Presentation of Idaho reports on Idaho Public Television is made possible through the generous support of the Laura Moore Cunningham Foundation, committed to fulfilling the Moore and Bettis family legacy of building the great state of Idaho.

With additional major funding provided by the estate of Darrell Arthur Kammer in support of independent media that strengthens a democratic and just society.

And by the Hansberger Family Foundation.

By the Friends of Idaho Public Television.

The Corporation for Public Broadcasting.

And donations to the station from viewers like you.

Thank you.

When you cut these things like therapy, that doesn't mean that my daughter won't get them.

It means we are paying out of our pocket for them.

Budget uncertainty is driving just about every conversation this year on tax policy, on education, and definitely on health care.

Where might the governor and lawmakers find common ground?

I'm Melissa Devlin.

Idaho reports starts now.

Hello and welcome to Idaho Reports.

This week, producer Logan Finney discusses tax conformity and why what's normally a formality has become an unexpected debate this legislative session.

Then Kevin Richert of Idaho Education News joins me to talk about looming budget cuts and how they might affect public schools, higher education, and just about everything else.

But first, on Thursday, the Idaho Supreme Court denied a request to stop the new parental choice tax credit program from going into effect.

The Committee to Protect and Preserve the Idaho Constitution, the plaintiffs in the case had argued that the program violates the Idaho constitutional provision to establish and maintain free and uniform public schools.

The court rejected that argument, saying the constitutional provision does not impose a limitation on the legislature's authority to do more than what the provision minimally requires when it comes to education.

Rather, it establishes a floor, not a ceiling, unquote.

We'll have more with Kevin Richert later on in the show.

The Trump administration's ramped up immigration enforcement continues to impact Idahoans and public policy discussions in the state, prompting demonstrations across Idaho both for and against the enforcement.

Multiple tribes in Idaho have encouraged their members to carry their tribal identification cards with them.

In case they get stopped by Immigration and Customs Enforcement agents with the Shoshone Bannock tribe telling members they should remain calm and respectful if approached, present their identification and report the encounter to Fort Hall Police Department's non-emergency line.

The Nez Perce tribe reminded its members that tribal lands operate under tribal sovereignty, and that ICE does not have automatic authority to enter private homes or tribal facilities without proper legal authorization.

And also this week, Governor Brad Little rescinded his reappointment of Estella Zamora to the Idaho Human Rights Commission after online comments and discussion pointed out recent anti-ICE posts on her social media, including one supporting a planned general strike against ICE in late January.

Zamora was first appointed to the Human Rights Commission by Governor Cecil Andrus in the 90s.

The letter to rescind Zamora's appointment came after her fairly straightforward hearing in front of the Senate State Affairs Committee on January 28th.

I've had the opportunity to serve Idaho on the Human Rights Commission as president and now currently serving as vice president.

I am passionate about everyone being treated respectfully, with dignity and be given an opportunity to work in a state.

To live in that state.

After Governor Little rescinded her reappointment, Zamora told Boise State Public Radio that no one from the governor's office had contacted her about the decision.

Also this week, a group of Republican lawmakers unveiled plans to introduce immigration related legislation, including audits of how many undocumented children are enrolled in Idaho public schools.

How many undocumented people are in county jails across the state, and how many use Idaho's health care system?

I think it's time to say no more cheap slave labor, no more propping up the Third World, no more subsidizing corporate greed.

Cartels in modern day slavery through the exploitation of tens of thousands of foreign nationals who are currently in Idaho as we're sitting here.

And I think most Idahoans can agree on that basic thesis, which is we should have the information to debate the issue plainly.

Are there too many, is there too much money being spent on illegal aliens, minor children or in public schools?

Are there too many illegal aliens currently in our jails and our prison system?

Maybe there's not.

Maybe there's not.

Maybe it's a fraction of a fraction of a problem.

But until the public is given that information, there can't be an educated debate.

We'll continue covering the story as the legislative session unfolds.

Another defining topic of this legislative session continues to be the budget and how the Idaho Legislature will balance that budget and cut spending after last year's tax cuts.

After the Governor's Budget Office recommended a path for ongoing 3% cuts.

Last week, the co-chairs of the Senate Finance Appropriations Committee asked agencies for roadmaps on how to cut an additional 1% and 2% from their general fund budgets.

That prompted concern from both agencies and some Idahoans, who might be impacted by those proposed cuts.

On Wednesday, a group of Democratic lawmakers held a public townhall on Medicaid services and how cuts would affect constituents.

The proposed cuts are so horrendous.

They're literally keeping me and my family awake at night.

my nonverbal nudist daughter would be a very excellent target for a predator, I can't understand everything, but I don't want them to take away my house.

I'm one crisis away from not being able to pay my mortgage.

you know, with these cuts, it's taken away my job.

You know, any chance of something that I thought I was going to have, I sat in front of the J. Fact committee 25 years ago when he was five, and I handed out, a flier saying, here's Grant.

If you cut his services, this is how it's going to hurt.

And here we are again, memorize who on the Jpac committee votes against this, memorize their face, and don't let them be comfortable in public.

On Friday morning, the Joint Finance Appropriations Committee is scheduled to vote on some of those ongoing budget cuts.

And we can't talk about the budget without talking about revenue, which is directly tied to tax policy.

Now, more than ever.

Producer Logan Finney has more.

It's that time of year again, tax season.

To keep things simple for Idahoans, our state generally conforms to the federal tax code.

We'll start with your total income.

That's wages, capital gains, interest and dividends earned during the year.

We then subtract any adjustments.

Things like retirement and health savings contributions, and educators' classroom expenses.

That equals your adjusted gross income, or AGI, used to determine things like the poverty line and if people qualify for certain government programs.

From there, you can either take the standard deduction or itemize for things like business expenses, resulting in your federal taxable income.

We then apply the federal tax rates to find your total tax.

And don't forget about credits.

Things like retirement savings or child care credits will reduce the amount of tax you owe.

Simple, right?

Now, rather than make us do all of that again, Idaho conforms to the federal code.

We take the federal AGI, again that's Adjusted Gross Income, and we apply our state deductions.

Also, adjustments for things like Social Security benefits, which Uncle Sam taxes like income but Idaho doesn't.

And then we get our total adjusted income.

Apply Idaho's flat tax rate to get your tax owed.

And Idaho has its own state level credits, some of which are refundable and add to your refund, like the $155 food credit or the new Parental Choice Tax credit for private education expenses.

The policy debate this year is whether, or rather to what degree, Idaho will conform with the federal code with changes included in President Donald Trump's One Big Beautiful Bill act, and what this would mean for the state budget.

Among other things, qualified taxpayers can now deduct tips and overtime and loan interest for new cars that were assembled in America.

Seniors can deduct up to an additional $6,000.

The standard deduction and the child tax credit were increased, and the adoption credit was made partially refundable.

I sat down on Thursday morning with Miguel Legaretta of the Associated Taxpayers of Idaho, May Roberts with the Idaho Center for Fiscal Policy, Mark Wynn with the Idaho Association of Commerce and Industry, and bill sponsor Representative Jeff Ehlers to get a feel for what conformity could mean for our state moving forward.

Thank you all so much for joining us today.

Representative Ehlers, the governor's budget proposal coming into this session wanted conformity to be forward looking.

The bill out of the House takes it back to 2025, taxes people are working on right now.

Why was that important for you?

Yeah, I think that's important to individual Idahoans to get the full benefit of Trump's one big, beautiful bill.

A lot of the individual tax provisions and benefits in Trump's bill expire in four years.

They're only good for '25, '26, '27, and '28.

If we didn't go back to '25 and we missed that, they're missing 25% of the tax benefits that they could have gotten.

And so for us, it was important that they got the full benefit of Trump's one big beautiful bill.

Mark, for the business and corporate side of this equation, we hear a lot about R and E, research and experimentation, in this proposal.

What sort of things does that cover and how does that benefit Idaho's companies?

Yeah.

So, R&E, often called research and development, is important for companies because that is the innovation side of what companies create and do in their business.

So think of products that a company would discover or new products that they would they would initiate.

And it could be products that they already have but they're enhancing them, making them better.

It's usually something that takes a lot of lead time, where they're investing a lot in this research, and then they're hoping that it leads to something that that can provide economic benefit to the company.

May, your organization the Center for Fiscal Policy, is against the bill that came out of the House.

You told constituents to contact their senators.

Can you explain your overall concerns with the bill?

Yeah.

So the center is opposed to House Bill 559, because there's, some missing pieces, provisions accounted for in the Tax Commission's estimates that we were concerned about.

But our main concern is the impact to the general fund.

The general fund is the fund that all Idahoans pay into it, their sales and income taxes.

And the has cut the income tax five times over the last five years.

So that was a, hit to the general fund.

And then, if we choose to conform our state's tax code with the federal government, that will be an additional, hit that can impact investment into programs and services for families.

Miguel, when we heard the bill in the House committee earlier this week, you were asked a couple times, is supportive of the bill yes or no?

You kind of sheepishly refused to give a straight answer there.

What's ATI's perspective on this bill?

I think you're hearing some of it.

As we go around the round table.

You have individual provisions, and tax preparers are waiting on conformity.

We're already late, frankly, in passing a conformity bill.

And on the other side, we're delaying the R&D provisions that Mark mentioned.

And that's, going to create some issues with the business side of things.

So it's a balancing act of the budget.

What we can do now and moving something forward in a timely manner.

And then, the the reason it's not, you know, exactly where it would we'd like it to be is related to the business provisions than the delays that we're going to experience.

There.

Representative Eilers, you're a CPA by trade, Mark.

You also are certified professional accountants.

Making these individual provisions backward looking affects the taxes that people are working on right now as we speak.

Is there would that cause any sort of problems for the accountants around Idaho?

Well, yeah, they are working on it right now, and it's for the taxes for this time.

We always do conformity every year.

And so there's always sometimes some years have more or less.

This year is a very big year around changes.

So there's certainly things we need to adapt.

If we didn't conform and maybe took it up in the forward looking year like the governor suggested, then we would have that same problem next year.

Having to adapt and adjust all these forms.

So either way, there's some element of adaptability that needs to happen.

Mark, what's your perspective there?

Yeah.

Businesses love conformity.

We have a little bit more time.

On the business side, we're not in as big of a rush or it takes more time to do our filings.

However, if we don't have conformity, we essentially have to create a new set of books for Idaho than we do for federal tax purposes.

And that that can create a tremendous amount of complication and administrative burden and resources and cost to companies.

If if Idaho doesn't conform and it creates cost for Idaho, because Idaho has additional expense to administer these decoupling provisions if they don't conform.

All right.

Let's hear a little bit of a clip from the House Revenue and Taxation Committee.

This was back on Monday.

Way back at the beginning of this week when the bill was introduced.

Let's take a listen.

I'm afraid we got ourselves into this mess because we made blind assumptions.

It makes no sense to me that making more of those will get us out.

Like Milton Friedman said, I'm in favor of cutting taxes under any circumstances.

And for any excuse for any reason, whenever it's possible.

Miguel, 80, is generally supportive of cutting taxes as an economic development measure.

Is that a good blanket perspective to be coming from?

It's a balance.

And we've seen that in the, in the, budget, for example.

We do continue as we cut taxes to see revenue coming in strong.

However, this is one of those years where there's a great deal of uncertainty related to the budget, and there's some caution being taken.

So we'll we'll continue to work with the legislature to see if there's some additional outcomes, as the business side does have a little more time.

Representative Ehlers, what were your reactions hearing the testimony in committee earlier this week?

Yeah, there is a lot of good testimony.

I appreciate the public being so involved most of the time in conformity.

There's not a lot of public attention, but I appreciate all that input.

And that is a balance, right?

And I understand the interrelationship in a budget of the revenue side, which is taxes and the expense side, which is our other budgets and the agencies.

And so I think it's important to understand the whole picture and how those work.

You also made made a points on the on the floor that this is a policy bill.

It is not a revenue bill, but ultimately the taxes we collect turns into the revenue.

How how how easy is it actually to dis to disconnect those two things?

Yeah, I think a point I was trying to make is that, you can vote for this tax policy in its own merits.

There are a lot of assumptions of what that might do to expenditures, but the bill is silent on that.

It doesn't.

There's going to be there was a lot of programs mentioned in testimony and elsewhere about this program or this cut.

That could be another conversation that, the bill doesn't mention.

There's a lot of ideas on what to do for budgets.

So I wanted people to be able to say, oh, I can vote for this tax bill.

And we can also figure out different options for how to handle it.

Mark, we've heard some talk from the House leadership about, the business provisions in your specifically, there's been some talk about whether companies are double dipping, if they're taking things as deductions on the top end credits on the bottom.

And what's your perspective and your your view with the Association of Commerce and Industry?

Yeah.

The bill really targets, companies that have R&D expenses and, and credits and, the bill effectively increases taxes on these companies.

And, one thing that concerns me about the bill is it includes a provision that decouples from the Internal Revenue Code.

So it doesn't the doesn't conform with the Internal Revenue Code.

And this this provision has been in place since 1981, and it's now going to be a tax increase permanently for companies that invest in and innovate in Idaho.

Let's hear a little bit from the Joint Finance Appropriations Committee on Tuesday.

This is after the bill made it to the House floor.

This is Senator Groh, who is the co-chair of that committee, talking about the uncertainty they're seeing in the budget.

Let's take a listen.

So we've got uncertainty about to the, individual side of it.

Yeah.

There's office took the median take hundred 55 million.

We hope that's good.

But we don't know on the R and East side, which looks like they've included that in the, bill that came out of the House to the committee yesterday.

That's the big uncertainty.

We don't know how much money that thing is going to be.

I've heard the numbers from 0 to 88 million.

It's hard to balance the budget when you have that kind of uncertainty.

May your shop over at the center for Fiscal Policy has worked on this.

What are your best estimates for what this package would cost the state?

Yeah, there's been estimates from 284 million from the Tax Commission.

Of course, they included some of the provisions that and this bill has decoupled from.

So, that make a change.

But yeah, there's, there's other provisions like the Salt deduction and whatnot that weren't included in the Tax Commission's estimates that, we were concerned about.

But as you heard from Senator Groh, there's so much budget uncertainty.

And wherever revenues are coming in right now, whether it's below, above, because it changes month to month.

But the the information that we get, they're considering significant tax cut.

They're not tax cuts.

They're considering significant budget cuts, to services like Medicaid.

And then to pay for some of these, tax cuts.

And they're really drawing that bright line there.

And we've already seen some of the effects of this, these kinds of cuts to Medicaid.

I heard from, Mandy Bergstrom.

Her son, Max, has down syndrome and relies on, services through Medicaid to get occupational and speech therapy for her son so he can thrive, into her.

An additional $200 in tax relief, is pennies compared to the cost of these therapies that she relies on.

So what we would really like to see is the legislature fully fund the agencies that provide, safe roads, keep Idahoans, healthy and educated.

And then look at what money is like left over that can pay for additional, tax relief because tax relief, should get all families better off, and not leave any families struggling to get by.

Miguel, in your tenure with the Associated Taxpayers of Idaho, is this uncertainty about revenue something we're familiar with, or is this fairly new territory for us?

To the level that it is this year is, unprecedented in my ten years?

The, there were elements of, conformity and other things that just created revenue estimates that were questions and uncertain.

And essentially JFK's trying to ensure that we stay within those margins, that they're comfortable with.

Right now.

I think we have a $30 million ending balance.

Last year, we had a $400 million ending balance.

So that that's where JFK's coming from.

It's, a delicate time in terms of the budget, and I think we'll see more soon.

But it's not information we have now.

All right.

Well, acknowledging we're recording this Thursday morning, the Senate committee vote is expected on Thursday afternoon.

On Friday morning, Jack is going to be considering further cuts to the budget.

Representative Jeff Mark, when May Roberts mingle, like to thank you all so much for making time for us.

Thank you.

Hours after that conversation on Thursday afternoon, the Senate Local Government and Taxation Committee voted on party lines to advance that tax conformity bill.

Here to discuss that and so much more is Kevin Richert of Idaho Education News.

Kevin, any surprises on that vote?

Not particularly.

I think the vote was not terribly surprising.

This has been passing through on party line votes all along, through the House and through Senate committee.

Not really many surprises in the debate either, because it really does come back to, to a large degree, folks who were skeptical about this bill questioning can we afford it?

And how will that tie into the budget and the potential for additional budget cuts this year and next year?

And that uncertainty hasn't been, a secret, right?

The person who made the motion to send that bill to the full Senate was Senator Grow, the chairman of the Senate Finance Committee, who spoke at length earlier this week about how this introduces uncertainty into the budgeting process that he is currently trying to shepherd his committee through.

But both Senator Grow and Representative Josh Tanner, his counterpart on the House side of JFAC, both said we don't know for sure how much this is going to cost.

The $155 million estimate is just that.

It's an estimate that the sponsor of the bill Representative Ehlers has said, it's a reasonable estimate.

But, you know, you're talking about a budget right now, whether you're looking at the governor's version of this budget or the version that seems to be emerging from the legislative side, we're talking about a $30 million margin in this year's budget, and out of a budget of more than $5.5 billion.

I mean, that is a minuscule margin for error.

So any way that you're off on the cost of this immediately could have an immediate impact on the bottom line.

We're having this conversation the evening before the Joint Budget Committee is considering additional 1% or 2% cuts to some budgets.

Before we get into those implications, last week, Superintendent Debbie Critchfield responded to the request for roadmaps for more cuts, by saying no thanks, I'm not going to give you this blueprint for cutting my own budget after I already pulled back the $50 million special ed proposal.

So, regardless of how you feel about the public education budget, that was a pretty gutsy move on her part.

A very forceful non-response, and you need to keep in mind that things are a little bit different when you're a constitutional officer who's elected statewide.

You have a little bit more latitude to do what Critchfield did.

That said, it is still a pretty gutsy maneuver.

But you can see where she's coming from, and a lot of in the sense because, like you say, she did pull back a $50 million proposal on special education, not because she doesn't believe that there's a need for additional funding for special education.

As she saw the writing on the wall and realized that this is not going to happen in this budget year.

We don't have a crystal ball, but do we yet know if the Joint Budget Committee is going to propose direct cuts to K-12 public education?

So far, the indications are that they are not.

If you look at what they talked about in committee on Tuesday, it looks like they're taking K-12 off of the table.

Now, what happens down the road with this rescission package that might come out on Friday?

We'll wait and see.

And you know, when I talked to Representative Tanner about this whole process earlier this week, you know, I asked him, well, how does this really work?

Because we've never seen anything quite like this, and the way it works is that once you do this rescission package, whatever it looks like, and once you do the maintenance budget, which is kind of the continuation of last year's spending this year, the committee can then come back and do what has been called enhancement budgets.

We've seen this language emerge the past couple of years.

And he said, you know, an enhancement budget, it can be an increase, it could be a decrease.

So I would not expect to see any movement on a K-12 budget cut tomorrow.

In fact, when they do this rescission package, because everything that we've heard so far indicates that that's not going to happen.

But it's February 6th.

Tomorrow is February 6th.

It's early in the session.

A lot can still happen with K-12, higher ed, really any budget.

Any budget is fair game potentially at this point.

You brought up my transition for me.

K-12 is one story.

Community colleges and universities are another.

What are you expecting to see?

Well, I think right now, higher education is in the crosshairs here.

Because what the committee has done so far, what JFAC has done so far, with the way it looks like they're doing this rescission package, they've taken K-12 off of the table.

They've taken Medicaid off of the table.

They've taken corrections off of the table.

They've taken state police off of the table.

And I'm not debating for or against any of this.

I'm just pointing out that when you do that, you're trying to get your cuts from a shrinking piece of the budget.

Higher ed is still on the block.

So what this means, I'll dumb down the math a little bit because I've written a story about this today at IdahoEdNews.org, where I go into much more detail about the math.

More than 30% of these cuts would come from higher education.

The four year schools, the two year schools, if they stay on this path that they've talked about, 30% of the cuts would come from, you know, these two sectors of state government that receive, I want to say, about 8% of the overall state budget.

So really disproportionate cuts relative to how much state funding that these higher education institutions get.

And this is after big cuts from the Great Recession, 2008, 2009, 2010, that they never quite fully recovered from when it comes to general fund.

Right.

It's after those cuts.

And if, you know, fast forward to the present, you even have Governor Little is talking about cuts to higher education funding as well.

He's talking about almost like a $10 million cut in a line item that's really designed to help the colleges and universities deal with enrollment growth.

Well, guess what?

Enrollment is growing.

So you put all these budget pressures together.

It seems almost inevitable that you're going to see a tuition and fee increase to come out this spring for next fall.

Then the question is how much of an increase.

And like you said, you have that great breakdown at idahoednews.org.

We have a little bit more than a minute left.

Other late breaking news on Thursday afternoon, the Idaho Supreme Court, as we mentioned earlier, rejecting a challenge to the Parental choice tax credit program.

We're still breaking down that opinion.

But what were your takeaways?

Well, one minute on this is gonna be tough.

But the takeaway is it was a resounding victory for the private school choice advocates, a resounding defeat for this coalition that was trying to overturn this law.

And this a coalition that included the Idaho Education Association, the Moscow school District.

Really, just on about any count possible, The Supreme Court sided with the advocates for the private school choice program, basically saying there is nothing in the Constitution that prohibits you from setting up a second system of education funding, that the constitutional mandate for a public school system just mandates that you do that.

It's a floor.

It's not a ceiling.

It doesn't limit you from doing this additional program.

So really, the advocates of private school choice got pretty much everything that they could want out of this, out of this ruling.

Including attorney fees for the tax commission.

Right?

I mean, there was there was no consolation prizes for the coalition that was trying to overturn House Bill93.

Alright, again, more coverage from your colleagues at IdahoEdNews.org, we'll leave it there.

Thank you so much for watching.

We'll see you next Thursday.

Presentation of Idaho reports on Idaho Public Television is made possible through the generous support of the Laura Moore Cunningham Foundation, committed to fulfilling the Moore and Bettis family legacy of building the great state of Idaho.

With additional major funding provided by the estate of Darrell Arthur Kammer in support of independent media that strengthens a democratic and just society.

And by the Hansberger Family Foundation.

By the Friends of Idaho Public Television.

The Corporation for Public Broadcasting.

And donations to the station from viewers like you.

Thank you.