2003 Local Government & Taxation
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January 10, 2003
January 13, 2003
January 15, 2003
January 17, 2003
January 20, 2003
January 22, 2003
January 24, 2003
January 27, 2003
January 29, 2003
January 31, 2003

February 3, 2003
February 5, 2003
February 10, 2003
February 12, 2003
February 17, 2003
February 24, 2003
February 26, 2003

March 3, 2003
March 5, 2003
March 10, 2003
March 17, 2003
March 19, 2003
March 24, 2003
March 31, 2003

April 2, 2003
April 7, 2003
April 8, 2003
April 21, 2003

May 1, 2003
May 3, 2003

DATE: January 10, 2003
TIME: 3:00 p.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/EXCUSED:
Chairman Bunderson called the meeting to order at 3:00 p.m. A silent roll
call was taken. Members of the committee were welcomed. Hans Amen,
Page to the committee, was introduced. Bibiana Nertney, Secretary to
the committee, was introduced.
Chairman Bunderson reviewed the Idaho State Income Tax and Sales
Tax exemptions. He requested that each member review the exemptions
and identify those that should have a public hearing.
Chairman Bunderson reviewed his comments and suggestions to
Governor Kempthorne’s Blue Ribbon Task Force. These comments are
on file in the secretary’s office.
Chairman Bunderson reminded the committee of the National Conference
of State Legislatures briefing on streamlined sales and use tax to be held
Monday, January 13th in the Gold Room. He requested the whole
committee attend.
Chairman Bunderson reviewed the letter that he sent to Ken Harward,
Executive Director of the Association of Idaho Cities, stating his concern
on the quality of cities’ internal controls system, adequacy of state law
and adherence to state law by city officials. He has requested that Mr.
Harward poll his membership to determine if Idaho code should be
modified to specifically reference internal controls. Mr. Harward will be
invited to present to the committee at a later date.



Discussion was held on the legislature’s authority over interpreting code
to cities and counties with the intent that this inquiry is not an attempt to
run local cities but merely to insure the adequacy of the law governing
cities arising from recent incidents in the city of Boise.

Chairman Bunderson reviewed the highlights of President George W.
Bush’s Economic Stimulus Package. The committee will pay attention to
what happens in Washington, D.C. and how it may affect Idaho.
Vice Chairman Hill discussed what Administrative Rules the committee
has been assigned to review. Assignments to review certain rules were
made to the following members:



Senators Hill and Sweet

Income Tax Administrative Rules

Senators Ingram and Werk

Sales and Use Tax Administrative Rules

Senators McKenzie and Malepeai

Property Tax Administrative Rules

Senators Gannon and Compton

Property Tax Administrative Rules (35-0103-0205)

Senators Ingram and Werk

County Option Kitchen and Table Wine Tax Admin. Rules
Cigarette and Tobacco Products Tax Administrative Rules
Beer Tax Administrative Rules

Tax Commission Administration and Enforcement Rules



Karen Gustafson with the Department of Administration, Office of Administrative Rules,
explained the difference between Pending Rules, Pending Fee Rules and Temporary
Rules. The committee will only deal with Pending Rules. Options are to
approve, reject, or reject a piece of the rule. The committee may not
amend a rule.



Ted Spangler with the Idaho Tax Commission referred to some rules that
may have more comment than others and should be reviewed carefully.

Chairman Bunderson stated that the committee will invite the Governor’s
office to present his tax plan to the committee. When bills come from the
House the committee will be informed.
Meeting adjourned at 3:58 p.m.






DATE: January 13, 2003
TIME: 3:00 p.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/EXCUSED:
Chairman Bunderson called the meeting to order at 3:30 p.m. A silent
roll call was taken. Senator Compton moved the minutes of January 10
be approved as written
. Senator Ingram seconded the motion. By
unanimous voice vote the minutes were approved.
Chairman Bunderson reviewed the Attorney General’s opinion letter on
the constitution and where bills that increase revenue must originate. The
constitution deals with the origin and amendment of bills and provides that
bills may originate in either House, but may be amended or rejected in the
other, except that bills for raising revenue shall originate in the House of
Representatives. It is the Attorney General’s opinion 99-2 that bills
providing tax deductions and exemptions as well as bills repealing tax
exemptions must also originate in the House of Representatives.
Chairman Bunderson reported that when the Association of Idaho Cities
has completed their poll of membership they will report to this committee
on the adequacy of state law referring to cities. He has also asked the
Association of Idaho Counties to conduct a similar review with their
members and they will report to this committee as well.
Vice Chairman Hill introduced Janice Boyd, Tax Policy Specialist with
the Idaho State Tax Commission to review Income Tax Administrative
Rules.
Janice Boyd INCOME TAX ADMINISTRATIVE RULES

35.01.01



(Details of each presentation are not included on these two pages. A copy
of the rules and synopsis is included with the permanent set of minutes.)

Rule 035 relating to trusts had discussion on federal law relating to estate
taxes and any consequences of federal action to Idaho. Dan John, with
the Idaho State Tax Commission explained that congress has eliminated
federal estate tax over a ten-year period. Idaho estate tax is known as
the death tax credit. A percentage goes to the federal government. Idaho
will lose approximately 12-14 million dollars when the death tax expires in
6-7 years.
Rule 130 relating to deductions of certain retirement benefits had
discussion relating to the definition of “disabled individuals.” This
definition is described in Idaho code.
Rule 190 relating to Idaho Medical Savings Accounts had discussion on
how many people use this type of account. The rule change is to make it
simpler in the hope that more people will use it.
Rule 254 relating to nonresident and part-year individuals and
subtractions allowed in computing Idaho adjusted income had a
discussion on who qualifies as an American Indian. The Tax Commission
looks to the federal Bureau of Indian Affairs for the definition. Tribal
members are exempt from state income tax earned while working on the
reservation only. All off reservation income is state taxable.
Rule 745 relating to credit for qualifying new employees in a revenue
producing enterprise had discussion on what the credit is and who
qualifies. Only employees of a revenue producing enterprise which
means an Idaho business that begins with a natural resource and
produces, assembles, fabricates or processes a value-added product
would qualify.
Motion Senator Compton moved for approval of docket 35-0101-0201. Senator
Gannon
seconded the motion.
Vote By unanimous voice vote the motion passed.
ADMINISTRATION RULES

35-0201

Janice Boyd Janice reviewed changes in rules 310, 400, and 704.
Motion Senator Gannon moved for approval of docket 35-0201-0201. Senator
Compton
seconded the motion.
Vote By unanimous voice vote the motion passed.
Senator Hill thanked Janice and the other members of the Tax
Commission for their presentation. He asked that Alan Dornfest present
on the property tax administrative rules on Wednesday, January 15. The
committee will finish rules’ review on Friday, January 17.
Meeting adjourned at 4:50 p.m.






DATE: January 15, 2003
TIME: 3:00 p.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/EXCUSED:
Chairman Bunderson called the meeting to order at 3:00 p.m. A silent
roll call was taken. Senator Compton moved that the minutes of January
13 be approved as written
. Senator Werk seconded the motion. By
unanimous voice vote the minutes were approved.
Vice Chairman Hill introduced Alan Dornfest, Tax Policy Specialist
Supervisor with the Idaho State Tax Commission to present property tax
rules.
Alan Dornfest Mr. Dornfest explained to the committee that his department acts as an
oversight committee to the counties. They provide technical assistance to
counties and act as a sounding board to help counties do business in a
uniform manner. They help counties interpret laws and provide guidance
to county assessors.
PROPERTY TAX ADMINISTRATIVE RULES

35-0103-0201

35-0103-0202

35-0103-0203

35-0103-0204

35-0103-0205

(Details of each presentation are not included on these two pages. A
copy of the rules and synopsis is included with the permanent set of
minutes)
Rule 635-docket 35-0103-0202 relating to partial exemption for parcels of
land in a rural home site development plat had discussion on it being a
new rule to provide clarification of eligibility for the speculative homesite
exemption. The phrase “continue to be eligible” means that the parcel
must have been eligible for the speculative value exemption during the
year immediately preceding the first year of eligibility for the speculative
home site exemption. The phrase “improvements are being built” is
defined to mean structures and not associated site improvements.



A question was raised as to when property tax on a new home begins and
the flow of revenue starts flowing to the state. No property tax is due until
the property is occupied and collected the following year. There is
another tax called the occupancy tax which is a prorated tax assessed
from the time the home is occupied.



Vice Chairman Hill indicated that the House will accept this rule and
there will be legislation this year to make clarification to this issue.

Rule 316-docket 35-0103-0203 relating to compliance of continuing
valuation program is a new rule to specify procedures for compliance of
counties in appraising or reappraising property every five years. Counties
must appraise 20% of all property per year with total completion in five
years.



Legislation may come up this year that offers counties flexibility in the
20% per year rule as long as 100% of property is appraised every five
years.

A question of how technology will aide auditors was discussed.
Technology will improve the quality of information gathered, but physical
leg work is still a necessary task in appraisals.
Rule 020-docket 35-0103-0205 relating to the value of recreation vehicles
for annual registration and taxation of unregistered recreational vehicles
was amended to provide tables which incorporate depreciation schedules.
Discussion was held on how this would lower fees to owners as well as
income to the Department of Parks and Recreation. It won’t go into effect
until 2004 to allow Parks and Recreation to re-budget. Depreciation
values were determined using NADA guides.
Motion Senator Compton moved for approval of dockets

35-0103-0201

35-0103-0202

35-0103-0203

35-0103-0204

35-0103-0205

Senator Malepeai seconded the motion.

Vote By unanimous voice vote the motion passed.
Chairman Bunderson reviewed next weeks meeting schedule.



Monday-Brian Whitlock and Mike Ferguson with the Governor’s office will
present the Governor’s tax package, consequences and elasticity and
Dan John with the Idaho State Tax Commission will review tax
exemptions.



Wednesday-Wells Fargo Bank will present their economic forecast,

and Bill Von Tagen with the Attorney General’s office will brief the
committee on the AG’s opinion relating to which House may initiate tax
bills.



Friday- Nancy Merrill and Mike Mooney, members of the Governor’s Blue
Ribbon Task Force will present their recommendations.



Chairman Bunderson reminded the committee to review the tax
exemptions and prepare a prioritized list of how to go about evaluating
them and which ones are worth reviewing. It was suggested setting some
criteria to apply that establishes a level playing field when reviewing
exemptions.

Ted Spangler Mr. Spangler explained the three step process in joining other states in a
streamlined sales tax program. A draft has been established by the Tax
Commission to join the project, become an implementing state and make
the changes to the sales tax law that conform to the agreement. Draft
legislation has been prepared to accomplish step one and two. Part of
this legislation directs the Tax Commission to prepare the changes in
sales tax to conform to the agreement.
Meeting adjourned at 4:45 p.m.






DATE: January 17, 2003
TIME: 3:00 pm
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Compton, Werk, Malepeai
MEMBERS
ABSENT/EXCUSED:
Senator Gannon excused
Chairman Bunderson called the meeting to order at 3:05 p.m. A silent
roll call was taken. Senator McKenzie moved that the minutes of
January 15 be approved as written
. Senator Hill seconded the motion.
By unanimous voice vote the minutes were approved.
Vice Chairman Hill introduced Jim Husted, Tax Policy Specialist with the
Idaho State Tax Commission.
Jim Husted Sales Tax Administrative Rules

35-0102-0201



(Details of each presentation are not included on these two pages. A copy
of the rules and synopsis is included with the permanent set of minutes.)

Rule 98-docket 35-0102-0201 relating to foreign diplomats had discussion
on foreign diplomats being exempted from sales taxes by federal treaties.
United States diplomats receive tax exemptions and we reciprocate with
similar exemptions. The rule updates the new type of card diplomats
carry.
Rule 133-35-0102-0202 relating to radio and broadcast equipment is a
new rule clarifying that businesses that produce and broadcast either
television or radio programs can qualify for an exemption. It clarifies that
cable television companies do not qualify for the exemption. The intent of
the statute enacted in 1975 was clearly to create this exemption even
though the statute doesn’t directly say this. The exemption has been
granted since the statute became effective.
Senator Werk questioned the policy of state agencies writing rules on the
intent of what the statute says rather than on what the statute actually
says. Discussion was held that rules do have the force and effect of law
and it was clearly the intent of this statute to grant an exemption.
Larry Benton Mr. Benton representing the Idaho State Broadcasters offered a history on
this statute. ISBA brought this to the legislature in 1975 and have been
granted this exemption since. Recently the question on whether cable
companies qualified for the exemption came up and the tax commission
wanted to clarify the exemption. The Broadcasters would like to see this
rule accepted.
Senator Werk Requested unanimous consent to hold decision on this rule (docket 35-0102-0202) until January 24 for his further study. There was no objection
from the committee.
Motion Senator Compton moved for approval of docket 35-0102-0201. Senator
Malepeai
seconded the motion.
Vote By unanimous voice vote the motion passed.
County Option Kitchen and Table Wine Administrative Rules

35-0109-0201

Motion Senator McKenzie moved for approval of docket 35-0109-0201. Senator
Sweet
seconded the motion.
Vote By unanimous voice vote the motion passed.
Cigarette and Tobacco Tax Administrative Rules

35-0110-0201

Motion Senator Werk moved for approval of docket 35-0110-0201. Senator
Ingram
seconded the motion.
Vote By unanimous voice vote the motion passed.
Beer Tax Administrative Rules

35-0112-0201

Motion Senator Werk moved to approve docket 35-0112-0201. Senator Ingram
seconded the motion.
Vote By unanimous voice vote the motion passed.
Chairman Bunderson reminded the committee that on Monday the
committee will hear from Brian Whitlock and Mike Ferguson with the
Governor’s office on the Governor’s tax package as well as begin to
review tax exemptions with Dan John of the Idaho State Tax Commission.
Randy Nelson with the Idaho State Taxpayer’s Association warned the
committee that doing away with some tax exemptions could put Idaho at a
disadvantage with economic development.
Senator Ingram asked the committee how they liked the new set up of
the meeting room. The change was met with positive comments.
Meeting was adjourned at 4:10 p.m.






DATE: January 20, 2003
TIME: 3:00 pm
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/EXCUSED:
Chairman Bunderson called the meeting to order at 3:00 p.m. A silent
roll call was taken. Senator Hill moved the minutes of January 17 be
approved as written
. Senator McKenzie seconded the motion. By
unanimous voice vote the minutes were approved.
RS 12587 Senator Compton presented RS 12587 relating to the assessment of real
and personal property; amending section 63-314 Idaho code, to specify a
timeline for the appraisal of all taxable property in a county. By law
assessors are to appraise all property in a county every five years. The
law states that 20% of the property must be appraised every year with all
property appraised in five years. In large counties with diverse kinds of
properties to appraise this 20% per year can be difficult. This legislation
gives the assessors latitude to appraise as little as 15% per year as long
as 100% is appraised in five years.
Motion Senator Hill moved to send RS 12587 to print. Senator Gannon
seconded the motion.
Vote By unanimous voice vote RS 12587 will be printed.
Brian Whitlock Chairman Bunderson introduced Brian Whitlock the Governor’s new
Chief of Staff to review the Governor’s Tax Package. Mr. Whitlock
reviewed a hand out on Idaho’s general fund revenue and expenditure
history annual % changes since 1991. Revenue grew an average of 7.5%
per year and expenditures grew at a 7.7% rate. Fiscal Year 2002 had
Idaho’s revenue line dip below 0% by more than 14%. The budget for FY
2003 also dipped below the 0% line.



Mr. Whitlock showed the committee a graph of base general fund revenue
estimates. FY 2002 had a decline in growth by 14.3%. The Governor and
the legislature then ordered cuts. With the cuts and projections FY 2003
looks like Idaho will experience a 4.3% increase in growth and FY 2004 a
4.1% increase. Budgets are estimated eighteen months prior to the
actual year. The 14.3% decline in growth in FY 2002 was 29% due to the
tax cut by the Idaho Legislature and the other 71% was due to the decline
in the economy.

Mr. Whitlock reviewed charts on FY 2003 and 2004 fund
recommendations with the Governor’s recommended tax increase and
without an increase. With the increase of sales tax of 6.5% effective May
1, 2003 FY 2003 would show an ending balance of zero (0). FY 2004
would include the raise in cigarette taxes to 62 cents per pack and allow
several funds (refund fund for tax exemption, budget stabilization fund,
permanent building fund, and the millennium fund) to receive money and
finish the year with a $937,300 balance. Without the sales tax and
cigarette tax increase, FY 2004 would finish with a <$104,880,700> loss.
No tax increase equates to a 5.5% cut in budgets across the board.



Raising the sales tax to 6.5% brings the sales tax more equal to the
income tax for the state’s major income stream. It offers the state more
predictability to the income stream. It also allows the state’s critical
projects to continue in a timely manner. The Governor has included a
sunset clause to drop the sales tax increase from 6.5% back to 5% by
June 30, 2006. He will not sign a bill without this sunset clause.

Discussion was held on how the Governor chose 62 cents per pack to
raise the cigarette tax. The national average is 62 cents per pack and this
would bring Idaho up to the national average. The cigarette tax in Idaho
is lower than Oregon, Washington, and Utah, but higher than Wyoming,
Montana and Nevada or on Indian reservations. Elasticity of this tax has
been built into the formula. Elasticity equals people who quit smoking or
buy cigarettes elsewhere.
Mr. Whitlock answered questions regarding studies into other types of
ways to increase revenues or further cut spending. He emphasized the
immediate need for cash and the increase in sales tax starting in May
2003 would help meet that need. Discussion with national experts
showed Idaho with a solid tax system. The experts recommended looking
at taxing services and developing a committee that would take multiple
years to review tax exemptions and quarterly collection of taxes.
Mr. Whitlock was questioned on state employee bonuses being given
during these economic hard times. He explained that in FY 2001 the
state had an excess and merit increases were given in FY 2002 before
the economic downturn. From July 1, 2002 until today only one bonus
has been given. Bonuses are not being given at this time.
Dan John Mr. John with the Idaho State Tax Commission began a review of some of
the state’s tax exemptions.



Mr. John reviewed the three types of exemptions in Idaho. There are
exemptions based on who purchases the product (government entity),
product exemptions (prescription drugs), and use space exemptions (how
the product is used. For example the use of a tractor for farming is
exempt. The use of a tractor to mow your lawn is not exempt.)



A. Lottery and parimutuel ticket sales are exempt as a service. Any
winnings under $600 are not taxed as income. Winnings over $600 are
taxed as income.



B. A non tribal member who is working and living on a reservation pays
Idaho income tax. Tribal members working on a reservation are exempt
from taxes. A definition of who is an indian is determined by the Bureau
of Indian Affairs and is issued a card by the tribes.



Mr. John explained that there is an Idaho statute that says sales and use
taxes are exempted if they’re (the sale) made by a tribally owned
enterprise on the reservation. Anybody can buy a product on a
reservation and not have to pay a sales or use tax when they take that
product off the reservation. The use tax exemption was enacted by the
Idaho Legislature. The Tax Commission probably could not enforce the
sales tax collection because they have no jurisdiction on reservations, but
they could enforce the use tax when the item came off the reservation if
the exemption was repealed.



Chairman Bunderson asked that if he was a tribal organization could he
put in any retail establishment, even heavy equipment or automobiles,
worth a million dollars and sell them for less than any non tribal business
by not collecting sales and use tax? Mr. John replied “yes.” Mr. John
indicated that as of yet no big ticket items have been sold by tribally
owned businesses on a reservation.



Chairman Bunderson asked if he purchased an automobile from a
tribally owned business on a reservation and took it off the reservation
and registered it with the state would he be exempt from the use tax? Mr.
Johns answered “the way the statute is written, yes you would be exempt
from the use tax.”



C. Mr. John indicated that the issue of fuel tax on indian reservations is
currently being litigated in the ninth district court.

D. The exemption to INEEL Research and Development purchases has
been granted since 1967 and is an exemption for products used in the
course of research.
Being late in the day, Chairman Bunderson invited Dan John back to the
Wednesday, January 22nd meeting.
Meeting adjourned at 5:15 p.m.

DATE: January 22, 2003
TIME: 3:00 pm
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet, McKenzie,
Gannon, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

Senator Compton excused
Chairman Bunderson called the meeting to order at 3:00 p.m. A silent roll call
was taken. Senator Hill moved that the minutes of January 20 be approved as
written
. Senator McKenzie seconded the motion. By unanimous voice vote the
minutes were approved.
Chairman Bunderson introduced Kelly Matthews an economist from Utah with
Wells Fargo Bank. Mr. Matthews started his presentation by sharing with the
committee that there are a number of states experiencing a 24-25% deficit.
Idaho is not among those states.



Mr. Matthews presented the committee with four key points important to Idaho.



1. The Idaho and national economy will gradually begin to grow this year. He
predicts more job creation and the continuation of lower interest rates. This
gradual growth may show a growth in jobs by approximately 6,000this year
versus a loss of 4,000 last year.



2. The growth will not be rapid enough to hold the state budget flat. Idaho will
not avoid some magnitude of a deficit, barring a big national or environmental
event.



3. Areas that will prosper will have strong high tech businesses. These high
tech regions have the fastest growth rate. To recruit this high tech business an
area will have to have a strong educational environment.



4. States must watch their balance sheet. Idaho has used up the one time
monies and rainy day type of reserve funds. It is important to rebuild some of
Idaho’s reserve funds. These reserve funds are necessary for the state’s credit
rating.



Mr. Matthews reported that the agriculture industry may not be a growth segment
in the near term but agriculture is also not a dying segment of our economy.

Mr. Matthews felt that some sort of tax revenue producing action would be an
investment in the future growth of Idaho.

Chairman Bunderson introduced Keith Johnson, the Idaho State Controller, to
review the duties of his office and how that office interacts with cities.



Mr. Johnson handed out a letter reviewing these duties (a copy of this letter is
attached). He stressed that the Controller’s relationship with municipal
governments is to act as a resource and as an oversight and safety net to local
governments. His office does have subpoena power and acts as a law
enforcement agency.



If a city or municipality requests the assistance of the Controller’s office the
controller can aide them in the auditing process. The cost of this assistance
would average $30 per hour plus any costs of experts needed.

Chairman Bunderson introduced Bill Von Tagen Deputy Attorney General who
explained to the committee that all bills raising revenue must originate in the
House of Representatives. Mr. Von Tagen explained that even bills lowering
taxes are considered raising revenue but in a smaller amount. He wants to take
a cautious approach. Once a bill originates in the House, the Senate does have
amending rights.
Chairman Bunderson introduced Dan John with the Idaho State Tax
Commission to continue the review of tax exemptions.



Vending Machine Sales carry one exemption. There is no sales tax imposed
when the vendor purchases the dispensing machines. Sales through vending
machines are taxed at 117% of wholesale costs. Amusement games purchase a
sticker for $35 per year and this is the only tax on these items.



Magazine subscriptions collect sales tax if they are based in Idaho. If not in
Idaho, sales are subject to the use tax.



Professional Services are not taxed by definition in Idaho statute. The statute
only speaks to tangible items.



Motor Vehicles, bought in Idaho, and taken out of state to use have an
exemption. This keeps people buying cars in Idaho vs. in other states.



Production equipment and supplies exemption is for equipments that produce a
product that will be resold.



Utility sales have carried an exemption since 1965. Mr. John reported that some
states do tax utility sales.



Motor fuels since 1965 have been exempted. Idaho constitution provides that
taxes collected on motor fuels go directly to the highway department. There is a
tax on fuels not used on highways.



Charitable organizations are not tax exempt unless specifically named in statute.

Meeting adjourned at 4:40 p.m.








Dear Senator Bunderson,



As per your request, the following is background information pertaining to
clarification of the Controller/Auditor duties in relation to oversight of
entities receiving government funds.






1. Historical/ Chronological

– Work began in Summer 2002 to identify, analyze, and
determine all roles and responsibilities currently set forth in
statute pertaining to the office of Idaho State Controller,
formerly known as the State Auditor.

– A bill (HB55) was drafted in November of 2002 and pre-filed with the Legislative Services Office. This piece of
legislation was intended to modernize and address
inconsistencies and vague language in Idaho code, which
appear to be obsolete and/or not compliant with current
modern practices.

– Subsequent to pre-filing HB 55, it became apparent that
Idaho State Code and Idaho Territorial Code clearly
stipulated specific duties for the State Controller/Auditor
relevant to municipalities, and/or custodians of state funds.

– After the pre-filing of HB55, the State Controller was asked
what responsibilities the office has when there are
accusations of misuse of public funds by a municipality.
This question was posed following the public release that
Boise City was hiring an out-of-state firm, at taxpayer
expense, to review their financial practices, expenditures,
and receipts.

– The question isDo the citizens of a given city, as Idaho
taxpayers, have a safety net within existing government
(The State of Idaho) to ensure the integrity of the financial
records and practices?

– It appears that statutorily and through case history that it
would be permissible for the Idaho State Controller to be
that safety net.



2. Key Points-

– It is not the intention of the Idaho State Controller to
unduly involve itself in the business of the state’s
municipalities.

– The language in both Idaho State Code and Idaho
Territorial Code would indicate the intent of the original
authors was for the state, through the Controller/Auditor, to
provide a “safety net” to ensure the veracity and integrity of
those entities charged with administering public funds.

– Although it might be politically expedient to avoid this
question altogether, the Idaho State Controller is compelled
to carry out our responsibilities consistent with the intent of
state law.

– It appears to the Idaho State Controller, and to others we
have consulted, that Idaho Code sets forth on several fronts
the clear authority of the state to review the financial
records of any public entity handling public funds.

– The Idaho State Controller has subpoena authority, and is
referred to as a “Law Enforcement Agency” in Idaho Code
9-335(2), along with the Attorney General, Idaho State
Police, the office of any prosecuting attorney, sheriff or
municipal police department. (The Territorial Controller
had subpoena power. The Supreme Court has said the
Territorial Controller’s duties translate to the State
Controller’s current duties.)



Please let me know if I can be of any further assistance.



Sincerely,

Keith Johnson

Idaho State Controller






KJ/dg/tkl






DATE: January 24, 2003
TIME: 3:00 pm
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

Chairman Bunderson called the meeting to order at 3:00 p.m. A silent
roll call was taken. Senator McKenzie moved that the minutes of
January 22 be approved as written
. Senator Compton seconded the
motion. By unanimous voice vote the minutes were approved.
Chairman Bunderson reported on his meeting with Representative
Dolores Crow, chairman of the House Revenue and Taxation committee
on how her committee and this committee can work together. It was
agreed that both committees will maintain excellent communications. This
committee working on crafting tax legislation will work closely with
Representative Crow.
Senator Compton reported on a letter that was received from an
assessor that questioned confusing language relating to estimated taxes
for an upcoming year. After review, Senator Compton felt that this
committee did not need to craft legislation at this time.
Vote Rule 133-Docket 35-0102-0202 motion was brought to the table. By
unanimous voice vote docket 35-0102-0202 was approved.



Senator Hill will inform the Pro Tem that our review of rules is completed.

Chairman Bunderson introduced Nancy Merrill, Mayor of Eagle and
chairman of the Public Safety, Transportation and Natural Resources
Committee of the Blue Ribbon Task Force.



Ms. Merrill informed the committee that the Blue Ribbon Task Force is a
recommending body only. Their first task was to develop some short term
recommendations that this session of the legislature could act on. The
committee’s recommendations are:



1. Explore the expansion of community-based prevention programs for
“at risk” youth to decrease the need for treatment and/or incarceration of
juvenile offenders.



2. Explore creative, community-based sentencing alternatives for
juvenile offenders.



3. Ask to Governor to appoint a group of policy makers to work with the
VERA Institute of Justice to assess sentencing for adult offenders in
Idaho.



4. Appoint an interim or Ad Hoc Legislative Committee to explore
reinstating “good time release” policies for adult offenders in an effort to
substantially reduce growth rate in prisons.



5. Examine the need for a separate facility, specialized treatment, and
dedicated funding for inmates with mental illness being held within the
state correctional system.



6. Examine the need for specialized treatment, dedicated funding, and
alternative housing for geriatric inmates held within the state correctional
system.



7. Examine the need for separate facilities, specialized treatment, and
dedicated funding for the sex offender special population group held
within the state correctional system.



8. Examine the need for separate facilities, specialized treatment, and
dedicated funding for the substance abuse population held within the
state correctional system, in particular the development of chemical
dependency treatment facility.



9. Support the transfer of the Threatened and Endangered Wildflower
Management program from the Department of Parks and Recreation to
the Department of Fish and Game.



10. Support development of online pesticide licensing by the
Department of Agriculture.



11. Support a request that the Idaho Legislature adopt a concurrent
resolution that creates a task force or committee with active participation
by the Department of Transportation’s Visioning Committee, counties,
cities, highway districts, and other entities to study and report issues
related to public transportation coordination and funding for urban and
rural areas.

Chairman Bunderson introduced Randy Nelson, Executive Director of
the Idaho State Taxpayers Association and member of the Revenue and
Economic Development Committee of the Blue Ribbon Task Force.



Mr. Nelson reviewed the recommendations from that committee.

1. Implement an estimated tax payment system for the State of Idaho
Individual Income Tax.

2. Increase the number of tax personnel at the Idaho State Tax
Commission primarily to focus on non-filer and compliance recovery.

3. Modify the Investment Tax Credit to make it transferable to other
taxpayers from the taxpayer earning the original credit.

4. Increase cigarette tax by 20 cents per pack and direct increased
revenues to the States’s General Fund.

5. Support the effort of the Streamlined Sales Tax Project to collect tax
on remote sales by simplifying and modernizing sales/use tax
administration.

6. Implement an Accounts Receivable Offset program for those
businesses or individuals’ providing services to the state of Idaho that
have established tax liabilities to the state.

7. Increase the sales tax rate by 1%, effective June 1, 2003 and sunset
this increase 3 years from the date of enactment.

Meeting adjourned at 4:45 p.m.






DATE: January 27, 2003
TIME: 3:00 pm
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

Chairman Bunderson called the meeting to order at 3:00 p.m. A silent
roll call was taken. Senator Compton moved that the minutes of January
24 be approved as written
. Senator Werk seconded the motion. By
unanimous voice vote the minutes were approved
.
RS 12550 Senator Ingram presented RS 12550 which would raise the fees paid to
sewer and water district board members from $50 per meeting to up to
$100 per meeting. These funds are not general fund dollars but
dedicated funds from the districts. Discussion was held as to the
rationale of the state being involved in local decisions. The legislature
created these districts and the fees were attached as mandates. Senator
Ingram reported that it is increasingly hard to recruit members to sit on
these boards.
Motion Senator Werk moved to send RS12550 to print. Senator Hill seconded
the motion.
Vote By unanimous voice vote RS12550 will be sent to print.
HB 74 Ted Spangler with the Idaho Tax Commission presented HB 74 relating to
the sales and use taxes amending section 63-3627, Idaho code.
Motion Senator Hill moved to send HB 74 to the senate floor with a “Do Pass”
recommendation
. Senator Werk seconded the motion.
Vote By unanimous voice vote HB 74 was approved.
HB 75 Ted Spangler with the Idaho Tax Commission presented HB 75 relating to
property taxes amending sections 63-301A, 63-602A, 63-602C, and 63-803 Idaho code.
Motion Senator Compton moved to send HB 75 to the senate floor with a “Do
Pass” recommendation
. Senator Werk seconded the motion.
Vote By unanimous voice vote HB 75 was approved.
HB 77 Ted Spangler with the Idaho Tax Commission presented HB 77 relating to
sales and use taxes amending sections 63-3620, 63-3622R, and 63-3622GG, Idaho code.
Motion Senator Gannon moved to send HB 77 to the senate floor with a “Do
Pass” recommendation
. Senator Compton seconded the motion.
Vote By unanimous voice vote HB 77 was approved.
HB 79 Dan John with the Idaho Tax commission presented HB 79 relating to
corrections to the Idaho income tax act amending sections 63-3022, 63-3022P, 63-63-3024, 63-3029E, 63-3029F and 63-3042, Idaho code.
Motion Senator McKenzie moved to send HB 79 to the senate floor with a “Do
Pass” recommendation
. Senator Compton seconded the motion.
Vote By unanimous voice vote HB 79 was approved.
HB 80 Dan John with the Idaho Tax commission presented HB 80 relating to the
unclaimed property law amending sections 14-524, 14-526 Idaho code.
Motion Senator Werk moved to send HB 80 to the senate floor with a “Do Pass”
recommendation
. Senator Gannon seconded the motion.
Vote By unanimous voice vote HB 80 was approved.
Meeting adjourned at 4:05 p.m.






DATE: January 29, 2003
TIME: 3:00 pm
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

Chairman Bunderson called the meeting to order at 3:00 p.m. A silent
roll call was taken. Senator Compton moved to accept the minutes of
January 27 as written
. Senator Hill seconded the motion. By unanimous
voice vote the minutes were approved.
H 68 Judy Comstock with the Idaho Treasurer’s office presented HB 68 relating
to the Idaho savings program board; amending sections 33-5401, Idaho
code to revise the definitions of account owner and member of the family.
Motion Senator Sweet motioned to send HB 68 to the senate floor with a “Do
Pass” recommendation
. Senator Malepeai seconded the motion.
Vote By unanimous voice vote HB 68 was approved.
HB 69 Judy Comstock with the Idaho Treasurer’s office presented HB 69 relating
to the Idaho college savings program amending section 63-3022, Idaho
code.
Motion Senator Malepeai motioned to send HB 69 to the senate floor with a “Do
Pass” recommendation
. Senator Werk seconded the motion.
Vote By unanimous voice vote HB 69 was approved.
Senator Bunderson reviewed the Legislative Council Interim Committee
Report in relation to high speed internet broadband. This technology has
become so important that the Interim committee agreed that this
technology is as much of an ordinary and necessary infrastructure as
roads and electricity.



Senator Bunderson introduced Greg White with the City of Boise
Information Technology department. Mr. White reviewed what sort of
bandwidth, reliability and accessibility that will be required for the City to
meet the demands of the next decade. Due to high costs from private
providers, Boise has hired a consultant and continues to explore
developing an INet system for the city. Mr. White indicated that it would
be very helpful if high speed or ultra high speed broadband be
acknowledged by the Legislature as an ordinary and necessary service
requirement of local government. This acknowledgment would enable
cities to pass a bond with a simple majority vote. Discussion was held
relating to if cities can provide this service for less than the private sector
by borrowing for a longer period of time and at a lower rate, does this put
the city in competition with the private sector?



Mike Reynoldson with Qwest reported to the committee that there are a
variety of choices available to the city and that the city should continue to
work with the private sector.



Ron Williams with Sprint and the Idaho Cable T.V. Association reported
that this type of broadband carries a huge investment in capital. He
questioned the need of every household to have access.



The committee decided to revisit this issue to try to knock down some
barriers between the public and private sector.

Chairman Bunderson introduced Nathan Bentley, State GIS
Coordinator, who reported on the one year old Idaho Geospatial
Committee whose goal it is to build a system of computer software and
hardware networks that contain data to tell various groups things like
where something is, what its area is, what it’s near etc. Digital spatial data
is essential to almost all sectors of the economy. GIS is used as a
planning and management tool.
Chairman Bunderson reviewed the possibility of the Idaho Building
Authority purchasing the MK Plaza. Discussion was held on the benefits
of the state owning buildings that they currently pay rent on. The Liquor
dispensary was used as an example of the state paying up to three times
the value of the building when they were leasing the facility.



Due to the hour, this issue will be continued at a future meeting.

Meeting adjourned at 5:05 p.m.






DATE: January 31, 2003
TIME: 3:00 pm
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, McKenzie,
Gannon, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

Senators Compton and Sweet
Chairman Bunderson called the meeting to order at 3:04 p.m. A silent
roll call was taken. Senator Gannon moved to accept the minutes of
January 29 as written
. Senator Malepeai seconded the motion. By
unanimous voice vote the minutes were approved.
Ken Harward Chairman Bunderson introduced Ken Harward, Executive Director of
the Association of Idaho Cities. Mr. Harward reported to the committee
that a survey was conducted of the members of the Association of Idaho
Cities as to the extent of their internal financial controls as well as the
adequacy of Idaho Statutes relating to cities.



Mr. Harward read a resolution adopted by The Association of Idaho Cities
membership reaffirming beliefs, standards and codes of conduct for city
officials. (See attached). Cities who have no established codes will use
this resolution as a model to establish codes.



Mr. Harward reported that the Association and the State Controller’s
office are working together to provide city officials with training. They are
also developing an accounting manual for officials. They will continue to
foster their relationship with the Controller’s office.



The Association of Idaho Cities supports adding language to Idaho code
50:1017 that includes, “The city council shall establish and maintain an
adequate and reasonable system of internal accounting controls.” They
also support language acknowledging electronic payments an acceptable
means of paying claims of the city.



Mr. Harward was questioned on the number of cities who have
established per diem rates and what type of resources are available for
cities to establish internal controls. Mr. Harward stated that most cities do
have established per diem rates and that cities rely on professional
auditors and association sponsored training for establishing and
maintaining controls.



The Association of Idaho Cities will prepare legislation relating to internal
accounting controls and electronic payments to present to this committee.

Daniel Chadwick Chairman Bunderson introduced Daniel Chadwick, Executive Director
of the Idaho Association of Counties. Mr. Chadwick reported to the
committee that almost everything dealing with counties is set forth in
Idaho statute. He stated that provisions of the statute require two of the
three county commissioners to approve a claim. Prior to any claim
reaching the commissioners, it is reviewed by the elected county clerk
who can question department heads. The county treasurer also reviews
claims.



The county conducts workshops for elected officials and all counties have
a per diem rate or approval of expenses with receipts.

Chairman Bunderson stated that other than the legislation coming from
the cities, this review concludes the responsibility of the committee on this
issue.
The meeting adjourned at 3:35 p.m.
January 31, 2003



Honorable Members of the Senate Local Government and Taxation
Committee:

Senator Hal Bunderson, Chairman

Brent Hill, Vice Chairman

Dick Compton

Tom Gannon

Cecil Ingram

Edgar Malepeai

Curt McKenzie

Gerry Sweet

Elliot Werk

 Thank you for the opportunity to meet with you today.

 The Association of Idaho Cities has conducted a review of Idaho
statutes regarding financial controls for city governments. An AIC Task
Force was assembled to review the laws and gather information on the
internal financial control processes in place among the cities of Idaho.

The attached resolution was drafted by the Task Force and was
unanimously adopted by the nearly 200 city officials in attendance at
the AIC legislative conference yesterday and by the AIC Board of
Directors. We believe that a strong commitment to honesty and
integrity has to be foundational to legal financial controls.

 We support adding language to 50:1017 that includes, “The city
council shall establish and maintain an adequate and reasonable
system of internal accounting controls.”

 We would also support language acknowledging electronic payments
as an acceptable means of paying claims of the city, as the current
language in the code speaks only of “warrants and checks.” Electronic
payments must come under the same scrutiny and control as warrants
and checks. The Internal Revenue Service and the Public Employee
Retirement System of Idaho now require remittances electronically.

 Respectfully submitted,

Ken Harward

Association of Idaho Cities

Resolution 2003-01

Association of Idaho Cities

RESOLUTION REAFFIRMING BELIEFS,
STANDARDS AND CODES OF CONDUCT
FOR CITY OFFICIALS



WHEREAS, Cities in the State of Idaho have a long history of integrity and
excellence in local governance; and



WHEREAS, all City officials, as stewards of the public trust, have a
responsibility to conduct the affairs of government with the
highest of ethical standards; and



WHEREAS, the public judges its government by the way public officials and
employees conduct themselves in the position to which they are
elected or appointed; and



WHEREAS, citizens have a right to expect that every public official and
employee will conduct themselves in a manner that will preserve
public confidence in, and respect for, the government it
represents; and



WHEREAS, it is important for all representatives of City government to
periodically reaffirm the beliefs, standards and codes of conduct
that are critical links to the trust and confidence of the citizens
we are sworn to serve.



NOW, THEREFORE, BE IT RESOLVED that we, as representatives of our
respective Cities and members of the Association of Idaho Cities, subscribe to
and reaffirm the following principles.



We are dedicated to the concepts of effective and democratic City
government.



We affirm the dignity and worth of the services rendered by City
government and the employees through whom the services are provided.



We are dedicated to the highest ideals of honor and integrity in all public
and personal relationships.



We will continue to conduct ourselves in a manner to maintain public
confidence in our City governments.



We subscribe to systems of strong internal controls and believe current
Idaho statutes, if complied with, adequately provide for sufficient
controls.



We support clear, concise and understandable budgeting, auditing and
financial reporting systems.



We subscribe to fiscally responsible practices, compliance with
established budgets and using tax dollars wisely and effectively for the
benefit of all.



We endorse openness in government and empowerment of employees to
help assure public trust at all levels of government.






DATE: February 3, 2003
TIME: 3:00 pm
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

Chairman Bunderson called the meeting to order at 3:05 p.m. A silent
roll call was taken. Senator McKenzie moved to accept the minutes of
January 31
. Senator Malepeai seconded the motion. By unanimous
voice vote the minutes were approved.
RS 12592 was not heard by the committee.
DuWayne
Hammond
Chairman Bunderson welcomed and introduced DuWayne Hammond,
chairman of the Idaho State Tax Commission. Mr. Hammond reported on
each division within the Tax Commission.



The General Services Division provides for centralized management,
policy development, legal, personnel, fiscal and computer services with a
total of 74 positions.



The Audit and Collections Division provides direct taxpayer service,
collects delinquent taxes, conducts audits, conducts discovery and
enforcement efforts and administers Idaho’s unclaimed property statutes
with a total of 222 positions.



The Revenue Operations Division administers the voluntary tax
compliance program with a total of 76 positions.



The County Support Division provides oversight and technical support in
the administration of the property tax system with 40 positions.



Total budget recommended for FY 2004 is $23,802,600 and 412
positions.



Mr. Hammond reported that the target of the Tax Commission is for
Idaho to have a voluntary compliance-based system of tax administration
that is understandable, administrable and fair to the taxpayer, to the State
of Idaho, and to the staff of the Commission; and avoids, as much as
possible, the need for post-transactional assessments.

Commissioner

Coleen Grant

Mr. Hammond introduced commissioner Coleen Grant who reported on
the CATS (Convert All Tax Systems) project. This project converted the
25-year-old Legacy computer system to a modern data base.
Commissioner Grant reported that this project has been a complete
success. It was three months ahead of schedule, under budget (15
million dollars), and it works. She reported that it is an “off the self” type
of program and its benefits include, but are not limited to, improved
productivity in collections, an improved interface with taxpayers, improved
management of unclaimed property and flexibility.
Commissioner
Larry Watson
Commissioner Watson is in charge of the County Support Division and
reported that all 44 counties have successfully achieved statutory
compliance with respect to the proper appraisal of all categories of
properties.



He also reported that the division continues to deploy modern computer
enhanced appraisal systems, but due to budget hold backs fewer were
completed than scheduled. He is continuing to work on partnerships with
stakeholders to uncover new financial sources to advance important
technological initiatives.



Commissioner Watson reported that the Circuit Breaker property tax
reduction program distributions to the counties increased $813,729. This
increase to the elderly and disabled is due to organizations getting the
word out about the program. The income ceiling for this program is tied to
the Social Security rate of inflation and is presently $22,000.

Commissioner
Sam Haws
Commissioner Haws is in charge of the Revenue Operations Division
and oversees sales and use tax, revenue operations, taxpayer services,
and communications and outreach.



She reported that electronic filing of returns has increased 142% over the
same time last year. This is promoted at every opportunity.



Tax payer services include holding offsite tax assistance as well as all
requests for assistance in tax preparation.

Ted Spangler Mr. Spangler explained to the committee the MTC (Multi State Tax
Commission.) It was created through a compact of 21 states, and among
other benefits it offers a joint audit program. This is extremely useful
when auditing large corporations who pay taxes in several states.
Membership in this organization has brought in large sums of money to
Idaho.
S1035 Don Munkers with the Idaho Rural Water Association explained that
S1035 would raise compensation to board members of water and sewer
districts from $50 per meeting to up to $100 per meeting. Each district
sets their own budgets and may not opt to use this increase.
Lynn Moser Mr. Moser, General Manager of the Eagle Sewer District testified that
board meetings are at times very long and complicated. At times
members spend numerous hours preparing and studying issues prior to
meetings. They serve six year terms, and finding people to hold these
positions are, at times, very difficult.
Motion Senator Compton moved to send S1035 to the senate floor with a “Do
Pass” recommendation
. Senator Gannon seconded the motion.
Senator Werk requested a roll call vote.
Vote By unanimous roll call vote S1035 was approved.
Senator Hill Senator Hill explained a protocol item to the committee. If a Senator
votes a bill out of the committee with a “Do Pass” recommendation, he or
she is expected to vote affirmatively for the bill on the floor. If he or she
changes his/her mind on the vote, it is proper to inform the bill’s sponsor.
Meeting adjourned at 4:45 p.m.






DATE: February 5, 2003
TIME: 3:00 p.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

Chairman Bunderson called the meeting to order at 3:05 p.m. A silent
roll call was taken. Senator Compton moved to approve the minutes of
February 3
. Senator McKenzie seconded the motion. By unanimous
voice vote the minutes were approved.
RS 12592C1 Senator Goedde presented RS 12592C1 which changes prisoner
reimbursement and allows counties to hire a collection service to collect
delinquent debts owed to a county. It also allows adding a fee to the debt
owed to cover the costs of the collection agency fee.



Discussion was held on the meaning of “attempt to contact” the debtor
and what the extent of the attempt is. Several committee members
expressed a desire to have the word “attempt” defined.

Motion Senator Hill motioned to send RS 12592C1 to print. Senator Compton
seconded the motion.
Vote By roll call vote the motion passed. Senators Bunderson, Hill, Ingram,
McKenzie, Gannon, and Compton
voted aye. Senators Sweet, Werk
and Malepeai
voted nay.
RS 12901 Chairman Bunderson presented RS 12901 relating to adding language
to Idaho code 50-1017 to provide that prior to payment, all claims against
the city shall be approved by the city council and the city council shall
establish and maintain an adequate and reasonable system of internal
accounting controls. It also allows the authorized payment of claims by
electronic means.
Motion Senator Gannon motioned to send RS 12901 to print. Senator Werk
seconded the motion.
Vote By unanimous voice vote the motion carried.
Chairman Bunderson reviewed the Joint Legislative Economic Outlook
and Revenue Assessment Committee information packet showing
statewide and industry economic trends and analysis. (A copy of this
packet is on file in the secretary’s office.)

The Committees mission is to: (1) Make an overall assessment of Idaho’s
economy; by providing a forum for expert testimony from economists,
business leaders, and industry spokesmen regarding the status of Idaho’s
current economy and the economic outlook for the next eighteen months.
(2) Review the Governor’s fiscal years 2003 and 2004 General Fund
revenue projections and provide advice to the Legislature regarding the
total estimated revenues expected to be available for appropriation.

Meeting adjourned at 4:25 p.m.






DATE: February 10, 2003
TIME: 3:00 p.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

Chairman Bunderson called the meeting to order at 3:00 p.m. A silent
roll call was taken. Senator Hill moved to accept the minutes of February
5
. Senator Gannon seconded the motion. By unanimous voice vote the
minutes were approved.
RS 12813C1 Senator Noh reviewed the legislation relating to Fire Protection Districts
to revise corporate powers and duties of the Board of Fire Protection
Commissioners and to make a technical correction. The bill would also
revise procedures of how fire protection district funds are handled. It also
provides duties of the Board of County Commissioners whenever a
vacancy occurs on the Board of Commissioners of a Fire Protection
District.
Motion Senator Ingram moved to send RS 12813C1 to print. Senator Compton
seconded the motion.
Vote By unanimous voice vote RS 12813C1 will be printed.
RS 12938 Senator Noh presented a Senate Concurrent Resolution which would
state the findings of the Legislature and authorize the Legislative Council
to appoint a committee to undertake and complete a study of the Local
Planning Act and related statutes. This would be an interim study and it
has been approximately 30 years since this act has been reviewed.



Representatives from the Association of Idaho Cities and the Idaho
Association of Counties had no objection to a full review of the Planning
Act.

Motion Senator Ingram moved to send RS 12938 to print. Senator Hill
seconded the motion.
Substitute
Motion
Senator Werk moved to send RS 12938 to print and have it returned to
this committee for further review
. Senator Gannon seconded the motion.
Discussion was held on when a concurrent resolution leaves the
committee, it goes directly to the floor for debate, and if passed it will go
directly to the House floor. Several members felt like they would like more
information on this act and land use planning. Chairman Bunderson
offered to bring in an expert to help educate the committee on the act.
Substitute
Motion
Withdrawn
Senator Gannon withdrew his second to the substitute motion. Senator
Werk
withdrew the substitute motion.
Vote By unanimous voice vote RS 12938 will be printed.
RS 12988 Senator Goedde reported that this RS cleans up the language that the
committee members were concerned about in Senate bill 1070. It now
explains that “reasonable attempt” means that the public agency has
notified the debtor, either by mail, electronic transaction, telephone or in
person of the existence of the debt. Senator Goedde asked the
committee to approve this new RS and to hold S 1070.
Motion Senator Gannon moved to print RS 12988. Senator Hill seconded the
motion.
Vote By voice vote RS 12988 will be printed.
With no objection from the committee, S 1070 will be held.
S 1071 Chairman Bunderson presented legislation providing that prior payment
of all claims against a city must be approved by the city council and that
the city council maintains a reasonable and adequate internal accounting
control system. It also allows cities to accept electronic means as
acceptable for payment of claims. The legislation does not have an
enforcement provision except for that of public scrutiny and opinion. Ken
Harward, Executive Director, of the Association of Idaho Cities stated that
his association is comfortable with this legislation.
Motion Senator Compton moved to approve S 1071 with a “Do Pass”
recommendation
. Senator Hill seconded the motion.
Vote By unanimous voice vote S 1071 was approved.
H 130 Dan John with the Idaho Tax Commission presented H 130 which
repeals the $2.00 incentive credit that is given to taxpayers who file their
claims electronically. By repealing this credit it will save the state
approximately $290,000. He informed the committee that there are many
software packages that allow electronic filing free of charge over the
internet.
Motion Senator Werk moved to approve H 130 with a “Do Pass”
recommendation
. Senator McKenzie seconded the motion.
Vote By unanimous voice vote H 130 was approved.
Chairman Bunderson reviewed several sheets of data that were missing
from last week’s presentation on the Joint Legislative Economic Outlook.
Gross state product by industry was reviewed as well as the number of
employees per industry and industry growth over the past ten years.
Several members of the committee requested an educational overview of
the Department of Commerce. This will be scheduled in the near future.
Meeting adjourned at 4:15 p.m.






DATE: February 12, 2003
TIME: 3:00 p.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

Chairman Bunderson called the meeting to order at 3:00 p.m. A silent
roll call was taken. Senator McKenzie moved to accept the minutes of
February 10
. Senator Gannon seconded the motion. By unanimous
voice vote the minutes were approved.
Chairman Bunderson thanked our Page, Hans Amen for his service to
the Senate over the past six weeks and presented him with a gift and
letter of recognition from the committee.
H 113 Michael J. Kane representing the Idaho Sheriffs Association testified on
H 113 which is designed to make it clear that the sheriff of a county has
the primary responsibility and duty to engage in search and rescue
operations. The bill clarifies that there can be only one person charged
with the responsibility for a search and rescue operation and one person
in charge of obtaining and maintaining resources for search and rescue
operations.



Mr. Kane presented the committee with an amendment to line 33 section
6 adding (c) which reads “Pursuant to Section 21-114, all aerial activity
related to search for lost aircraft and airmen shall be under the direction
and supervision of the director of the Idaho Transportation Department
and coordinated with the Division of Aeronautic. (d) Nothing in subsection
(6) shall apply to search and rescue operations within the limits of any
city. (e) Nothing in subsection (6) shall apply to the rescue of entrapped or
injured persons where their location is known to be within a fire district,
where the fire district performs such service.”



Mr. Kane requested that the committee send the bill to the 14th Order to
be amended to incorporate the new language.

Motion Senator Compton moved that H 113 be sent to the 14th Order. Senator
Hill
seconded the motion.
Bruce Allcott, representing the Idaho Fire Chief’s Association and a Fire
Chief in Caldwell, testified that his Association feels that this will not effect
them as they handle mostly urban rescue.
John Cline, Director of the Bureau of Disaster Services for Idaho,
testified that nothing in the bill or amendments would change the nature of
the Disaster Services Act.
Vote By unanimous voice vote H 113 will be sent to the 14th Order. Senator
Keough
and Senator Compton will co-sponsor the amendments to the
bill.
Kerry Ellen Elliott with the Idaho Association of Counties, reported on
Transferable Development Rights as required by law. This Act was
passed in 1999 and is voluntary. The Act is a planning tool for counties
for land planning and is used to help counties keep open space or
agricultural land.



Ms. Elliott reported that four counties have ordinances that are working
well.



The committee requested that Ms. Elliott and the Idaho Association of
Counties review the need for the Association to annually report on this Act
to the legislature.



(A copy of this report is on file in the secretaries office.)

Shirl Boyce, Vice President Economic Development, Boise Metro
Economic Development Council, Boise Metro Chamber of Commerce
reported that tax rates, labor costs, land and office space costs, energy
costs, capital costs, and business climate are the key factors in attracting
business to a city. Other factors include access to a trained educated
workforce, close proximity to educational and research facilities, an
existing network of suppliers, availability of venture capital, climate and
other quality of life factors, and the general cost of living in an area.



Mr. Boyce suggested that the Legislature form and interim committee or
task force to look into and develop a good incentive base for Idaho and
future economic development.



The committee discussed the possibility of crafting a Concurrent
Resolution to establish this committee. Mr. Boyce will work to develop
this.

Bob Deely, Managing Director for Cypress Semiconductor testified that
Idaho is in danger of stalling or declining due to lack of university
engineering infrastructure and budget cuts. A well educated workforce is
key to economic development.
Michael Ferguson, Chief Economist for the Division of Financial
Management reviewed the General Fund Revenue Forecast for FY 2003-2004.



FY 2003 forecasts a growth rate of 4.3%. FY 2004 forecast a growth rate
of 4.1% FY 2002 had a 14.3% decrease in growth.



FY 2001 had several tax law changes that affected FY 2002.



The first three months of FY 2003 the sales tax revenue was strong due
to an increase in car sales.



Mr. Ferguson reported that the national economy needs to improve for
Idaho to see any economic improvement. There needs to be a return to
business investment and a quick, concise end to the conflict in Iraq. If a
war were to draw out, the nation could face a recession.

Meeting adjourned at 5:15 p.m.






DATE: February 17, 2003
TIME: 3:00 p.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

Chairman Bunderson called the meeting to order at 3:00 p.m. A silent
roll call was taken. Senator Compton moved to accept the minutes of
February 12 as written
. Senator Gannon seconded the motion. By
unanimous voice vote the minutes were accepted.
Chairman Bunderson introduced Abigail Morehouse from Boise as the
committees’ new Page for the last half of the session.
S1108 Senator Goedde presented S 1108 allowing counties to retain collection
agencies to collect past due debt owed a county. He presented the
committee with an amendment that clarifies that unless the debtor within
30 days of receiving notice disputes the validity of the debt that the debt
shall be deemed valid. If the debtor disputes the debt, verification of the
debt will be mailed to the consumer by the public agency. He asked that
the committee send the bill to the 14th Order.



Discussion was held on how the collection agencies would be paid. By
statute, a county is responsible for collecting all of a public debt. They
cannot waive any of the debt to collect part of it. The fee paid to the
collection agency would be on top of the debt owed a county.



Discussion was held on what type of complaint process is available to the
debtor. The Department of Finance investigates all complaints against
collection agencies.

Motion Senator Werk moved to hold the bill in committee. Senator Sweet
seconded the motion.
Substitute
Motion
Senator Compton moved to send the bill to the 14th Order. Senator Hill
seconded the motion.
Substitute
Motion Vote
By roll call vote S 1108 will be sent to the 14th Order. Senators
Bunderson, Hill, Ingram, McKenzie, Gannon
, and Compton voted Aye.
Senator Sweet, Werk, and Malepeai voted Nay.
H 222 Representative Skippen presented H 222 that would allow County
Commissioners the option of providing for the election of members of the
Board of Trustees for mosquito abatement districts, or to appoint them. It
would eliminate the reporting requirements by mosquito districts to County
Commissioners, and provide for notification and public hearings of
mosquito abatement districts. The mosquito abatement Board of
Trustees would assume the responsibilities of the County Commissioners
for mosquito abatement districts. Noncontiguous areas could be annexed
into a mosquito abatement district, and noncontiguous districts could
consolidate. It would eliminate the requirement for land ownership to vote
in an election to establish a mosquito abatement district. Representative
Skippen
feels that these changes would make the Trustees more
responsible to taxpayers and more efficient in planning mosquito
abatement.



An elected Trustee would have to abide by all laws affecting elected
officials. They would become an entity unto themselves like other entities.
If a Trustee was appointed, they would answer to the County
Commissioners.



The Idaho Association of Counties supports this legislation.



Discussion was held on what entity would be liable if an organic farm was
accidentally sprayed for mosquito abatement, and the committee
expressed concern about cutting the County Commissions out of the
picture.

Motion Senator McKenzie moved to send the bill to the 14th Order. The motion
died for lack of a second.
Motion Senator Hill moved to hold H 222 in committee. Senator Ingram
seconded the motion.
Vote By unanimous roll call vote H 222 will be held in committee.
H 142 Max Vaughn, Minidoka County Assessor representing the Idaho
Association of Counties and the Idaho Association of County Assessors,
presented H 142. The purpose of the bill is to provide the County
Assessor flexibility in directing the 5-year reappraisal plan required by
Idaho code. Present law requires reappraisal of not less than 20% of all
parcels of property in the county so that 100% of all properties are
appraised in a five-year period.



Due to factors including more properties requiring first time appraisals,
inclement weather, extensive distances and new subdivisions, the ability
to complete the required 20% per year has at times been unattainable.
The new legislation seeks to change the flat 20% or more requirement to
15% or more in the first year, 35% in the second year, 55% in the third
year, 75% in the fourth and 100% by the end of the fifth year.

Motion Senator Compton moved to send H 142 to the floor with a “Do Pass”
recommendation
. Senator Gannon seconded the motion.
Vote By unanimous voice vote H 142 will be sent to the floor with a “Do Pass”
recommendation.
Richard Elwood, the statewide Information Technology Coordinator
reported that his department supports the Information Technology
Resource Management Council (INTRMC) and has developed an online
listing of all of the internet providers in a county. This tool can be used by
companies looking into locating in Idaho.
Charlie Creason, Manager of Syringa Networks, reported to the
committee that Syringa Network offers 2.5 gigabits in broadband
conductivity to the southern half of the state. Many small communities can
now attract high tech business. They have spent $12 million building this
network along with another $20 million from 12 independent telephone
companies. They have contracts with national and international carriers
for high speed service across the world.



He reported that reaching every household with high speed broadband is
not feasible for everyone, but there are other less expensive ways to
reach residential customers from the main high speed fiber lines.

Rich Hahn representing IDACORP introduced Mike Feiler, Vice
President of IDACOMM. IDACOMM can provide first mile, middle mile
and last mile network solutions for large entities to residential customers.
They have various partners to meet any need that is requested.
Mike Reynoldson, Manager of Qwest reported that Qwest operates
worldwide but primarily in the 14 western states. He explained the
difference and gave examples of the type of bandwidth that is available,
how fast each type is, and who may need to use what type of service. Mr.
Reynoldson
explained that a large grocery chain may need ultra high
speed broadband to use when a customer scans a credit card to pay for
groceries. The customer’s payment information may be transmitted to
several locations around the country for approval and receive a reply in a
few seconds. A residential customer may not need that type of speed.
He stressed that Idaho consumers do have choices.
Ron Williams representing the Idaho Cable Telecommunications
Association, introduced Dan Clark the manager of Cable One and Jim
Hannan
, Vice President of Engineering for Cable One.



Mr. Clark reported that Cable One has invested $60 million in the
Treasure Valley and more than $100 million in Idaho to update systems.
In the Boise area their high speed cable internet is available to 100% of
the customers. They serve 20,000 households.



Mr. Hannan explained that the reason fiber cable is not in all homes is
that not everyone wants it and the cost is high. Coaxial cable is used to
reach the average two miles that any residence is from fiber cable.
Technology will develop as customer demand rises. His example was
that not everyone needs Niagara Falls in their home.

Shirl Boyce, Vice President Economic Development, Boise Metro
Economic Development Council, Boise Metro Chamber of Commerce
reported that telecommunications is an absolutely critical element in most
any company’s decision to remain and grow in an area. He reported that
no company has not come to Boise because of a lack of high speed
broadband.



A meeting was held with service providers and Boise City representatives,
and the following points of agreement arose from that meeting.



  1. 1. The issues surrounding telecom and broadband availability are
    complex, and not well understood due to the myriad of new
    regulations and number of new service providers entering the
    market.
  1. 2. There is not a lot of agreement on what broadband services do
    exist and how available they are to business customers.
  1. 3. Solutions developed for Boise may not address the needs of
    other Idaho communities. One size does not fit all.
  1. 4. Service providers and local government in the Boise area will
    be invited around the table to develop and agree on criteria for
    identifying what broadband services and facilities do exist and
    where the gaps might be. This could be used as a model of
    other Idaho communities.
Pam Ahrens, Director of the Department of Administration, expressed her
appreciation that the service providers were starting a dialog. She wants
to see all providers receive a return on their investment.
The meeting adjourned at 5:10 p.m.






DATE: February 24, 2003
TIME: 3:00 p.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton, Werk, Dr. Rulon Ellis (temporary
replacement for Senator Malepeai)
MEMBERS
ABSENT/

EXCUSED:

MINUTES: Chairman Bunderson called the meeting to order at 3:00 p.m. A silent
roll call was taken. Senator Hill moved to accept the minutes of February
17 as written
. Senator McKenzie seconded the motion. By voice vote,
with Senator Werk objecting, the minutes passed as written
.
Chairman Bunderson welcomed Dr. Rulon Ellis who is sitting in for
Senator Malepeai.
H 145 Michael Kane representing the Idaho Sheriff’s Association introduced H
145 that allows counties to set sheriffs service of process fees in an
amount reasonably related to the actual cost of the service but not
exceeding the actual cost. The legislation allows individual counties to
study actual costs and set fees accordingly.



Vicky Beall, Civil Deputy for Boise County, testified in favor of the
legislation stating that in 2001 the average fee paid per service in Boise
County was $28. The actual cost was $45 per service leaving Boise
County taxpayers paying the $17 difference. She also reported, that
many private process servers’ charge clients a hefty fee to have
documents served and then rely on the county to serve them at a lesser
fee.



County Commissioners are required to hold hearings on these fees and
will periodically review and set fees.

Motion Senator Compton moved to send H 145 to the floor with a “Do Pass”
recommendation
. Senator Hill seconded the motion.
Vote By unanimous voice vote H 145 passed. Senator Compton will sponsor
the bill on the floor.
H 146 Michael Kane, representing the Idaho Sheriff’s Association, presented H
146 explaining that the sheriff’s revolving fund is a small ($5,000)
separate fund consisting of monies from the sheriffs budget that is
available for sheriffs travel and hotel expenses. This fund is used in a
more streamlined fashion than through the normal county claims process
for immediate needs. The legislation would increase the fund from $5,000
to $10,000 and allow it to be used for training purposes and for other
duties requiring the need of a warrant.



Discussion was held on what checks and balances are available for this
fund. To use the fund, the sheriff must sign an affidavit demonstrating the
need for the money and the fund is audited at the end of the year. The
County Commissioners also will review the expenses when the fund is
replenished.

Motion Senator Gannon moved to send H 146 to the floor with a “Do Pass”
recommendation
. Senator Werk seconded the motion.
Vote By unanimous voice vote H 146 passed. Senator Gannon will sponsor
the bill on the floor.
Jeff Shinn, with the Division of Financial Management and the
kindergarten through twelfth grade (K-12) budget analyst for Governor
Kempthorne, presented an overview of where money comes from to fund
public schools. In FY 2004, $943 million (56%) will come from the general
fund and regular appropriations, $323 million from local levies, $117.7
million from other local levies, $76.1 million from local tuition, investments
etc. for a total of 30.7% from local entities, and $159.6 million (9.5%) from
the federal government. Mr. Shinn reported that 85% of funding for
Professional-Technical education comes from the general fund with 14%
from the federal government and 1% from other sources.



Discussion was held on the recommended 2% hold back by JFAC and the
effect on public schools. Mr. Shinn reported that some school districts do
have reserve funds that would allow them to survive the cutback this year.
Eighty five percent (85%) of education money goes to salaries and
benefits. Many of these salaries are for contracted employees.



The average cost to educate a student in Idaho is $5,569.00. Enrollment
numbers have increased 3-4% over the last five years.



Funding for Charter Schools was briefly discussed. They do not receive
dollars from property tax.

Jane McClaran, a budget analyst with the Division of Financial
Management handling secondary education, reported on the FY 2003
appropriation of $294,443,000 for colleges and universities. $213,558,
800 (73%) comes from the general fund, $67,127,300 (23%) comes from
student fees. Of student fees, 63% are restricted fees which cannot be
used for instructional costs. They are used for physical plant
maintenance and operations, student services and institutional support.
Thirty seven percent (37%) of student fees are unrestricted and can be
used for any purpose including instructional costs. $13,635,900 (5%) of
funding comes from endowments and has decreased in past years due to
poor market performance.



Ms. McClaran reported on appropriated and unappropriated funds per
university. Appropriated funds are general fund dollars, endowment funds
and student fees. Unappropriated revenues include, auxiliary enterprises,
such as book stores and student housing, institutional accounts, gifts, and
grants and contracts.



Appropriated Unappropriated



Boise State University $ 94,386,300 $122,428,159

Idaho State University $ 83,208,800 $106,009,605

University of Idaho $111,816,100 $179,321,800

Lewis Clark State College $ 16,849,300 $ 14,288,300



Of all appropriated funds in FY 2003, 52.1% were used for instruction,
12.4% for physical plants, 11.0% for institutional support, 7.8% academic
support, 5.7% student services, 5.6% libraries, 3.0% research, and 2.1%
athletics.



Ms. McClaran reported that the average annual resident student tuition at
an Idaho university or college for FY 2003 is $3,004.00.



In response to a question asking if Idaho has too many colleges or
universities, Ms. McClaran stated that she will find this information from
the Western Interstate Commission on Higher Education (WICHE) and
report her findings to the committee.

Meeting adjourned at 4:45 p.m.






DATE: February 26, 2003
TIME: 3:00 p.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

MINUTES: Vice Chairman Hill opened the meeting at 3:03 p.m. A silent roll call was
taken. Senator Gannon motioned to accept the minutes with corrections.
Senator Sweet seconded the motion. By unanimous voice vote, the
minutes of February 24 were approved as corrected.
Lyle Cobbs with the Board of Tax Appeals, introduced Lisa Godwin from
Orofino, who Governor Kempthorne has appointed to the Board of Tax
Appeals for a term expiring June 30, 2005. Ms. Godwin is a native of
Idaho and will represent the 10 northern counties on the board.



Lisa Godwin testified that she is 32 years old, a native of Idaho with two
young children. She graduated from Orofino High School and attended
Lewis Clark State College. She worked at Western Appraisal in Lewiston
for one year. Ms. Godwin became a certified appraiser and worked in
Nez Pierce County for 18 months until an opening came up in Clearwater
County. She was elected as a County Assessor in 1995 and served two
terms. She continued her education and became a Fee Appraiser starting
her own fee appraisal business in 2002. She is interested in this
appointment as a way to serve the Governor and the state in a field she
loves. Her political party affiliation is Democrat.

H 255 Representative Fred Tilman presented H 255 that would provide that
property used for Charter School purposes is exempt from taxation. He
testified that Charter Schools are meant to be part of the public school
system. They are funded with local entity money but receive no property
tax revenue. Some Charter Schools need to rent or lease a portion of a
building to use for classes. The legislation would allow the part of the
building used for Charter School purposes to be tax exempt.



Representative Tilman reported that during a Charter School start up
period no funds are available for the school (some federal programs are
available) so leasing becomes an attractive alternative to owning until
they can afford to buy a permanent building. The exemption would only
cover the portion of the building used for the Charter School.

Kerri Whitehead, representing the Idaho Charter School Network
testified that three Charter Schools in Idaho lease space (Pocatello
Community, ANSWER, and Nampa Charter School.) The landlords would
receive the exemption and pass the savings onto the Charter School.
Motion Senator Werk motioned to send H 255 to the floor with a “Do Pass”
recommendation
. Senator Sweet seconded the motion.
Vote By unanimous voice vote H 255 passed. Senator Werk will sponsor the
bill.
H 223 Representative Eulalie Langford presented H 223 which would allow
counties that wish to do so to return severed mineral rights to the land
from which they originated. In Bear Lake County there are land owners
that have sold their land but retained half of the mineral rights to that land.
When the mineral rights and land are kept together, they are taxed as
one. When a portion of the mineral right is severed from the land, it
becomes a separate asset that is taxable. The last oil well dug in Bear
Lake County was in 1952 and it came up dry. The county has a whole
stack of mineral rights that are yielding no revenue and people are
refusing to pay taxes on them. Under present law, the only way the
county can collect the tax is to sell the severed mineral rights at a public
auction where there have been no buyers. Putting the mineral rights back
with the land would help the county clear up their books.
Motion Senator Sweet motioned to send H 223 to the floor with a “Do Pass”
recommendation
. Senator McKenzie seconded the motion.
Vote By unanimous voice vote H 223 passed. Senator Sweet will sponsor the
bill.
H 151 Representative Wendy Jaquet presented H 151 which amends existing
code to extend the appointed positions of planning and zoning
commissioners beyond two terms with the concurrence of two-thirds of
the governing board (county commissioners or city council members.)



This legislation repeals term limits on planning and zoning
commissioners. It adds a check and balance in that the governing body
must approve the members by a public 2/3 vote. This legislation is
supported by the Association of Idaho Cities and the Idaho Association of
Counties.



Representative Tim Ridinger testified that small communities get hit
hard by term limits on planning and zoning commissioners. These
commissioners are volunteers requiring a lot of training. Keeping
members with the knowledge base on the board is important.



This legislation would allow terms to be extended. There is also a
provision in the legislation for removal of commissioners and the
legislation would not limit the appointment of those who want to serve,
because the governing board is required to appoint a variety of members.

Motion Senator Compton motioned to send H 151 to the floor with a “Do Pass”
recommendation
. Senator Gannon seconded the motion.
Vote By unanimous voice vote H 151 passed. Senator Compton and Senator
Stennett
will sponsor the bill.
H 225 Dan John with the Tax Commission, presented H 225 which clarifies the
transferability of the tax credits for investment in broadband equipment
and the incentive income tax investment credit. Once the credit has been
transferred to a taxpayer for use on the transferee’s return, it may not be
transferred again. In the case of the broadband credit, the taxpayer who
earned the credit may make the transfer through an intermediary.



The incentive investment credit can be transferred one time. The
broadband credit is a five-year credit given as an incentive to establish
broadband capabilities. This credit can be transferred twice because
these companies tend to be small companies with limited resources.

Motion Senator McKenzie motioned to send H 225 to the floor with a “Do Pass”
recommendation
. Senator Hill seconded the motion.
Vote By unanimous voice vote H 225 passed. Senator McKenzie will sponsor
the bill.
H 194 Dan John with the Tax Commission presented this legislation that
annually updates references to the Internal Revenue Code (IRC). It
conforms the Idaho income tax to changes made to the IRC after January
1, 2002, including the federal “Job Creation and Worker Assistance Act of
2001.” It includes that no Idaho deduction will be allowed relating to:



1. The special allowance for 30% first year “bonus depreciation”
permitted by subsection (k) of section 168 of the IRC would not be
deductible in computing Idaho taxable income, the adjusted basis of
depreciable property and capital gains or losses will be modified to reflect
the disallowance of the federal bonus depreciation.



2. Expenses of elementary and secondary teachers for purchases of
classroom supplies otherwise allowable under the IRC would not be
deductible.



Mr. John estimated that if Idaho conformed to the IRC in full leaving in
these two provisions, it would cost the state $25 million per year in income
tax in the first three years.



Senator Brent Hill testified that as an accountant he thinks the bill has
some problems. The bill is trying to save the state money, but Senator
Hill
feels that it is poor public policy.



Senator Hill presented the committee with a chart showing bonus
depreciation versus no bonus depreciation over a seven-year period. By
not conforming with the IRC in this area, every year the taxpayer must
add back in an amount on their state tax return. Internal Revenue Service
(IRS) form 4797 is used when a sale of an asset is sold and is extremely
complicated to fill out. A separate 4797 form must be filled out for the
state to show a smaller gain than on the federal tax return for every asset
sold. This is a problem for the small business that has several
depreciable assets (i.e., a dairy farmer must keep a separate depreciation
schedule for each replacement heifer, then as the heifer is sold, the
farmer must recalculate the gain or loss on that asset.)



This affects assets with depreciable lives of up to 20 years. Not
conforming with the IRC can make it very difficult for small business even
if Idaho decides to comply several years down the road. Senator Hill
testified that this is a tax on our citizens of time and work.



Senator Hill testified that the deduction for kindergarten through twelfth
grade (K-12) teachers of up to $250 is a good investment because it only
costs the state $15.00-$19.50 depending on the teacher’s tax bracket. He
feels that every $250 donation a teacher makes to the classroom is less
money the state provides. If it is an incentive for teachers to buy supplies
for teaching students, then it is a good program. He feels that by doing
away with this deduction that it is an insult to Idaho’s teachers.



Discussion was held on deductions for anyone who donates to a school.



Senator Hill asked that the committee send the bill to the amending
order. Discussion was held on holding the bill in committee, but Senator
Hill
felt that it did have some good things for the tax commission.



Discussion was held on amending the bill to conform to the IRC and
freezing the investment tax credit for three years.



Mr. John felt that tacking on language freezing the investment tax credit
to this bill was not the proper place to that.



Mr. Skip Smyser representing Connolly and Smyser testified that he
would like to see the committee hold hearings on any amendments that
might affect the investment tax credit.



Russell Westerberg representing PacifiCorp testified that the committee
should not use conformity with the IRS bill to tack on investment credit
issues.



Randy Nelson, President of the Associated Taxpayers of Idaho agreed
with Mr. Smyser and Mr. Westerberg. He stated that they are two
different issues.



H 194 will be held until the committee’s next meeting.



Meeting adjourned at 4:50 p.m.








DATE: March 3, 2003
TIME: 3:00 p.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, McKenzie,
Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

Senator Sweet was excused.
MINUTES: Chairman Bunderson called the meeting to order at 3:00 p.m. Senator
Malepeai
motioned to accept the minutes of February 26 as written.
Senator Compton seconded the motion. By unanimous voice vote the
minutes were approved.
Motion Senator Hill motioned to accept the Gubernatorial appointment of Lisa
Godwin
to the Board of Tax Appeals for a term expiring June 30, 2005.

Senator Malepeai seconded the motion.
Vote By unanimous voice vote the appointment of Lisa Godwin to the Board of
Tax Appeals was accepted
.
H 195 Representative Mary Lou Shepherd presented H 195 to increase the
maximum compensation for fire protection board commissioners to $75
per day. Representative Shepherd presented an amendment to H 195
clarifying that the $75 per day is not mandatory. It allows that the fire
board commissioners may receive up to the $75 per day. She asked that
H 195 be sent to the Amending Order.



Representative Mike Naccarato testified to the numerous duties a fire
commissioner performs. He said that at times they travel up to 80 miles
per day to perform their duties.

Motion Senator Compton motioned to send H 195 to the Amending Order.
Senator Gannon seconded the motion.
Vote By unanimous voice vote H 195 will be sent to the Amending Order.
Senator Compton will sponsor this amendment.
H 233 Representative Mary Lou Shepherd presented H 233 which revises the
provisions in Idaho code relating to the election of fire protection district
commissioners. The existing language for conversion to the election
schedule set forth in Idaho code has been unworkable for some districts.
Motion Senator Werk motioned to send H 233 to the floor with a “Do Pass”
recommendation
. Senator McKenzie seconded the motion.
Vote By unanimous voice vote H 233 was passed. Senator Werk will sponsor
this bill.
H 76 Ted Spangler with the Tax Commission, testified that occasionally the
Tax Commission has a taxpayer who just will not pay a delinquent tax
obligation. The Tax Commission may have to seize property and sell it to
satisfy the debt. They can seize the property and sell it, or seek judicial
authorization to go into a property with a warrant and seize the property.
With judicial authorization, the sheriff seizes the property and conducts a
sale.



The legislation changes the process by having the sheriff seize the
property, and then turn it over to the Tax Commission for them to sell. Mr.
Spangler
feels that the Tax Commission can garner more revenue from
selling the seized item than the sheriff can, thus being advantageous to
the taxpayer by covering more of the delinquent debt.

Motion Senator McKenzie motioned to send H 76 to the floor with a “Do Pass”
recommendation
. Senator Gannon seconded the motion.
Vote By unanimous voice vote H 76 was passed. Senator McKenzie will
sponsor the bill.
H 194 Senator Hill presented the committee with a chart and letters from the
Idaho Society of Certified Public Accountants, and Stanton, Jackson &
Co., PLLC, supporting full conformity with the Internal Revenue Code.



Senator Hill testified that by conforming with the Internal Revenue Code
(IRC) it will cost the state between $18-$25 million per year. Idaho will get
this revenue back starting after year three. He testified that by conforming
to the IRC it will avoid waste in taxpayer’s time and effort. He feels that
not conforming to the IRC is bad public policy. By amending the bill to
conform in full, it would keep Idaho maintaining good public policy.
Senator Hill testified that conforming to IRC will help spur business and
investment and lead to economic growth. He stressed that Idaho does
get this revenue back.



Senator Hill testified that allowing teachers up to a $250 deduction for
supplies used in the classroom is a good investment. It costs the state
$15-$19 for an investment of $250. This is a 16-1 return on investment.
He feels that Idaho needs to show that we care about education. It sends
a wrong message to Idaho teachers.



Dan John with the Tax Commission, testified that the bill as it is written
has a zero cost impact. If the 30% bonus depreciation and teacher
deduction is not carved out, the state will experience a $25 million impact.
He questioned if Idaho can afford to comply. It is very front end heavy
and the cost is probably prohibitive. Twenty-nine other jurisdictions have
not conformed to the IRC.



Steve Ahrens, President of the Idaho Association of Commerce and
Industry (IACI) testified that H 194 presents a special challenge both to
the legislature and to the business community. He testified that IACI’s tax
mantra is that Idaho’s tax system must be fair, stable and balanced. One
important element of such a system is conformance between state and
federal tax codes. He felt that conformance is wise tax philosophy and
that the state’s revenue needs are a separate consideration.



Mike Ferguson with the Division of Financial Management, testified that
the $25-$30 million revenue loss may be a high estimate but that the
impact will be significant. Conforming to the IRC, puts more money in the
taxpayer’s hands and less in government to pay for programs.

Motion Senator Ingram motioned to hold H 194 in committee. Senator
McKenzie
seconded the motion.
Discussion was held that by holding the bill in committee it would leave
the taxpayers in a lurch. Holding the bill has Idaho not conforming with
the IRC at all.
Substitute
Motion
Senator Gannon made a substitute motion to send H 194 to the
Amending Order
. Senator Compton seconded the motion. Senator Hill
called for a roll call vote.
Substitute
Motion Vote
Chairman Bunderson, Senators Hill, Ingram, McKenzie, Gannon,
Compton, Werk, Malepeai
voted aye
. Senator Sweet was excused. H
194 will be sent to the Amending Order.
Dan John reported on what the Investment Tax Credit (ITC) is and what
in Idaho qualifies for the credit. Generally what qualifies is tangible
personal property like machinery, manufacturing equipment, elevators,
single purpose agricultural or horticultural structures, qualified timber
products, petroleum storage facilities, qualified broadband equipment.
Anything used in a business other than a structure affixed to real property
qualifies.



The ITC is not transferrable and costs Idaho anywhere from $10.7 million
to $47.1 million.



Steve Ahrens with IACI, reported that the ITC is very essential to the
business community.

Meeting adjourned at 4:50 p.m.






DATE: March 5, 2003
TIME: 3:00 p.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

MINUTES: Chairman Bunderson called the meeting to order at 3:00 p.m. A silent
roll call was taken. Senator Malepeai motioned to approve the minutes
of March 3
. Senator Gannon seconded the motion. By unanimous voice
vote, the minutes of March 3 were approved
.
H 256 aa Speaker of the House, Representative Bruce Newcomb, presented H
256 as amended. The purpose of the legislation is to establish a
consistent review process that better enables governments to evaluate
whether proposed actions may result in a taking of private property
without due process. The legislation ensures that governments catch
potential mistakes. A takings analysis is only triggered after a written
request from an owner of real property affected is filed following a final
action being taken by the governmental entity.



Regulatory taking is a regulatory or administrative action resulting in
deprivation of private property whether such deprivation is total, partial,
permanent or temporary. Upon receiving a written request from an owner
of real property requesting a taking analysis, the government entity has
twenty-eight (28) days to prepare the written taking analysis concerning
the action. The government entity will use the Idaho Regulatory Takings
Act Guidelines manual, prepared by the attorney general, to conduct the
analysis.



Bill Chisholm from Buhl, Idaho testified in opposition to H 256. He felt
that when this legislation was being written that citizens’ groups were left
out of the process. He testified that the legislation gives special rights to
developers. Mr. Chisholm felt that the takings analysis should include
input from neighbors affected by the taking. He felt that the legislation
was not equal and that notification needed to go beyond the 300 feet that
is already in law.



Representative Kathy Skippen testified that the legislation is good
public policy. It reminds local government that they are dealing with real
people and their well being. It gives land owners some options.



Lauren McLean representing the Idaho Conservation League, testified in
opposition to the bill. She testified that it put pressure on local
governments not to say no to takings, and that it will make it harder to
think about owners in the initial planning process.



Jo Ann Butler, an attorney and member of the task force who wrote the
legislation, testified that the legislation insures that government doesn’t go
too far. It catches mistakes that local government may make. She
testified that neighbors always have rights and judicial relief is always an
option.



Ken Harward, Association of Idaho Cities, testified that his association is
in favor of the legislation. It protects private property rights.



Nancy Merrill, Mayor of Eagle, Idaho testified that Eagle is in support of
the legislation. User-friendly government is important.



Norm Semanko representing the Idaho Water User’s Association,
testified that his association supports both House bills 256 and 257. It is
an improvement over existing law.

Motion Senator Compton motioned to send H 256 to the floor with a “Do Pass”
recommendation
. Senator Sweet seconded the motion.
Vote By unanimous voice vote H 256 passed. Senator Sweet and Senator
McKenzie
will co-sponsor the bill.
H 257 Representative Bruce Newcomb presented H 257, legislation that
makes H 256 work. It amends the Local Land Use Planning Act to
provide that various actions taken by local governments in planning and
zoning actions may be subject to a regulatory takings analysis, to revise
notice requirements so that landowners within a specified distance of a
proposed action receive notice, provide that an interim ordinance or
moratorium may be in effect for not more than one calendar year and to
provide procedures to sustain restrictions established by an interim
ordinance or moratorium and to provide that every final decision
concerning a site specific land use request may be subject to a regulatory
takings analysis pursuant to 67-8003, Idaho Code.
Motion Senator Sweet motioned to send H 257 to the floor with a “Do Pass”
recommendation
. Senator Compton seconded the motion.
Vote By unanimous voice vote H 257 passed. Senators Sweet and McKenzie
will sponsor the bill.
Chairman Bunderson introduced former Chief Justice of the Supreme
Court, Robert Bakes
.
Chairman Bunderson conducted a training for the committee, reviewing
selected legislation either in process, or being considered that affect
general fund revenue.



A. A 1 ½ % sales tax increase proposed by Governor Kempthorne
could generate $20 million per month for the state. This legislation has
not been delivered to the House Revenue and Taxation committee.



B. A $.34 cigarette tax increase proposed by Governor Kempthorne
could generate $28 million per year. The legislation has not been
introduced to the House Revenue and Taxation committee.



C. There are two other bills raising tobacco taxes pending in the House
Revenue and Taxation Committee. One increases the tax on cigarettes
by $1, and another by $1.20 per pack. The $1 tax increase per pack
would raise about $90 million.



D. House Bill 135 is in the House Revenue and Taxation Committee.
The bill requires all cigarettes sold in Idaho to bear an Idaho stamp. Also,
it causes tribal businesses to collect and remit to the Tax Commission
cigarette taxes on sales they make to non-tribal members, the same that
is required of all other tobacco retailers. Dan John with the Tax
Commission reported that one-third (1/3) of all cigarettes sold in Idaho are
sold on Indian reservations.



E. Quarterly payment of estimated income taxes was discussed. If this
were to go into effect, it would generate $70-$80 million one time, $20
million per quarter. The positive side of this plan is that it would increase
revenue for the general fund in a one time flow of money. It would also
conform to the federal quarterly tax collection program. The negative
aspect of quarterly tax payments is that it would be more than an 80% tax
increase the first year for taxpayers because of paying tax for the year
previous, and making payments for the year it is implemented. Dan John
said that if the legislature did this, it would be preferable if it was
implemented at quarter end.

Senator Hill thanked Dan John, Ted Spangler, Mike Ferguson and
Randy Nelson
for their help and advice in keeping the committee
educated on tax issues.
Meeting adjourned at 5:10 p.m.






DATE: March 10, 2003
TIME: 3:00 p.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

Senator McKenzie
MINUTES: Vice Chairman Hill opened the meeting at 3:10 p.m. A silent roll call was
taken. Senator Ingram motioned to accept the minutes of March 5.
Senator Sweet seconded the motion. By unanimous voice vote the
minutes were approved.
H 276 Representative Gagner presented H 276 which seeks to restrict cities in
Idaho when dealing with Urban Renewal districts, from making decisions
outside of the city boundary in the county. The legislation corrects a
typographical error and further defines “Area of Operation.”



“Area of Operation” means the area within the corporate limits of the
municipality and the area within five miles of such limits, except that it
does not include any area which lies within the territorial boundaries of
another incorporated city or town or within the unincorporated area of the
county unless a resolution is adopted by the governing body of the city,
town, or county declaring a need.



Both cities and counties will have to come to an agreement to change
boundaries of Urban Renewal Districts.

Motion Senator Gannon motioned to send H 276 to the floor with a “Do Pass”
recommendation
. Senator Compton seconded the motion.
Vote By unanimous voice vote H 276 passed. Senators Lodge and Gannon
will co-sponsor the bill on the floor.
Dan John with the Tax Commission explained the Streamlined Sales Tax
legislation (SSTIS). The legislation would allow Idaho to participate with
thirty-five other states in the Streamlined Sales Tax Implementing States.
The legislation would enable Idaho to collect sales tax from remote
sellers. In 2001, Idaho lost $44 million in sales tax. It is estimated that by
2006, Idaho could lose $151 million.



One piece of legislation would make Idaho an implementing and
governing state in the SSTIS. The second piece of legislation is a joint
memorial to congress urging them to adopt a federal law allowing
members to collect remote sales tax.

Discussion was held on several bills that are in the House. H-96 that
would cap local government revenue sharing has been held in the
Revenue and Taxation Committee. H-126 capping school property tax
relief is also held in Revenue and Taxation. H-250 repealing the estate
tax was held in House Revenue and Taxation at the request of the
sponsor. H-191 which repeals the sales and use tax exemption on Indian
reservations is in House Revenue and Taxation. Legislation to raise the
cigarette tax by $1 was returned to the sponsor.



H-194 was amended on the Senate floor.

Meeting adjourned at 3:50 p.m.






DATE: March 17, 2003
TIME: 3:00 p.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

MINUTES: Vice Chairman Hill opened the meeting at 3:00 p.m. A silent roll was
taken. Senator Gannon motioned to accept the minutes of March 10.
Senator Malepeai seconded the motion. By unanimous voice vote the
minutes were approved
.
H 140 John Watts, representing the Idaho Library Association, testified that H
140 clarifies that if city residents vote to join a library district, that the city
library budget in effect on the date of the election is the budget to be used
to determine a total district budget and to calculate the first annual
assessment fee.



Cheri Rendler, representing the Ada Community Library District in
Treasure Valley, testified in support of H 140. She feels that by amending
current law, voters, library board members, and library personnel will
understand which budget figures are going to be used in planning and
implementing district consolidation.

Motion Senator Compton motioned that H 140 be sent to the floor with a “Do
Pass” recommendation
. Senator Bunderson seconded the motion.
Vote By unanimous voice vote H 140 passed. Senators Compton and
Bunderson
will co-sponsor the bill.
H 302 Representative Raybould introduced H 302 that identifies the standard
to be applied and the burden of proof in appeals of property tax
assessments. The legislation changes the legal standard from one that
requires proof that an assessment is manifestly excessive, arbitrary and
capricious, or fraudulent and oppressive to a standard that simply requires
proof that the assessment is erroneous. It changes the burden of proof
needed from “clear and convincing” burden to the normal “preponderance
of the evidence” standard. Representative Raybould testified that the
changes make the appeals process more fair in challenging an
assessment. The taxpayer will have the burden of proof in seeking relief.
Carl Olsson, Deputy Attorney General, spoke on behalf of the Tax
Commission. He opposes the legislation and testified that it would lower
property taxes on large properties and raise taxes on homes, farms and
smaller properties. He testified that it would flip the burden of proof from
the taxpayer to the assessor. Assessors can defend a challenge, but
large properties have more money to hire appraisers and mount a
challenge. Many small counties cannot bear the burden of defending a
challenge from a large property owner and may lower the taxes without
defending the appraisal.
Rick Smith, an attorney and Certified Public Accountant, testified that he
has done 20 years of property tax work in several states and has
reviewed the standard of proof in all 50 states. H 302 is patterned after a
Utah law and it does not shift the burden of proof from the party seeking
affirmative relief. He thinks the bill relieves the taxpayers from having to
go through big hurdles if a mistake is made. He doesn’t see many large
corporations appealing due to the fact that they provide all the information
to the assessor prior to the property taxes being set. It would put Idaho in
line with 47 other states.
Bob McQuade, an assessor with Ada County, has two concerns with the
bill. One concern is that the bill is confusing as to what type of proof is
needed to mount an appeal, and the second concern is that it is a tax shift
if big business only needs a preponderance of evidence. He wants to see
the higher standard of proof maintained. Mr. McQuade, explained that
the assessors have many checks and balances with the Tax Commission
to ensure the accuracy of appraisals.
Alex La Beau, testified that the Idaho Association of Realtors are in favor
of the bill and that it is good policy.
Gene Kuehn, an assessor with Canyon County, testified that assessors
listen to evidence that taxpayers bring to them when questioning an
assessment, and that they do use a preponderance of the evidence when
making decisions. He would like to see a higher burden of proof.
Dr. Greg Nelson, representing the Idaho Farm Bureau Federation,
testified that the appeals process can be frightening and that his
association is in favor of the legislation.
Steve Ahrens, with the Idaho Association of Commerce and Industry,
supports the bill and stated that the smaller taxpayers gain.
Representative Eskridge, testified that he has gone through the appeals
process and felt intimidated. The legislation will make the process less
intimidating.
Dan Chadwick, Executive Director with the Idaho Association of
Counties, testified that the legislation is a huge shift in policy, and that 60
years of case law will go down the tube. He encouraged the committee to
hold the bill.
Motion Senator Sweet motioned to send H 302 to the floor with a “Do Pass”
recommendation
. Senator Ingram seconded the motion.
Senator Compton explained to the committee that as a county
commissioner for six years, he has listened to two thousand appeals. He
feels that the assessor’s office is helpful and does show the taxpayer
evidence that justifies the assessment. Assessors must be 90% to 110%
on target in accuracy of appraisals. He feels that assessors from small
counties will fold when dealing with large companies. He would like to
see this bill revisited.



Senator Sweet feels that the bill gives everyone a fair standard.

Substitute
Motion
Senator Werk made a substitute motion to hold the bill in committee.
Senator Malepeai seconded the motion.
Substitute
Motion Vote
Senators Compton, Werk and Malepeai voted Aye. Senators Hill,
Ingram, Sweet, McKenzie, and Gannon
voted Nay. Senator
Bunderson
was excused. The substitute motion failed.
Vote Senators Hill, Ingram, Sweet, McKenzie, Gannon, Compton and
Malepeai
voted Aye. Senator Werk voted nay. Senator Bunderson was
excused.
H 232aa Kevin Burnett, the Executive Director of Downtown Boise testified that H
232 as amended is intended to provide full disclosure of the status of
property to be sold or leased within a current Business Improvement
District. It would make a future tenant or owner aware that they are
purchasing or leasing property within a Business Improvement District and
any obligations that would be required of them. The legislation will
eliminate the hunting for new tenants to bill for dues of the district.
Motion Senator Gannon motioned that H 232 be sent to the floor with a “Do
Pass” recommendation
. Senator McKenzie seconded the motion.
Vote By unanimous voice vote H 232aa passed.
Meeting adjourned at 5:10 p.m.






DATE: March 19, 2003
TIME: 3:00 p.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

MINUTES: Chairman Bunderson opened the meeting at 3:00 p.m. A silent roll was
taken. Senator McKenzie motioned to approve the minutes with a
correction
. Senator Compton seconded the motion. By unanimous
voice vote the minutes of March 17 were approved.
H 136 Representative Raybould presented H 136 which makes amendments
to section 63-602FF. It restores intended language in H 488 as amended,
that passed the legislature in 2002, on who qualifies for the agricultural
exemption for parcels of land in a rural home site development plat.



Developed plats would continue to qualify for the exemption if they were
actively devoted to agriculture when the plat was approved and recorded
with the county, and were actively devoted to agriculture on or before
January 1, 2002. They would lose the agriculture exemption if one of the
following things were to take place. If the plat no longer is actively
involved in agriculture, the parcel is sold by the owner, the owner leases
the parcel for a nonagricultural purpose, any construction construed as an
improvement is done, or the rural home-site is annexed into a city.

Russell Westerberg, representing New Horizons Development, testified
that the bill is unfair, unnecessary and a departure from the intent of H
488 as amended. It is a policy reversal that negates work done
previously. He feels that it takes back the incentive to develop in rural
areas. He fears that people who developed plats according to the law last
year will see a tax increase if H 136 passes. He encouraged the
committee to amend the bill.
Alex LaBeau, representing the Idaho Association of Realtors, testified
that his association supported H 488 last year and supports H 136 this
year. He believes that H 136 clarifies that the agriculture (Ag) exemption
should be used only on land that is used for agricultural purposes.
Dan John with the Tax Commission, testified that since the passage of H
488 three lawsuits have been filed. The Tax Commission defines the
word “previously” to mean last year.
Michael Ferguson, a developer from Rexburg, opposes H 136. He
testified that the current law is working. H 488 was passed as an
economic development incentive to bring development to rural Idaho.
Russ Hendricks, testified that the Idaho Farm Bureau supports H 136. H
488 was never intended for developers to qualify for the Ag exemption.
Mitch Jacobs, a farmer and rancher, testified that he has started
developing his agricultural land. Prior to the passage of H 488 he was
taxed on plats before they were sold. He was encouraged with the
passage of H 488 and believed that it would protect him for the next
fifteen years. Mr. Jacobs believes that there should be no tax before
there is any economic gain. As a cattle rancher, he must put up fences to
keep his cattle out of developed plats.
Max Vaughn, Minidoka County Assessor and President of the Idaho
Association of County Assessors, supports H 136. He believes that it
restores the intent of H 488. Mr. Vaughan reported that the final fiscal
impact as a result of the amendment to H 488 was a 30 million-dollar loss
in assessed value shifting property taxes to other property owners. This
year schools will lose $120,000 dollars. He testified that H 488 was
passed so Idaho farmers and ranchers could be economically competitive
with surrounding states that have a similar exemption.
Representative Raybould closed testimony, reporting that in July the
Tax Commission asked him to fix some of the problems that have come
up with H 488. With the advice of the Attorney General’s office H 136 was
developed.
Motion Senator Compton motioned to send H 136 to the 14th Order for
amendment
. Senator Sweet seconded the motion.
Vote Senators Ingram, Sweet, McKenzie, Compton, and Malepeai vote Aye.
Senators Hill, Gannon, and Werk voted Nay. Senator Bunderson was
excused. Senator Compton will work on the amendments.
H 321 Representative Jaquet, testified that H 321 states that those who are
buying and selling transferable development rights have the discretion as
to whether the right will be transferred permanently or only for a fixed
period of time, stated in a written contract that must be recorded with the
county recorder.
John Eaton, representing The Building Contractors Association of SW
Idaho, wants the Transferrable Development Rights program to work,
and the proposed changes in H 321 make them work.
Alex LaBeau, representing the Idaho Association of Realtors, testified
that H 321 allows more flexibility for buyers, sellers, and developers.
Kerry Ellen Elliott, with the Idaho Association of Counties, refreshed the
committee’s minds on what transferable development rights are, and
which counties have programs.
Motion Senator Gannon motioned to send H 321 to the floor with a “Do Pass”
recommendation
. Senator Werk seconded the motion.
Vote By unanimous voice vote H 321 passed. Senators Gannon and
Stennett
will co-sponsor the bill.
H 177 Jack Lyman, representing the Idaho Manufactured Housing Association,
introduced H 177 which passed through the Senate Commerce
Committee and was on the Senate floor when he requested that it be sent
to the Local Government Committee. He brought amendments to the bill
and asked the committee to send it to the 14th Order for amendment.



The amended legislation would allow an existing manufactured housing
park to be subdivided into individual lots. The legislation would not
increase the number of lots or change the boundary lines approved for the
park. It would require the park to create a homeowner’s association to
operate privately owned facilities like water, sewer and roads. It requires
that manufactured home parks must meet all land use planning
ordinances and certify that the drinking water and sewer systems meet
applicable standards.

Patricia Nilsson, Planning Manager with Ada County Development,
testified that certain provisions of H 177 have caused Ada County to
oppose the bill. The definition of a manufactured home park is
inconsistent with the existing definitions in Idaho statute 67-6509b. It is
inconsistent with requirements of Chapter 13, Title 50, Idaho Code. The
fee definition is inconsistent with Idaho Code 67-6519, and H 177 is
unclear on a process for governing board action.



In response to an inquiry as to why it is so difficult to convert from being a
mobile home park to becoming a subdivision, Ms. Nilsson responded that
Ada County wants to make sure that each lot has a good description, title,
proper water and sewer system, and proper roads and access.

Eugene Gunderson, Director Southwest District Health, addressed
public health concerns in relation to water and sewer systems in existing
parks. Water systems will still have to be maintained as public water
systems with periodic testing, reporting and maintenance by a certified
drinking water manager. Health Districts would not be able to lift sanitary
restrictions without redesign or reconstruction of the subsurface sewage
disposal systems during the platting process. Failed septic systems may
not be approved, and expensive alternatives would be required to
conform to standards.
Kerry Ellen Elliott, with the Idaho Association of Counties, testified that H
177 if approved is making a major policy shift. Every developer has to go
through the subdivision process. Also the bill does not guarantee that the
lots will be sold by the owner of the park. She stated that there is no clear
way to implement the bill if it passes.
Jack Lyman, Manufactured Housing Association, closed testimony by
telling the committee that the amendments to the bill have covered what
the Department of Environmental Quality (DEQ) has asked for. Not all
manufactured home parks will qualify to be subdivided. The bill will not
allow substandard parks to subdivide.
Motion Senator Sweet motioned to send H 177 to the 14th Order for amendment.
Senator Ingram seconded the motion.
Discussion was held on the dual standards set for qualifying for a
manufactured home park and a subdivision. The standard should be the
same for both entities.
Vote By voice vote with Senator Hill dissenting H 177 will be sent to the
amending order
. Senator Ingram and Senator Noble will sponsor the
amendments. Senator Compton will work with Jack Lyman on crafting
the amendments.
Meeting adjourned at 6:00 p.m.






DATE: March 24, 2003
TIME: 3:00 p.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

MINUTES: Chairman Bunderson called the meeting to order at 3:00 p.m. A silent
roll was taken. Senator McKenzie motioned to accept the minutes of
March 19
. Senator Compton seconded the motion. By unanimous voice
vote, the minutes were approved.
H 264 Bonnie Tolman, an assessor with Jerome County, presented the H 264
to clarify the definition of occupancy of a house after construction. The
legislation would add an additional definition to the term “occupied” to
include the use of the property by any person as a residence including
occupancy of improvements or use in storage of vehicles, boats or
household goods, provided such use is not solely related to construction
or sales of the property.
Motion Senator Compton motioned to send H 264 to the floor with a “Do Pass”
recommendation
. Senator Werk seconded the motion.
Vote By unanimous voice vote H 264 passed.
H 317 Speaker of the House, Bruce Newcomb presented H 317 which would
allow companies who are located in Idaho to forego the Income Tax
Investment Credit (ITC), by electing an exemption from personal tax on
the property for two years. Taxpayers who have experienced a loss
situation are not eligible to claim the ITC. The bill allows taxpayers who
have suffered losses to elect to be exempt from property tax on personal
property acquisitions/investments for two years in lieu of the ITC.



Speaker Newcomb testified that the legislation would provide a way to
keep companies in business and in Idaho. It also encourages companies
to make new investment in capital.



A question was asked as to why the legislation was written to give the
incentive from money that comes from the counties, when the ITC
incentive uses state funds? Speaker Newcomb responded that the
economic gain will be in the county where the business is located and that
the county will see the rewards sooner than the state.

Randy Nelson, President of the Associated Taxpayers of Idaho,
presented an example of revenue that could be lost from public schools if
the legislation were to pass. He explained that the bill would allow
taxpayers the opportunity to forego a year of earned income tax ITC by
electing to take a 2-year exemption from the personal property tax on the
property investment in Idaho. It would allow only taxpayers who have
suffered losses to take this election on new personal property
acquisitions/investments. The time line for a taxpayer to take the election
would be: 1) They had a negative taxable income in the 2001 tax year, 2)
made qualified ITC investments that are placed in service beginning in the
2003 tax year, 3) elect in 2004 to take personal property tax exemptions
on the value of these investments in lieu of the ITC value, and 4) get the
two years of personal property tax exemptions in tax calendar years 2004
and 2005.



A question was asked what would happen if the company didn’t survive
after two years? Would they pay the money back to the state or the
county? Mr. Nelson’s response was that the payback would have to be
worked out in rules.

Phil Homer, Legislative Advisor for the Idaho School Administrators,
testified that this is a tax shift to local property owners and schools will
lose millions of dollars in funds.
A.J. Balukoff, School Board Member with the Boise School District,
doesn’t see how this is an incentive for companies to move to Idaho. He
is concerned that the recaptured money from companies who fail or leave
Idaho will be paid back to the state and not to the counties that incurred
the loss. School districts are already seeing a loss of funds.
Steve Ahrens, President of the Idaho Association of Commerce and
Industry, testified that everyone understands that we are in difficult
economic times and such times call for innovative approaches to dealing
with financial problems. In difficult times the state needs to do everything
to help businesses survive. H 317 may not affect a large number of
businesses, but it will be a great help to those businesses that will be able
to use this legislation. The tax shift would only be a small sum compared
to total statewide personal property taxes that could be lost if companies
went out of business.
Dan Chadwick, Executive Director of the Idaho Association of Counties,
testified that it would be bad for the counties if the recaptured money from
a failed company or a company that left Idaho were paid to the state. He
also questioned if this was a one time deal for companies.



Discussion was held on how important it is for the state to retain
businesses.

Ted Spangler with the Idaho Tax Commission, testified that the
legislation is administrable.
Speaker Bruce Newcomb closed testimony informing the committee that
Idaho has a two to five year climb out of trouble. Business is not growing
and nobody wants to borrow money. The time value of money is zero and
still nobody wants to invest. Other states like Virginia have better
incentives than Idaho to attract and retain business. He explained that
the sunset clause for the bill is if it is not working in two to five years, the
legislature can change it.
Motion Senator McKenzie motioned to send H 317 to the floor with a “Do Pass”
recommendation
. Senator Sweet seconded the motion.
Substitute
Motion
Senator Malepeai motioned to send H 317 to the 14th Order. Senator
Werk
seconded the motion.
Substitute
Motion Vote
By voice vote the substitute motion failed. Senators Malepeai and Werk
voted Aye. Senators Hill, Ingram, Compton, Sweet, McKenzie, and
Gannon
voted Nay.
Vote By voice vote H 317 passed with a “Do Pass” recommendation.
Senators Ingram, Compton, Sweet, McKenzie, Gannon, Werk and
Malepeai
voted Aye. Senator Hill voted Nay. Senator McKenzie will
sponsor the bill on the floor.
H 339 Representative Wayne Meyer introduced Phil Hart, Chairman of the
Remington Water District Board, who presented H 339. H 339 adds
language to 42-3212 Idaho Code to provide that sewer and water district
boards will have the power to maintain access to facilities and works by
the removal of snow from roads and lands.
Motion Senator Compton motioned to send H 339 to the floor with a “Do Pass”
recommendation
. Senator Malepeai seconded the motion.
Vote By unanimous voice vote H 339 passed.
H 327 John Mackey, United Heritage Financial Group, presented H 327 that
would add language allowing a stock insurance subsidiary to issue
dividends or distributions to the mutual insurance holding company or any
intermediate holding company and the dividends or distributions will be
excluded from the Idaho taxable income of recipients.
Jack Winderall with United Heritage Financial Group, testified that this
allows companies controlled under one mutual holding company to
transfer money to entities within that holding company that has the best
potential for growth.
Dennis Johnson, President and CEO of United Heritage Financial
Group, testified that United Heritage has a life insurance company,
brokerage company, and property and casualty company all under one
umbrella. The bill would allow transfers among all three of them without a
tax liability.
Motion Senator Ingram motioned to send H 327 to the floor with a “Do Pass”
recommendation
. Senator Werk seconded the motion.
Vote By unanimous voice vote H 327 passed. Senators Ingram, Sweet and
Werk
will sponsor the bill on the floor.
Senator Compton reported that with further study on the tax assessment
notices, the portion of the notice that estimates the next years tax is
confusing. This portion estimates the next years tax, but is only an
estimate, so if the actual tax is different from the estimate, taxpayers are
questioning their bill. The format and disclosures in the tax notices are
not in code. They are policies worked out by the assessors and former
Senate Pro Tem Twiggs.



It was decided that the Idaho Assessors should consider producing a
resolution that puts their recommendations for revisions to the tax notice
and reasons therefore in writing for the 2004 legislature to consider.
Senator Compton will work with the Assessors Association on the
resolution.

Meeting adjourned at 5:15 p.m.






DATE: March 31, 2003
TIME: 3:00 p.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

MINUTES: Chairman Bunderson called the meeting to order at 3:00 p.m. A silent
roll was taken. Senator Gannon motioned to accept the minutes of
March 24
. Senator McKenzie seconded the motion. By unanimous
voice vote the minutes were approved.
H 279 Representative Gagner presented H 279 which simplifies income tax
withholding for small and medium sized employers. It repeals the “split
month withholding” for 75% of businesses affected by “split month
withholding,” which was adopted as a revenue acceleration measure in
1983. There are 1050 businesses as of 2003 that are still affected by
this. It will increase the threshold in current statute and will affect 750
employers from the split month and return them to calendar month filers.



The threshold will rise for employers that had withholding equal to or
greater than two hundred forty thousand dollars ($240,000) in the
preceding year, or an average of twenty thousand dollars ($20,000) per
month per annum.

Craig Rasmussen, with Grow Rasmussen LLP, testified in favor of H
279. He stated that the law today creates double work for companies
affected. It has forced companies to calculate withholding mid month
when most companies work on a calender month. It will help small
businesses to be more efficient and will help the Tax Commission as well.
Motion Senator Hill motioned to send H 279 to the floor with a “Do Pass”
recommendation
. Senator Ingram seconded the motion.
Vote By unanimous voice vote H 279 passed.
Gubernatorial
Appointment
Coleen Grant, a Commissioner with the Tax Commission, has been
reappointed to the Tax Commission for a term expiring March 8, 2009 by
Governor Dirk Kempthorne.



Commissioner Grant is a native of Idaho and resides with her husband of
34 years in Fruitland, Idaho. She has been a Commissioner for 12 years
having been appointed by Governors Batt, Andrus and Kempthorne. She
has been very instrumental in automating the Tax Commission having
spearhead the development of the Convert All Tax Systems (CATS)
program.



Commissioner Grant explained that each Commissioner is responsible
for a certain area in the structure of the Commission.



Chairman Bunderson asked if there is a way to implement a withholding
on people who work in Idaho but only live in the state part time who do not
file a tax return? Commissioner Grant replied that the Commission does
catch a number of non filers. The Tax Commission is able to do a match
with federal returns. Anyone who files federal returns listing an Idaho
address can be cross matched to see if they have filed an Idaho return.



Commissioner Grant was asked if the Commission had enough auditors
to collect owed revenue. She replied that there are not an optimum
number of auditors at this time to cover all the cases. The average
Compliance Officer annually brings in $500,000. The average cost for the
Compliance Officer is $43,000. There is a six to one cost benefit ratio.
The state has $88 million in accounts receivable that could be collected if
the state had enough Compliance Officers. This amount is a hard number
and does not include non-filers.

Commissioner Sam Haws testified in favor of Coleen Grant’s
reappointment. She stated that all of the Commissioners have a very
good working relationship. She testified that the CATS system was
spearheaded by Commissioner Grant and has become a model
program for several other states.
Commissioner Larry Watson testified that as an assessor for 25 years
he has seen a number of Tax Commissions, and the one that is presently
serving is one of the very best. He encouraged the reappointment of
Coleen Grant.
Chairman Bunderson thanked Commissioner Grant and informed her
that the committee will vote on her reappointment at the next meeting.
Work Session Mr. Dan John was questioned on how long it would take for additional
Compliance Officers to gear up and collect enough owed revenue to
justify hiring additional officers. He replied that in the first year, the
Compliance Officer could collect more than they cost.



Dan John answered a question about amnesty programs that other
states have used to collect owed taxes. This is a potential way to collect,
but is expensive up front with advertising costs. It is a short term fix to a
long term problem. One of the problems is that people may not pay taxes
and wait to participate in the amnesty program. Mr. John will bring
information on how an amnesty program has worked in another state.



Mr. John explained that the $88 million in accounts receivable at this time
has been through the appeals process and some liens have been placed,
as well as property sold to settle some debt.

The computer program that Commissioner DuWayne Hammond
presented to the committee was reviewed, and each committee member
was asked to work with it to be prepared when a revenue bill comes over
from the House.
The meeting was adjourned at 4:20 p.m.






DATE: April 2, 2003
TIME: 3:00 p.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Compton, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

Senator Gannon
MINUTES: Chairman Bunderson opened the meeting at 3:00 p.m. A silent roll was
taken. Senator McKenzie motioned to approve the minutes of March 31.
Senator Compton seconded the motion. By unanimous voice vote the
minutes were approved
.
Motion Senator Compton motioned to reappoint Coleen Grant to the Tax
Commission
. Senator Hill seconded the motion.
Vote By unanimous voice vote the reappointment of Coleen Grant to the Tax
Commission was approved. Senator Ingram will sponsor her on the
floor.
Brian Whitlock, Governor Kempthorne’s Chief of Staff, informed the
committee of the actions that the House of Representatives have taken to
date on tax issues.



A bill that would move to quarterly tax payments has been sent to the
House floor without recommendation. This bill would generate $80 million
in 2004 and $80 million in 2005. It would begin January 1, 2004. The
shift to quarterly payments means that businesses may have to borrow to
pay the estimated taxes.



When questioned as to the Governor’s opinion on quarterly payments, Mr.
Whitlock
indicated that the Governor is not looking for a one time fix, and
doesn’t want the state to be in the same revenue shortfall boat next year.



A second revenue bill that was in the House Revenue and Taxation
Committee, is legislation that would temporarily increase the sales tax ½
cent starting in May. It would have a sunset clause of June 30, 2004.
This would give the 2003 budget two months of revenue, and 2004
budget 12 months. Estimated revenue projected is $80 million. This
legislation did not pass out of the Revenue and Taxation Committee.



A similar bill that would raise the sales tax ½ cent would start July 1, 2004
and have a sunset of June 30, 2004. This would raise eleven months
worth of revenue. It would not benefit FY2003. This bill was sent directly
to the House floor without recommendation.



Mr. Whitlock indicated that the Governor would feel that this is a one time
fix.



A third bill in the House would increase the tax on cigarettes to $1.00.
This would generate $53 million in revenue. A 20% elasticity rate is built
in to account for people who will buy cigarettes out of state, on an Indian
reservation, or quit smoking. This bill does include other tobacco related
products.



The increase in cigarette taxes to $1.00 would be split with the original
$.28 cents distributed at the current levels, and the additional $.72 cents
would be distributed to the general fund. This bill has been sent directly
to the House floor without recommendation from the Revenue and
Taxation committee.



House bill 402 would increase the tax on beer from $4.65 a barrel (31
gallons) to $7.44 a barrel. It would increase the tax on wine from $.45
cents a gallon to $.75 cents. The revenue generated would be $3.7
million. This legislation is in the House Revenue and Taxation
Committee.



Mr. Whitlock informed the committee that both of the Governor’s bills
have been held in the House Revenue and Taxation Committee and
probably will not be seen again this year. The Governor crafted these two
bills to add stability to services and programs in the state. He also wants
to maintain good standing in bond ratings for the state. He looked at the
sales tax as a way to establish stability. The last time the sales tax
increased was in 1986. The sales tax went from 3% to 4% in 1983. From
4% to 4.5% in June of 1983. It dropped back to 4% in July 1984. In 1986
the sales tax increased to 5%, and in 1987 the 5% was made permanent.



Fiscal year 2003 has a $168 million gap to fill. The Governor wanted to
use some one time money from funds, plus a sales tax increase to 6.5%
starting in May to fill the gap. This would have generated enough revenue
to add $18 million back to stabilize the millennium, deferred maintenance,
and rainy day funds.



Michael Ferguson with the Department of Financial Management,
reported that the preliminary March estimate for tax collections is $6.7
million ahead of projection. February collections were down $22.4 million
from projected. If March holds steady, collections will be down $15.7
million from projected.



Senator Sweet asked Mr. Ferguson about a report published by the
Cato Institute that states that increasing taxes in hard economic times will
serve to keep a depression economy lingering. It also states that tax
increases just increase government spending. Mr. Ferguson replied that
the Federal government can deficit spend and Idaho cannot. Raising
taxes or cutting programs will both have an impact on the economy and
society. If taxes are raised it hurts lower income citizens. If programs are
cut, it hurts vulnerable citizens.



Idaho has programs that have been cut, but the state needs an infusion of
cash to maintain needed programs. Idaho is not like some private
businesses that can give themselves an infusion of cash or cut whole
areas of operation. Idaho will have growth and vital programs that must
be covered.



Brian Whitlock discussed the Governor’s $.34 cent tax increase on
cigarettes. Many other states are looking at increasing cigarette taxes.
The national average is $.66 cents. Washington has a tax of $1.42,
Oregon $1.28, Utah $.69 1/2 cents, Wyoming $.60 cents, Montana $.18
cents, and Nevada $.35 cents. It has been nine years since the tax rate
on cigarettes has increased. The distribution rate would stay the same.
The current $.28 cent tax would be distributed as usual and the additional
collections would go to the general fund.



Mr. Whitlock indicated that the Governor does not favor an increase to
$1.00.

Chairman Bunderson made a presentation to the committee’s Page,
Abby Morehouse, and presented her with a letter of recommendation and
Senate watch. He expressed the committee’s thanks for a job well done.
Meeting adjourned at 4:45 p.m.






DATE: April 7, 2003
TIME: 3:00 p.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton,
Mr. Kelly Kumm (replacement for Senator
Malepeai)
MEMBERS
ABSENT/

EXCUSED:

Senator Werk, Malepeai
MINUTES: Chairman Bunderson called the meeting to order at 3:00 p.m. A silent roll
was taken. Senator Ingram motioned to accept the minutes of April 2.
Senator Compton seconded the motion. By unanimous voice vote the
minutes were approved.
Ron Crane, State Treasurer, introduced Cheryl Cook with Key Bank in Utah.
She is a financial advisor.



Mr. Crane reported to the committee that Idaho issues tax anticipation notes
that are rated by Moody’s, Standard and Poor’s and Fitch. Idaho has what
would be the equivalent to a AAA rating. He reported that 46 of the 50 states
have economic problems and Moody’s and Fitch have downgraded several
states including Washington and Oregon. If Idaho is downgraded, we could
have a tough time selling notes and it would cost the state 30-50 basis points.



Idaho issued $350 million in tax anticipation notes in 2003. If the state had to
pay 50 basis points the interest would be $1,750,000. All public debt in Idaho
totals $1.2 billion. At 50 basis points the cost to the state would be $2.5
million in interest for one year and over $50 million if carried to the term of the
bonds.



Idaho pledges their fourth quarter fiscal year revenues to pay off the
anticipation notes to insure a top rating from the three rating agencies.



Mr. Crane presented a handout from Standard and Poor’s directing the
committees attention to the paragraph addressing “The Peril of relying on
one-time measures. States that rely on significant one-time measures to
balance fiscal 2003 and 2004 will be facing structural budget imbalance,
which will be difficult to address in a slow-growth revenue environment.
These states will be most at risk for credit deterioration. Many states are
looking at interim and non-recurring measures for fiscal 2004, which will
bridge the budget gap to a more normal revenue environment in fiscal 2005.
This will be a risky strategy in this uncertain economy.”



Mr. Crane cautioned the committee that the rating agencies may not give
favorable ratings to states who initiate tax increases with a short sunset
clause. He felt that a three-year sunset clause would be acceptable.

Ms. Cook reported that Idaho’s bonds are very popular and sell quickly.
Idaho is paying slightly more than 2% interest. This year the interest rate is 1
½ %. Not all of the proceeds are distributed from the borrowed money
immediately. Some of the funds are invested until they are needed. If the
state is within 90% of the November cash needs estimate, the state can keep
the invested gain. If not, it goes to the IRS.

Jeff Youtz with Legislative Services, presented the committee with two
handouts. The first was a graph that compared the Governor’s budget
recommendation for FY 2003 to using all of the states reserves with a 3.5%
reduction. The second handout showed revenue options for FY 2004
including the Governor’s plan. (These handouts are on file with the
permanent set of minutes in the secretary’s office.)



Mr. Youtz reported that the 2003 budget depends on one time money from
several funds. He also reported that 93% of the 2004 budget has yet to be
appropriated. He indicated that if a sales tax increase is passed, it needs to
start in June to get a full year of tax revenue collections. H 400 has a July 1
effective date. Therefore since sales tax collections are delayed one month a
July 1 effective date will only produce one month of revenue.



Mr. Youtz responded to a question as to what would happen if no negative
supplemental was passed and the legislature adjourned? The Governor and
the Board of Examiners would have to cut appropriations. They would do
that after seeing how the April collections come in.



Mr. Youtz reported that the state is counting on the tobacco settlement
money to help to balance the 2003 budget. The state is not counting on any
tobacco money in setting the 2004 budget.



A question was asked what options for balancing FY 2003 are available? Mr.
Youtz
replied that all of the cash reserves have been used and that a sales
tax is the only way left. The Governor vetoed one appropriation bill and the
Senate vetoed another.



In response to a question, Mr. Youtz reported that there is no change in the
salary policy for state employees. In the Governor’s recommendation that is
being followed, money for salary increases will not be funded. That doesn’t
mean that some salaries will not increase. Any pay increases will come from
the agency’s budget. Teachers’ salaries are different. They have a statutory
roll up depending on time and continued education. JFAC will fund the health
insurance increase for teachers so they will not experience a loss in revenue.
The health insurance increase will cost approximately $8 million.

Meeting adjourned at 4:00 p.m. Any future meetings are subject to the call of
the chairman.






DATE: April 8, 2003
TIME: 3:00 p.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Sweet, McKenzie,
Gannon, Compton, Werk, Kelly Kumm (sitting in for Senator Malepeai
)
MEMBERS
ABSENT/

EXCUSED:

Malepeai, Ingram
MINUTES: Chairman Bunderson called the meeting to order at 3:00 p.m. A silent
roll was taken. Senator Gannon motioned to accept the minutes of April
7
. Senator McKenzie seconded the motion. By unanimous voice vote
the minutes passed
.
H 400 Representative Leon Smith presented H 400 that increases the state
sales tax from 5% to 5.5% starting July 1, 2003 with a sunset of June 30,
2004. Revenue generated would be $80 million all of which would go to
the general fund. It passed out of the House on a 39-31 vote.



Representative Smith testified that H 400 is a compromise bill and that is
the reason that is has a one year sunset. Initially the bill had a two-year
sunset.



A question as to why the start date was July 1 and not any sooner to help
balance the 2003 budget was asked. Representative Smith testified that
the March 2003 revenues looked better than expected.



When questioned if the one year sunset will really be one year,
Representative Smith answered “yes.” Future legislatures may change
it. He said that the one year sunset was to enable an interim committee
to study the state’s tax exemptions, and develop a plan for next year’s
legislative session.

Pam Eaton, President of the Idaho Retailers Association, testified that the
Retailers Association opposes H 400. It will hurt the many retailers that
have businesses along the border states of Montana and Washington. In
a good economy a tax increase is not felt as much as in a bad economy.
Many of her members have experienced bankruptcies and layoffs. They
have lowered their prices to encourage consumers to buy and profit
margins have dropped. An increase of the sales tax will lower the
disposable income consumers spend.



When questioned as to possible solutions, Ms. Eaton responded that the
state should do what businesses do and tighten its belt. She feels that
Education and Health and Welfare can be streamlined.



Ms. Eaton reported that internet sales are exempt from sales tax and that
the state loses revenue when cigarettes are purchased on an Indian
reservation. She also explained the Streamlined Sales Tax program that
is in the House Revenue and Tax Committee, and how it would bring in a
substantial amount of revenue and put retailers on a level playing field.

Mike Ferguson with the Department of Financial Management, reported
that sales tax revenue has shown growth over the past several years. In
2000 it was $750 million, 2001 $779 million, 2002 $792 million, 2003 $816
million and 2004 is projected at $848 million. He clarified that because of
the July 1 start date, sales tax collections are delayed one month, and H
400 would generate eleven months of revenue or $73 million for FY 2004.
One month of revenue or $7 million in FY 2005 would be generated.
Motion Senator Gannon motioned to send H 400 to the Amending Order.
Senator Hill seconded the motion. Discussion followed.



Senator Gannon feels that the dates on the legislation need to be fixed.



Senator Compton reported that he will be attaching an amendment that
will change the earned income tax credit to 10% of the federal rate. This
would generate $11.5 million.



Senator Werk feels that the ½ cent doesn’t get Idaho anywhere near the
amount needed to support education. He doesn’t think a regressive tax
like the sales tax should increase to subsidize the individual income tax
reductions of 2001. He would like to see lower taxes on groceries. He
likes the one year sunset clause in the bill to allow an interim committee
to present their findings on the sales tax exemption system to the
legislature next year.



Senator Bunderson clarified the effect of the 2001 income tax rate
reductions. He said that the lowest income tax rate was reduced from 2%
to 1.6%, a 20% reduction. The highest rate was only reduced 5%.



Senator Sweet feels that raising any tax during poor economic times is
bad judgement.



Senator Compton is opposed to any further cuts, and is opposed to a
sunset clause of one year. He is worried about the state’s bond rating
from Moody’s, Standard and Poors, and Fitch, who dislike a short term fix
for states in economic trouble. He feels that the cuts to the University of
Idaho have driven off some of our finest and most talented teachers.



Senator McKenzie supports sending the H 400 to the Amending Order,
but that will not guarantee his vote on the final bill that comes out of the
Amending Order.



Mr. Kumm, who is representing Senator Malepeai, feels that giving the
whole Senate a chance to amend the bill is a good choice.



Chairman Bunderson knows that this committee will be very
instrumental in amending H 400 because of the amount of professionals
that have been before them educating them on the issues.

Vote By voice vote H 400 will be sent to the Amending Order. Senators
Bunderson, Hill, McKenzie, Gannon, Compton, Werk voted Aye. Mr.
Kumm
voted Aye. Senator Sweet voted No. Senator Ingram was
absent and excused.
Meeting adjourned at 4:00 p.m.






DATE: April 21, 2003
TIME: 3:00 p.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

MINUTES: Chairman Bunderson called the meeting to order at 3:00 p.m. A silent
roll was taken.
H 403aa Representative Denney presented H 403 as amended which would
place the current pending school facilities lawsuit under the
constitutionally based Educational Claims Act. It would break the lawsuit
into segments small enough to handle and solve. The Educational Claims
Act was passed seven years ago but exempted the school district’s
lawsuit to enable the suit to be resolved. The lawsuit has been going on
for thirteen years and still is no closer to a resolution.
David High, Deputy Attorney General, testified that he has been in the
Attorney General’s office since the start of the lawsuit. He reported that
the Idaho constitution does not require the state to fund school buildings.
The constitution requires that the state must provide a thorough system of
education in a safe environment conducive to learning. School facilities
are funded with local money. In the 1960’s the state did start to support
the schools more and more.



The Educational Claims Act gives the court the right to impose a levy on a
district to provide that safe environment conducive to learning.



Mr. High doesn’t see an end in sight to the thirteen-year lawsuit. This
legislation is a reasonable way to resolve the issues. He referred to a
handout of tax levies by school districts (a copy is on file with the
permanent set of records in the secretary’s office). All but one district
involved in the lawsuit has no levies to help pay for school facilities.
These districts involved in the lawsuit are looking to the state to pay for
facilities rather than impose a levy in their district to cover the facility
costs.



Mr. High responded to a question stating that in the first two years of the
lawsuit the state had spent approximately $100,000 and the districts
spent $160,000.



Mr. High was asked to explain what the bill really does. He answered
that if the bill passes that it will be challenged in court. If it is shown to be
constitutional, which Mr. High believes it is, then the state will become the
plaintiff and the districts become the defendants. The state would work
with the districts to fix the problems. They would research if the districts
have the resources to fix unsafe facilities. If the cases cannot be
resolved, then the court could impose a levy on the district.



Senator Malepeai asked about a Task Force that made
recommendations to the Governor in February and what came about from
that. Mr. High responded that he’s not sure the Task Force’s four
recommendations would make the lawsuit go away.



Senator Hill asked why section four of the original bill was deleted. Mr.
High
responded that he did not know why it was deleted but the effect of
section four allowed a district to seek an additional levy and now the
amendment allows a levy only when ordered by a court.



Mr. High further explained that the state would take on the roll of
examining schools to see if they are safe. The state could sue a district to
make them impose a levy to fix their own schools. The state under Idaho
constitution is not responsible for maintaining schools.



Senator Ingram asked if the bill changes any constitutional issues and
Mr. High replied “no.”



Mr. High reported to the committee that the Attorney General’s office
requested a duplicate tape recording of a hearing held in the Idaho
Schools for Equal Educational Opportunity v. State of Idaho, Case No.
94008. (Copies of this request are on file with the permanent set of
records in the secretary’s office.)

Stan Kress, Superintendent of the Cottonwood School District, opposes
the bill and he presented three handouts on the history of the lawsuit,
school facilities needs assessment, and the Task Force report to the
Governor and Superintendent of Public Instruction (handouts are on file
with the permanent set of records in the secretary’s office.)



The Task Force concluded with four findings and five recommendations.
The four findings included 1.) that the super majority of 66 % affirmative
to pass a bond levy is in some cases prohibitive, 2.) on occasion serious
safety hazards exist in schools and there is no fail-safe method for local
school district’s Board of Trustees to remediate the hazard, 3.) there is a
disparity among school districts in their ability to retire long term debt, and
4.) two of the leading causes of school facility deterioration is inadequate
and neglected maintenance.



He testified that poorer school districts must levy more than richer
districts, and that the bill excuses the state from constitutionally based law
suits.



Senator Ingram asked why should people in districts with no facility
problems be taxed to pay for other districts problems? Mr. Kress
responded that some districts have a higher per capita income and
receive more money to maintain facilities than poorer districts. He
reported that some districts have tried to pass a levy but failed due to high
unemployment in that district.



Senator Hill asked if Mr. Kress felt that the state should pay for all
schools. Mr. Kress responded that if the five Task Force
recommendations were tried that he would do everything possible to get
the law suits dropped. He said that the bill as written doesn’t allow for any
vote of the people. The Task Force recommendations allow for a super
majority of 60%.



Mr. Kress reported that the Task Force had eight members, and five
meetings. One of the members was asked to write legislation but did not
write legislation that had come out of the Task Force.



Mr. Kress was questioned as to why he hasn’t closed his unsafe schools.
He replied that he has used all sorts of methods to reduce the unsafe
conditions.

Senator Sweet asked why charter schools can make it without the help of
any property tax money. Mr. Kress responded that there are advantages
when an area can invite only those they want versus accepting every
student.

Darrel Deide from the Governor’s office, supports H 403 as amended.
He has worked on many bills supporting school facilities. He has been a
teacher and superintendent. He has worked on thirty or more school
levies. All were successful. He was a part of the Task Force. He feels
that the fiscal impact of the Task Force recommendations is too high. He
feels that H 403 as amended offers some hope of resolution to the law
suit.
Geoffrey Thomas, superintendent of the Madison School District testified
in favor of the bill. He was a member of the Task Force and is concerned
that the recommendations are not given an opportunity to work. He feels
that if the legislation passes it will create many more law suits. He feels
that the legislation was drafted in a hurried manner and not well thought
out.
Mike Friend, Executive Director of the Idaho Association of School
Administrators spoke in opposition to the bill. He feels that the lawsuit
has kept the facility needs in the forefront. He expressed that S 1472 as
amended and passed last year was a good step in helping the districts.
Committee discussion included comments on the strangeness of turning
plaintiffs into defendants, and that the state does not pay for upgrades of
poor sewer or water systems in districts.
In closing, Mr. Kress reported that there is help for sewer and water
systems that do not meet requirements in the way of federal matching
dollars and some state dollars. He restated that the legislation will create
more lawsuits between the state and districts.
Representative Denney testified that there is a need to break the lawsuit
down into smaller suits so that the problems can be fixed on an individual
basis. He said there are relatively few school districts that have unsafe
schools. He also stated that the Madison School District is covered in the
existing law and that this bill only covers the districts remaining in the
lawsuit.
In closing, David High testified that each time the lawsuit has had a
hearing in the Supreme Court that part of the suit has been dismissed.
He reiterated the Idaho constitution requiring a thorough and uniform
system of education.
Motion Senator Hill motioned to send H 403 as amended to the floor with a “Do
Pass” recommendation
. Senator Ingram seconded the motion.
Senator Malepeai thinks that the best legislation comes from all parties
compromising. Senator McKenzie feels that the legislation will deal with
the problem. Senator Gannon pointed out that several of the Task Force
recommendations are already dead due to legislation that has failed.
Vote By voice vote, with two no votes, H 403 as amended passed. Senator
Little
and Senator Hill will cosponsor the bill on the floor.
Meeting was adjourned at 5:00 p.m.






DATE: May 1, 2003
TIME: 8:15 a.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Compton, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

Senator Gannon
MINUTES: Chairman Bunderson called the meeting to order at 8:15 a.m. A silent
roll was taken.
H428 Senator Goedde presented H 428 which authorizes counties to adopt
local option sales taxes. The bill would require that the measure be put to
the voters and obtain a 66% approval. The tax must be used for the
specific purpose of paying the debt requirement of detention facilities and
not less than 50% of the revenue generated would be applied to reduce
existing property taxes. There would be a sunset clause of ten years or
less.



Senator Goedde reported that Kootenai County passed a local option tax
in 1999 to pay for a jail. The Supreme Court found the tax
unconstitutional and overturned it. Now the debt burden has fallen on
property tax dollars. If the bill is not passed, it will increase the property
tax by $3.8 million in the first year and $4.8 million in the next years.



Senator Goedde responded to a question on how Streamlined Sales Tax
would be affected. Streamlined Sales Tax would not be affected. There
would be a change in the collection point from the counties to the state.



Dan John with the State Tax Commission testified that Streamlined Sales
Tax would require one jurisdiction to administer all taxes. The state would
contract with Kootenai County to collect the extra local option tax. He
indicated that there is not a problem with this legislation in regard to
streamlined sales tax.



Discussion was held on if this was a shift from property tax to sales tax. It
is a shift in that out of county visitors and retail customers help pay the
debt burden for the jail. When the sunset is up, the local option sales tax
will go away and some burden will shift back to the property tax. County
Commissioners will have time to plan and ease that shift in the burden.
However, since Kootenai County has existing bonds that are paid off
around 2009, the reduction in property tax resulting from such payoff will
offset any increase in property taxes resulting from the loss of the 50%
local option tax.



A question was asked if this local option tax is constitutional. Senator
Goedde
responded that he has an Attorney General’s opinion stating that
it would be constitutional because it is available to all counties.



Senator Compton testified that to pass the local option tax a county
would need a 66% super majority. Most businesses in Kootenai County
are in favor of this legislation. They have seen that it does not cause
them to lose business to other counties.



Senator Goedde reported that when Kootenai County had a local option
tax prior to the Supreme Court ruling, the revenue collected during the
best year was $6.8 million. $3.4 million or more of that would go to
property tax relief.

Motion Senator Compton motioned to send H 428 to the floor with a “Do Pass”
recommendation
. Senator Ingram seconded the motion.
Senator Sweet voiced his objection to the state fixing county problems.
He doesn’t believe that sunset clauses hold up very well and that H 428 is
bad policy.



Senator Malepeai believes that the counties are extensions of state
government and that the state needs to assist counties in carrying out
state business. Counties may need resources from the state.



Senator McKenzie doesn’t like the idea of different counties having
different sales tax rates. However, he feels that with the super majority
needed to pass a local option tax and the sunset clause that it is good
policy.



Kerry Ellen Elliott with the Idaho Association of Counties, was asked to
provide information to the committee on the number of tax bills the
counties have opposed and their stance on property tax relief.



In closing Senator Compton reported that Kootenai County needed
many new facilities including a jail in 1999. They worked with the Tax
Commission and the Attorney General’s office and passed the now
unconstitutional local option tax. All was well, and the tax was working
well in the county. He knows that the citizens of Kootenai County are
wise and they would not pass anything that wouldn’t work for the county.

Senator Sweet requested a roll call vote.
Vote By roll call vote H 428 passed with senators Bunderson, Ingram,
Compton, Werk, Malepeai
voting yes, and senators Hill, Sweet, and
McKenzie
voting no.
Meeting adjourned at 9:30 a.m.






DATE: May 3, 2003
TIME: 12:50 p.m.
PLACE: Room 426
MEMBERS
PRESENT:
Chairman Bunderson, Vice Chairman Hill, Senators Ingram, Sweet,
McKenzie, Gannon, Compton, Werk, Malepeai
MEMBERS
ABSENT/

EXCUSED:

MINUTES: Vice Chairman Hill called the meeting to order at 12:50 p.m. A silent roll
was taken.
H 452 Representative Darrell Bolz presented H452 to provide for an exemption
of the additional one percent sales tax on contracts entered into
agreement prior to May 1, 2003. Representative Bolz reported that this
is a trailer bill to the sales tax increase bill.



Contractors that have entered into a contract prior to April 15, 2003 with a
negotiated bid of 5% sales tax would be exempt from the 1% increase in
sales tax. It is a very specific exemption which has the contractor pay the
sales tax, and upon submitting a copy of the written contract, a detailed
invoice prepared by the seller, and a document signed by the purchaser
certifying that the tangible personal property relates to the qualified
contract, the contractor would receive a refund of the 1% sales tax
increase. The State Tax Commission will review all claims for a refund of
the sales tax, and if they find it proper a refund will be made. The bill
includes a high penalty for contractors who would abuse the system.



Discussion was held on how change orders within the contract would be
handled. Once change orders are signed, they become part of the
contract. The committee discussed adding intent language to clarify this
bill. Discussion was held that the language of the bill and rules already in
place at the Tax Commission would cover the issue of change orders.



Representative Bolz informed the committee that the Tax Commission
had a lot of input into the writing of the bill.



Roger Seiber with Capitol West testified that the language in the bill has
been used in other similar bills. He reiterated that the penalty imposed is
quite high and would deter contractors from abusing the system.

Motion Senator Ingram moved to send H 452 to the floor with a “Do Pass”
recommendation
. Senator Hill seconded the motion.
Vote By unanimous voice vote H 452 passed.
Motion Senator Werk moved to develop intent language to not allow change
orders signed after the contract was written to be considered part of the
original contract and receive the exemption
. Senator Malepeai seconded
the motion
.
Vote By voice vote the motion failed.
H 390 Chairman Bunderson reported that H390 is basically the same bill as H
194 as amended which the House did not concur with. The title of the bill
was changed to make it legal as a new bill.



The bill updates references to the Internal Revenue Code (IRC). It
conforms the Idaho income tax to the Internal Revenue Code with two
deductions taken out.



The special allowance for 30% first year “bonus depreciation” permitted in
the IRC would not be deductible in computing Idaho Taxable income.
Also, the expenses of elementary and secondary teachers for purchases
of classroom supplies otherwise allowable under the IRC would not be
deductible.



Senator Hill testified that it is important to conform to the Internal
Revenue Code. He feels that conformity is important to the citizens of
Idaho.



The committee discussed that this bill was amended in the Senate earlier
to add back bonus depreciation and teacher deductions. The amendment
did not pass in the House. Discussion was held on the ability of teachers
to take an educational credit allowance on their taxes which is better than
this deduction. The committee unanimously voiced their displeasure
against the removal of the teacher deduction, but felt that Idaho must
conform with the IRC.

Motion Senator Hill moved to send H 390 to the floor with a “Do Pass”
recommendation
. Senator McKenzie seconded the motion.
Vote By voice vote with Senator Sweet voting no, H 390 passed.
Chairman Bunderson informed the committee that the tribal cigarette tax
exemption repeal will not be brought up again this session. He informed
the committee that after the increase in the cigarette tax yesterday, that
many House members had a change of heart on this issue and wanted the
chance to level the playing field with retail cigarette sales on reservations
and off reservation retailers.
The meeting adjourned at 1:50 p.m.