BOISE — Gov. Jim Risch has signed his $260 million property tax relief bill that raises the state sales tax by a penny, declaring Idaho will never again use property taxes to fund day-to-day public school operations.
Following the bill-signing Thursday, Risch flew to Coeur d'Alene in northern Idaho for a similar ceremony in a region hard hit by rising property values and higher taxes. He promised the new law will provide "substantial property tax relief" of about 20 percent for homeowners who have grown angrier over rising annual payments — as well as a break to other classes of property owners including large and small businesses, farmers and utilities.
"Today is truly a historic day for Idahoans," Risch said. "I really don't believe any Legislature will ever turn back to using property taxes as a system to fund public schools."
The bill eliminates the public school maintenance and operations levy, and replaces the money by boosting the state sales tax to 6 percent from 5 percent on Oct. 1, to generate more than $210 million.
It also uses about $50 million from the state's $203 million budget surplus, and sets aside another $100 million in a rainy-day education fund.
"That's a very substantial item that protects education," Risch said.
There's also a nonbinding resolution on the Nov. 7 election ballot, to gauge whether voters like the governor's plan.
Risch was flanked in his second-floor Statehouse office by 10 Republican lawmakers from southwestern Idaho who voted against a similar plan in April, but switched course this summer.
Sen. John McGee, R-Caldwell, one of those lawmakers, said it was the state's 2006 budget surplus, tallied at the end of June, coupled with Risch's plan to squirrel away surplus money for education, that moved one-time skeptics to reverse their votes.
With the state expecting a $208 million budget surplus in the current fiscal year, Risch renewed his call for lawmakers to boost a grocery credit — currently $20 for every Idaho resident, and $35 per senior — during the 2007 Legislature in January to help take some of the sting out of the sales tax increase.
"At the very least, the tax credit on groceries ought to be increased," he told reporters.
Lawmakers in the House and Senate spent 15 hours debating the property tax relief measure Aug. 25. It won approval after 11 p.m. with a two-thirds majority.
Democrats joined groups such as the Idaho Education Association and advocates for low income residents in criticizing Risch's bill. They argued that it gives tax breaks to all property taxpayers, not just homeowners who have been calling loudest for them; raises sales taxes on poor people; and could hurt education by putting virtually all education funding decisions in lawmakers' hands.
Following Risch's bill-signing, minority party leaders pledged to monitor Republicans' promise to keep pace with future education funding, now that it's mostly off the property tax rolls.
And Democrats and Republicans alike said they expect debate over tax issues to re-emerge next year.
"The issue isn't over," said Sen. Kate Kelly, R-Boise. "If we're going to minimize the negative effects of the bill that was just signed, we would want to direct any relief to the people who really need it, rather than another across-the-board measure."