'06 reforms saw shift in school funding

COEUR d’ALENE — Discussions about how to fund Idaho’s cash-strapped public school districts often lead back to thoughts of 2006.

That was the year Idaho lawmakers, and then Gov. Jim Risch, enacted legislation that shifted public school financing from property taxes to sales and income taxes.

“The point of the shift at that time was property tax relief,” said Post Falls Superintendent Jerry Keane. “The governor and legislators indicated that the state revenues would be adequate to make such a shift.”

Keane said that school districts, while not opposed to property tax relief, were concerned about the stability of a funding system based only on sales tax and income tax.

Prior to the change, a Maintenance and Operations Levy of $3 per $1,000 of assessed property value was levied on all property owners in the state. Those funds provided the bulk of revenue that made up the general fund appropriation from the state’s education budget.

Districts were also able to ask voters to approve supplemental levies to provide additional funds, as they are today.

The property tax reform of 2006 eliminated the $3 per $1,000 Maintenance and Operations Levy, and raised the state sales tax from 5 percent to 6 percent to pay for the operation of the state’s public schools.

In 2006, the public cry for property tax relief reverberated loudly in Idaho, which had the 36th lowest property tax rate in the nation in 2005, and in other states where property taxes were soaring.

It did provide property tax relief in Idaho.

Prior to the shift, the school levy rate in the Coeur d’Alene School District was $5.23 per $1,000 of taxable assessed value. Today it’s $1.51 per $1,000.

If voters approve a $12.9 million levy the district is floating before them on March 8, the levy rate will rise to $2.14 per $1,000 of assessed property value.

“It’s still much, much smaller than it was,” said Superintendent Hazel Bauman.

In Post Falls, the school levy tax rate in 2006 was $5.61 per $1,000 of property value. Now it is $2.58 per $1,000.

If the old statewide property tax support for schools had been left in place, Alan Dornfest, property tax policy supervisor with the Idaho State Tax Commission, says  that in 2010, the $3.00 per $1,000 maintenance and operation levy would have generated at least $337 million for schools.

In 2011, the number drops to $302 million due to declining property values in the state.

Sales tax revenue declined dramatically when the economy plummeted in 2008, and  school districts subsequently saw a $128 million reduction in funding from the state education budget.

As state funds for education have dwindled, the pendulum has begun to swing back toward funding Idaho’s public schools with local property taxes.

In 2006, $78.7 million were collected through supplemental levies by Idaho school districts.

By 2010, the number of local property tax supplemental levies jumped by $57.6 million to $136.3 million.

“With an economic downturn of the scale we have seen there would have been state cuts even if the M & O was still in place,” said Tom Taggart, business director for the Lakeland School District. “What it would have done is provide a more stable revenue source. Of course that stability would have come at the expense of property owners.”