted to these two companies, among

opportunities for all Idahoans.

Pacific Research Institute

SMALL BUSINESS

2 Based on Idaho Bizhelp website: Business Wizard. 613 total options. 3 Based on Idaho Bizhelp website: Business Wizard. 63 agencies with regulatory authority over businesses. No business would be subject to all 63, but there is any combination of them

others, provides up to a 30 percent reimbursement on income, payroll, and sales taxes. Additionally, the director of the Department of Commerce has the sole discretion to grant companies money from the Idaho Opportunity Fund, a â&#x20AC;&#x153;deal-closing fundâ&#x20AC;? that has provided similar companies grants ranging from $85,000 to $800,000 for infrastructure development.4 Though no single policy entirely precludes the formation of new businesses in Idaho, the sum of these countless regulations and policies has steadily hindered the growth of small businesses in the state. 4â&#x20AC;&#x192;

Based on all grants issued between 2013-2016

Unemployment insurance rates 1.5%

1.13%

0.75%

0.38%

New Employers

Rate for All Average Rate Other Employers for All Positive Employers

SMALL BUSINESS

the

SOLUTIONS Limit the permitting, certification and registration process for new businesses

others, depending on the industry. At least one percent

Federal, state, county, and municipal governments all

by the IRS, and one percent are audited by the Idaho

hold specific requirements for new businesses. Forc-

Department of Labor.6 This is in addition to audits or

ing Idaho entrepreneurs to navigate such an extensive

inspections by the Industrial Commission and licensure

bureaucracy creates a substantial barrier to the forma-

boards. With so many agencies auditing, some busi-

tion and growth of new businesses. Idaho policymakers

nesses are subjected to a rapid succession of audits from

should streamline the state’s regulatory process for

differing agencies. There is no time limit as to how long

business owners by reviewing and replacing licenses,

audits may last but on average they are much longer

permits, and applications that create an unnecessary,

than 100 days, and the state may require businesses to

potentially costly, barrier. The review of all permits,

provide information through the duration.7

of businesses are audited by the state Tax Commission annually, 2.5 percent of small businesses are audited

licenses, and registrations would show the licenses and permits which create the largest barrier, as well as reveal

Lessening the frequency of audits from different

where there are duplicate licenses and permits with

agencies, as well as tightening the scope and impact of

separate federal, state, or local agencies. Policymakers

business audits could simplify the process for doing busi-

should then use this information to eliminate those

ness in Idaho and provide a more consistent regulatory

which are hurting business success and job creation

framework to operate within.

across the state. For example, liquor licensing hampers business growth because current policy allows only one

Eliminate corporate welfare programs

license per 1,500 residents, a restriction that hampers

Idaho’s financial incentives and tax credit programs

growth and has led to a costly $300,000 liquor license

subsidize big businesses in Idaho at the expense of small

in Coeur d’Alene. Analyzing existing regulations on busi-

businesses already established here. These programs put

nesses like this 70-year-old law would pave the path for

local businesses at a competitive disadvantage to the

policy changes that foster economic growth.

new businesses that come into the state after receiving

deal-closing funds.8 Policymakers should eliminate the

Ease auditing requirements

government programs that pick winners and losers in

Idaho businesses are subject to semi-random audits

the economy and instead focus on promoting the entire

from multiple state and federal agencies, such as the

business environment through less restrictive, universal

Idaho Industrial Commission, the Idaho Department of

tax policies.

Labor, the State Tax Commission, and the IRS, among

5 http://idahobusinessreview.com/2017/03/06/idaho-lawmaker-introduces-new-liquor-license-reform-plan/

SMALL BUSINESS

6 Information requested from State Agencies 7 Department of Labor- Compliance Division 8 Department of Commerce Website

Lower the taxable wage base for unemployment insurance

The inequitable burden of the unemployment insurance

Idaho’s taxable wage base for unemployment insurance

ment. For this full length of time, new employers pay a

is the fourth highest in the nation. Even though the rate

higher rate than all but eight percent of other businesses,

of taxation is lower than many states, because the wage

placing an undue burden on them. Businesses should

base is so high, Idaho businesses pay more in unemploy-

be moved to the appropriate rate after they have begun

ment insurance tax out of their payroll than all but five

paying into the system.

states in the nation. Idaho’s taxable wage base should

tax should be fixed by lowering the six-quarter require-

the average of all other states. This would offer Idaho

Eliminate the Workforce Development Training Fund

businesses substantial tax relief, which could carry over

The state Department of Labor manages the

in the form of higher wages for their employees and/or

Workforce Development Training Fund, which takes

reduced costs for consumers.9

money from all employers through a portion of their

be lowered from $37,200 —which is more than double

unemployment insurance taxes. Through this fund, the

Shorten the six-quarter requirement for unemployment insurance rates

department is then supposed to incentivize businesses

Idaho employers are assigned a premium rate per dollar

been little proven effectiveness of these programs,

of payroll which determines how much they must pay

with companies who receive grants often closing shop

into the state-run unemployment insurance program.

and leaving Idaho.10 Additionally, the Department

The assigned rate is based upon how many dollars each

of Labor cannot verify that these grants are going to

business’ employees have received from the system as

the correct recipients.11Eliminating this program could

compared to what they have paid. A business that has

save employers three percent on their unemployment

historically paid more into the fund than its employees

insurance taxes.

have taken out will have a lower rate than a business that

to grow and hire more employees. However, there has

However, businesses just beginning in Idaho must go

Eliminate the mandatory requirements for workers’ compensation programs

six quarters before receiving a rate reduction. This forces

Virtually all Idaho employers are mandated to provide

many newly-formed small businesses, which must use

workers compensation insurance, for which the providers

every dollar to grow, to pay extra amounts into the un-

and rates are already determined by the state of Idaho

employment insurance program, thus subsidizing other

and the National Council on Compensation Insurance

pays less than its employees receive.

businesses that are already established in the state.

https://ows.doleta.gov/unemploy/docs/aetr-2016est.pdf

10 See: http://idahofreedom.org/knock-knock-anyone-paying-attention-workforce-development-fund/ 11 Legislative Services Office Audit Division.” Management Report: Department of Labor,” August 1, 2017, https://legislature.idaho.gov/wp-content/uploads/audit/audit-reports/Agency/2015/Labor%20Department%20of.13-14-15.pdf

SMALL BUSINESS

the

SOLUTIONS (NCCI). The costs for this program range

as well, to allow fair competition between

from just pennies per $100 of an employ-

insurance providers.

er’s payroll for many clerical professions, trades.

Eliminate workers’ compensation mandate for small employers

Idaho should move to an opt-out program,

Thirteen states have provided an exemp-

which has been in place for more than 25

tion for workers’ compensation coverage to

years in Texas and was recently imple-

employers who have from two to five em-

mented in Oklahoma. An opt-out program

ployees.12 Adopting such an exemption in

would allow businesses to choose whether

Idaho would allow businesses to hire their

they want coverage. For those who chose

first employees without having to shoulder

to maintain coverage, they have greater

an additional financial burden, worker’s

flexibility in what it looks like, for those

compensation coverage, for which the fees

who do not have coverage, they are held

are determined by the state. Adoption of

to stricter standards of liability. This exam-

this exemption would provide substantial

ple in Texas has been effective at lowering

cost-reductions for these businesses.

up to $23 per $100 for some construction

costs for employers and has allowed them es their needs. Eliminating the mandatory

Eliminate the Unfair Sales Act

requirement for coverage in Idaho, along

This law, established under the auspices

with defined rates and specified insur-

of protecting businesses in Idaho, has the

ance providers, would allow businesses

capacity to greatly hurt many of them. This

to choose the best program for them and

Act prohibits businesses from selling any

their employees. Moving to an opt-out

items to consumers with less than a six

program would need to be tied with an

percent markup.13 This takes away one of

opening of the market to allow private

the greatest tools for expanding small busi-

companies to offer workers compensation

nesses, as they can no longer price-to-grow

insurance at their own rates, rather than

thereby expanding their customer base

the profession-specific rates established

and production. Take for example a cof-

by the NCCI. The Idaho State Insurance

fee shop that has just opened; it will likely

the flexibility to find a program that match-

Fund, which competes unfairly with private companies, would need to be phased out

SMALL BUSINESS

12 State List: AL, AR, FL, GA, MS, MO, NM, NC, RI, SC, TN, VA, WI. http:// www.nfib.com/content/legal-compliance/legal/workers-compensation-laws-state-by-state-comparison-57181/ 13 Idaho Code 48-403

“

By eliminating the programs which provide corporate welfare ... small businesses will no longer

“

have the scale tipped against them.

offer major discounts as a form of advertising and capturing a new corner of the market. However, for every item they sell puts them at risk for a 500 dollar fine and a misdemeanor charge. It is time that Idaho takes this anti-competitive law off the books.

Relax pari-mutuel wagering laws Idaho policymakers have prohibited the growth of the horse racing industry through laws prohibiting every aspect of the business. The repeal of historical-racing, the licensing of any facility and any employee, the fees and applications, have all made it nigh on impossible for businesses to continue in this industry. Idaho’s policymakers need to relax the laws governing the horse-racing industry in order to allow the growth of this historical industry. ndustry. This would be a boon to numerous communities across Idaho, produce jobs and bring money into the Idaho economy.

the

BENEFITS Eliminating counterproductive regulations on small businesses would have ripple effects across Idaho’s economy. These businesses, as defined by the Small Business Administration, employ 55.9 percent of all private workers in Idaho, and constitute 96.6 percent of all businesses in the state.14 By eliminating the programs which provide corporate welfare to the comparatively few large companies in Idaho, small businesses will no longer have the scale tipped against them. Additionally, removing the strict mandates for employee benefits such as worker’s compensation or unemployment insurance would give small businesses more flexibility to pursue greater growth, allowing them to hire more employees and provide better services to Idahoans. As Idaho becomes friendlier towards small businesses, not only will it encourage entrepreneurs in the state, it will spur job-creation in the private sector, encourage widespread innovation and improve the economic outlook for Idaho. 14 https://www.sba.gov/sites/default/files/advocacy/Idaho.pdf https://www.shrm.org/hr-today/news/hr-magazine/0916/pages/opting-out-are-alternative-workers%27-comp-programs-viable.aspx

SMALL BUSINESS

Transportation

Policy

Keep Idaho Moving By Phil Haunschild Josh and Ashley Byers of Middleton spend a

during his annual trip to renew his car tags. The

lot of time chauffeuring their three growing

price astounded him.

children to and from soccer matches, church meetings and family activities.

“I don’t put any more wear on the roads than anyone else does,” Byers told the Idaho

Josh, who works in New Plymouth, also faces a

Freedom Foundation. Josh grudgingly paid the

lengthy commute each workday.

charge, but oft expressed his consternation over the expense to friends, family and on

In an attempt to reduce their growing gas

social media.

budget, the Byers invested in a hybrid sedan, an auto that regularly averages more than

Luckily for the Byers and others, the surcharge

30 miles per gallon. A few months after they

irked a number of gas hybrid owners, who

purchased the sedan, a relative gifted the Byers

pointed out that some gas-only cars achieve

another hybrid, a 2005 Ford Escape, which

higher miles per gallon than many hybrids.

notches more than 25 miles per gallon.

Two years after writing the hybrid surcharge into state law, lawmakers repealed it.

The acquisitions set the family on a more frugal trajectory. Or so they thought.

Still, the Byers found themselves out $225 because they had to register their sedan once

During the 2015 legislative session, Idaho

and the Escape twice while the fee was on the

lawmakers approved a bill to raise gas taxes

books. They’re victims of reckless transporta-

and car registration fees. The bill, approved

tion policy, and a muddy-eyed vision for find-

in the latest hours of the 2015 session’s final

ing funding to maintain Idaho’s infrastructure.

day, was crafted to raise nearly $100 million in revenue, money that would fund road repairs

Josh told the Idaho Freedom Foundation

and upgrades.

that his family had to “cut where we could” to offset the the hybrid surcharge. Thus, they

The bill also contained a provision that target-

reduced spending on the activities his kids

ed people like the Byers. The law tacked on a

love—eating out and going to the movies,

$75 hybrid surcharge for each registration year.

among other things.

Lawmakers thought owners of the gas-sipping cars should pay the charge to make up for the

Josh knows he and his family could again

gasoline they don’t buy. That fee generated

be targets of unwise policy, and he hopes

about $1 million annually.

lawmakers will find a new method to pay for roads, one that doesn’t cost him memory-cre-

Josh discovered the surcharge in late 2015

ating experiences with his kids.

TRANSPORTATION

100

the

PROBLEM

ation Dollars per Capita ARVEE Excluded)

Transportation funding, an immense

consumer demand from falling or rising

portion of Idaho’s budget, which impacts

gas prices and federal policies continue

the lives of every Idahoan on a daily basis,

to push away the use of fossil fuels for ADA County Spending

has not received the attention it is due by

by Purpose transportation.

our state government. As such, funding

2019

sources and distribution formulas have not

Outdated funding policies, in addition

advanced. The state now maintains a bal-

to overspending in other areas of the

ance sheet of nearly $1 billion of debt for

state budget, have created a $100 mil-

transportation projects, and transportation

lion shortfall each year for transportation

funding per capita is expected to drop 27

projects. In 2017, Idaho took on an addi-Alternative

2020 2021 percent by 2021.1 The state gas tax, which

tional $300 million in Grant Anticipation

provides 30 percent of state transporta-

Revenue Vehicle (GARVEE) bonds for road

tion funding, is being rendered insufficient

construction, putting the state’s total debt

by new vehicle technologies. Revenue

load near one billion dollars. The Idaho

from the gas tax is dependent on shifts in

Transportation Department anticipates

Transportation Highway

IFF Calculations based on IBOL population growth statistics and ITD STIP Document

GARVEE Bond payments percent of of Federal Funds funds GARVEE bond payments as a as percent federal

Percentage of Federal Funds

30% 22.5% 15% 7.5% 0%

2012

2013

2014

2015

GARVEE Percentage

TRANSPORTATION

2016

2017

2018

2019

Statutory Limit

2020

nsportation Dollars per Capita (GARVEE Excluded)

ADA County Spending by Purpose

27.4 percent of federal funds will

Transportation spending in Ada County by purpose

go toward repaying these GARVEE bonds once these new bonds are sold.2 This will max out Idahoâ&#x20AC;&#x2122;s legal debt capacity, which is just 2.6 percent away from the statutory limit of 30 percent of incoming federal transportation dollars.

2019

2020

Alternative Transportation

2021

Highway

Idaho is on an unsustainable route to fund infrastructure, with decreasing revenues, deepening debt, and the inability to keep up with the needs of a growing population. To fix this, Idaho needs to rethink its sources for funding and its processes for construction of projects.

2â&#x20AC;&#x192;

Idaho Transportation Department Accounts Division GARVEE

Bond payments as percent of Federal Funds

30% Percentage of Federal Funds

2018

101

22.5% 15% 7.5%

Transportation Dollars per Capita (GARVEE Excluded)

Transportation dollars per capita (GARVEE excluded) 350

263

AD 0%

2012 175

2013

2014

2015

GARVEE Percentage

2016

2017

2018

2019

2020

Statutory Limit

2017

2018

2019

2020

2021

TRANSPORTATION

102

the

SOLUTIONS Prioritize transportation spending each legislative session At the start of each session, the governor should bring forward a proposal for transportation funding and initiatives, and legislators should act on it within the first few weeks, rather than leaving it up for debate until the end of the legislative session. Dealing with the transportation proposal first will let legislators know how much revenue remains in the budget, ensuring that transportation receives sufficient funding. The general fund dollars that Idaho puts towards transportation should appear on the balance sheet each year.

Reduce reliance on the federal government Idaho receives 50 percent of its highway funding from the Federal Highway Trust Fund Account (FHTFA).3 Pursuing local or state projects without federal funding could provide more flexibility and allow state officials the ability to fund the most-needed projects. That would mean the state would not be bound 3â&#x20AC;&#x192;

TRANSPORTATION

ITD Funding Primer

103

“

When budgeting for transportation, Idaho’s governor and legislators should ensure that funding for road construction comes from

“

existing revenues

by the conditions stipulated in the grants and funds

construction comes from existing revenues, or that

for dedicated purposes that the federal government

taking on additional debt abides by Idaho’s constitu-

awards. For example, many mass transit projects,

tional requirement that a majority vote of electors

bike-share programs, and other such projects receive

approve it.4 GARVEE bonds are a dubious process for

substantial federal and local funding, but they do not

funding state projects because they circumvent the

provide the same return on investment that many

vote of the electors. Additionally, every dollar that

state-funded projects provide. Projects completed

goes towards servicing the debt from these bonds

without federal funding could also be done at lower

takes away from the maintenance, upkeep, and resto-

cost, because construction-cost-inflating policies,

ration of the state’s existing infrastructure.

such as federal prevailing wage laws, would not come into play.

Avoid debt-spending via GARVEE bonds for building transportation infrastructure

Pursue Public-Private-Partnerships (P3s) for major infrastructure projects across Idaho P3s across the United States have been shown to provide more efficient construction, lower costs, higher

When budgeting for transportation, Idaho’s governor

rates of on-time completion, and a reduced risk for

and legislators should ensure that funding for road

taxpayers.5 Finding private investors to construct and

4 Idaho Constitution Article VIII Section 1 5 Virginia Example

TRANSPORTATION

104

the

SOLUTIONS cont.

manage Idaho’s transportation infrastructure would substantially reduce the public money necessary to maintain the infrastructure for Idaho’s growing population, while at the same time ensuring better infrastructure. Policymakers should establish in Idaho Code the authority to establish such partnerships, which 33 states already allow. This process must be laid out openly before the public, with fair consideration given to all participants in the market, such that there is fair and even-handed competition and the system combats cronyism from the start. P3 authority should also be broad and flexible, so that different members of the private sector can provide these services, rather than a limited and select group of individuals.

Explore avenues for establishing more effective user-fees As the gas tax becomes more inefficient as a mechanism for funding road systems, new user-fee systems, such as tolls or mileage fees, should be investigated for their viability in Idaho. Doing this now will help ensure that transportation infrastructure receives sufficient funding and that funding is equitably distributed across all those who use the roadways. However, it is imperative that the introduction of a new user-fee system comes in conjunction with a decrease in or elimination of the gas tax, not in addition to the tax.

TRANSPORTATION

105

“

An updated and innovative transportation policy

“

can move Idaho firmly into the 21st century.

States with transportation P3 enabling legislation as of Jan 1, 2016

MA RI CT NJ DE DC

Broad Enabling Legislation Limited or project-specific legislation No legislation

the

BENEFITS An updated and innovative transporta-

of new industry technologies and develop-

tion policy can move Idaho firmly into the

ments. With a more efficient funding mech-

21st century. Idaho businesses, consum-

anism, policymakers can use fewer dollars to

ers, residents, and visiting tourists, would

repair and expand Idaho’s roadways, bridges,

reap countless benefits from an advanced

and other structures.

transportation system that takes advantage

TRANSPORTATION

About the Idaho Freedom Foundation The Idaho Freedom Foundation’s roots can be traced to 1977, when Ralph Smeed and Maurice Clements started the Center for the Study of Market Alternatives (CSMA) in Caldwell. CSMA was years ahead of its time. National organizations existed to promote liberty, but there were no state-based think tanks working to educate state and local public servants and residents about free markets and the principles of liberty. In Idaho, CSMA filled the void. Many of Idaho’s political luminaries, including former U.S. Sen. Steve Symms, Northwest Liberty Academy Director Elizabeth Hodge, and Foundation for Economic Education President Larry Reed point to Ralph, Maurice, and CSMA as playing a pivotal role in their beliefs. In 2008, Ralph Smeed and Maurice Clements reached out to Wayne Hoffman about starting a new state-focused, free-market think tank dedicated to Idaho issues. At that point, every state in the country had a free market think tank except for Idaho. Ralph and Maurice described their vision for the organization as one that would provide policymakers with free-market solutions and hold those same officials accountable if they expanded government.

Coincidently, Idaho native Heather Lauer was also working on a plan to start a think tank in the Gem State. Heather had reached out to Norm Semanko, who connected Wayne and Heather. Together, Wayne and Heather put together the organizational blueprint and the funding to start what would become the Idaho Freedom Foundation, which officially launched in January 2009. The Freedom Foundation quickly developed a reputation as an accurate, independent source for liberty-minded policy innovation and as a tireless watchdog against government waste and marketplace intervention. Three months after its founding, IFF had provided the intellectual ammunition to stop a well-greased effort to raise taxes on cigarettes and alcohol. By August 2009, IFF had launched a government transparency website, and two months later it began producing original journalism, which eventually became IdahoReporter.com. IFF’s work has been credited with saving taxpayers millions of dollars, eliminating failed government programs, and holding politicians accountable like never before in the history of the state.