By Dan McDonald
Special to the Reader
Each year, January brings a new legislative session for our Idaho legislators. For county commissioners in Idaho it brings a hope of potentially some good things to come and some hesitation as to what else may be handed down to the Idaho counties.
In the past four years I have been a commissioner we have seen some confusing decisions made by the Legislature with some ending up being unfunded mandates that get handed down to the counties to determine how to pay for some of the legislature’s “good ideas.” Fortunately, we have good working relationships with Rep. Sage Dixon and Sen. Jim Woodward, who do fine jobs of always being open to conversations about our concerns and working toward actions to resolve them. They are however, only two of the 105 who represent all corners of the state.
This year will be especially interesting considering the governor’s unilateral actions regarding COVID-19, along with his distribution of Cares Act money, an authority that is supposed to be under the Legislature and not the Executive Branch. Additionally, I appreciate the bills and resolutions currently being debated regarding the state of emergency, COVID-related policies and the Legislature having the ability to call itself back into session.
I am consistently uncomfortable with one person — in this case the governor — being the sole arbiter of how to proceed under these kinds of conditions. Our form of government is supposed to include our local representatives and I believe more ideas are better than fewer.
There are two issues, one old, one new, that we look forward to seeing the Legislature offer some potential solutions and clarity, as both will directly affect each of the counties in Idaho and especially Bonner County.
The first issue is Medicaid expansion. Funding is becoming the key issue and the individual counties are looking at some potential cost increases, which would take several years of a full 3% tax increase to cover and continue to cover.
The current plan is to eliminate the funding for the state’s Catastrophic Health Care fund, which assists counties by picking up the cost of medical treatment for those who qualify after the county covers the initial $11,000. The thinking is many of those reliant on the CAT fund would easily qualify for expanded Medicaid coverage under the parameters set forth in the legislation.
Here’s the problem: Since the passage of the Affordable Care Act we’ve seen some positive but mostly negative results. While a small percentage of the country who were without insurance were able to receive subsidized coverage under the ACA, that subsidized bill was rolled onto all other policies that were not subsidized under the ACA along with private policies, as well. More devastating was the market multiplier effect that the ACA had due to the subsidized costs and increased regulations that increased the cost of actual health care.
This sets up our current dilemma. The increase in health care insurance and actual health care is widening the gap that Medicaid expansion was expected to cover. With the gap moving up the income scale, we are seeing CAT fund applications coming in from folks who don’t qualify for expanded Medicaid but can’t afford the inflated insurance, let alone the co-pay to pay for the inflated cost of treatment.
So how does this affect the county? The county pays only the first $11,000, with the CAT fund paying the balance. With the state using CAT fund moneys to pay for expanded Medicaid access, the counties will be on the hook for covering not just the first $11,000 but having to cover the entire medical bill for those in the new gap not covered by Medicaid expansion, and the counties will also be on the hook for the mental health portion in indigent care, as that won’t be funded under expanded Medicaid.
We review and approve these bills every week and I also serve on the CAT board. Many of these invoices are in the $200,000 to $300,000 range. If we get more than three of these in a year without having the CAT fund to back us up, we will exceed the amount of money that can be raised by law with a tax increase. That will mean cuts in other county services should this happen. Based on our experience, this won’t be an if, it will be a when. We are hoping the Legislature finds a funding solution that will not pass the burden onto the counties, which have fixed yearly budgets while the state is enjoying a revenue surplus.
The other issue is one being generated by a state representative in Ada County regarding the revision of the statutes regulating counties’ ability to levy yearly property taxes. After discussing this controversial issue with commissioners in other counties through a conference call with the Idaho Association of Counties, we see several issues with the initial plan. The first offering from the southern Idaho representative was to eliminate the county’s ability to realize new construction revenue and eliminate foregone balances that are on the books. New construction revenues are what we have been using here in Bonner County to offset inflation and increases in operating costs that have allowed us to not increase taxes over the past three years. Additionally, if you were to not realize the new construction or new additions to the tax rolls, we would have a constitutional issue as properties would not be taxed under a system that treats all properties the same. Last year our new construction revenue was more than $500,000. Not having that revenue to offset expenses would assure tax increases and possible cuts in services.
Foregone is the money not realized by a taxing entity that has the ability to tax up to an increase of 3% per year. For the past three years, we have not taken the 3% increase that we are by statute able to take, so that money goes into the foregone account. This account is basically a bookkeeping entry that the state tracks. Our account has grown to well over $2 million — money we can access in part or in whole during our yearly budget process.
What foregone represents to most taxpayers is the county’s ability to go back in time and capture tax increases they hadn’t taken in the past and raise the taxable yearly rate. In most every circle, foregone is a dirty word. With the county commissioners over my past four years we also classify it as a dirty word and look upon foregone as an “in case of emergency, break glass” fund. We refuse to use it and are allowing it to continue to grow. Because we choose not to use it doesn’t mean future commissioners might not want to access it for a pet project. While we don’t want to use it, we also don’t want to lose it; it’s like punishing us for being responsible with our budget and spending.
I have offered a compromise idea to cap foregone at a percentage of each county’s budget to avoid these funds from getting too large and reduce the temptation for commissioners to use it for anything other than a real emergency. Bonner County is one of only a few counties that have a foregone account, with many of them having already drained their accounts.
Other areas of reform for property taxes is to scrutinize forest and ag exemptions. For those properties that have legitimate forestry and ag operations it’s a great tool; however, we are seeing more and more property owners who are taking advantage of the system and not living up to the details of the program. This results in a tax shift to all other property owners.
An additional issue we are seeing now — which we also saw back in the post 2008 housing market crash — is a shifting of property tax liability from commercial properties to residential properties. In post-2008, with the housing values dropping but commercial remaining high, the larger share of property taxes was shifted to commercial properties. Our assessor at the time saw this and quickly moved to create a discount multiplier for commercial property that rebalanced the sheet and created fair distribution of the property tax liability. Now it’s happening in reverse of 2008, in that residential housing is increasing in value rapidly — outpacing commercial and creating a similar imbalance with respect to property tax liability.
We are asking as part of the property tax reform that the Legislature include language to require county assessors to review and rebalance the tax liability as it relates to both the current trends for residential compared to commercial properties on a yearly basis.
These are but a few of our hopes and concerns as the Legislature works its way through the 2021 legislative session.
Dan McDonald serves as chair of the Bonner County Board of Commissioners.
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