Author: christian

A 21st Century State…a 20th Century Tax Structure

The Idaho Legislature stumbled to adjournment on Monday after reducing state spending by 19% over the last two sessions. Now, you might ask, what next?

At some point – in the not too distant future, one hopes – the economy starts to grow at a stronger clip and the revenue streams at the state level start to produce the dollars needed to rebuild an education system and sustain other basic services. Education gets a lot of attention, as it should. For two years running state support has been reduced in real dollars. That has never happened before. At the same time, a number of other agencies – like the Departments of Environmental Quality and Water Resources – that consume a small slice of the budget, have been close to crippled.

Despite election year rhetoric about holding the line, the budget outlook this year and next is nothing less than bleak. The line hasn’t really been held, it has been moved backward.

Even as the session was dominated by the scramble to patch and scratch a budget together, some legislators were seriously floating the notion that taxes, particularly the income tax, should be cut. Others, like the state senate’s budget leader Dean Cameron were more realistically suggesting that the 2011 session will need to find a way a raise revenue. Cameron told the Statesman’s Dan Popkey that next year could “be even more difficult.”

“Our budget is full of places where we have robbed from one fund or another to keep programs or services going,” Cameron said. “Now, we’re at the end of it.”

Here is the reality: even when you account for the many tweaks that have been made to the Idaho tax system over the years – sales and income tax rates have increased over time, for example – the essential structure has gone unchanged since the historic decision in 1965 to create an Idaho sales tax. What has changed is a steady deterioration, made worse by the awful economy, of revenue to support critical services like public and higher education. Public school support, to a substantial degree, has shifted from the more stable property tax to the more volatile sales tax. Meanwhile, sales tax exemptions have grown like noxious weeds with each exemption eating away at the state’s general fund and, by definition, diminishing the state’s ability to support education.

Somewhere on a shelf in the spiffy, remodeled Statehouse is a box full of studies analyzing how the state’s tax structure has become the sick man of Idaho. Every serious look at Idaho’s “three legged stool” of sales, income and property taxes has concluded that the basic structure is badly dated. Those past studies have accumulated dust and not influenced policy and the just adjourned legislature – after two years of slashing spending by 19% – couldn’t even bring itself to study the system one more time.

That famous 1965 legislative session designed a tax structure for its time. Idaho had a resource dependent economy in those days. The timber industry was in full flower and the Coeur d’Alene mining district was producing vast amounts of silver and creating family wage jobs. Agricultural production was the dependable staple of the Idaho economy.

Forty-five years ago, Hewlett-Packard wasn’t in Boise, Micron either. The service economy hardly existed. Idaho’s corporate community, including mainstays like Albertson’s and Morrison-Knudsen, created stability and jobs. Now much of that is gone or at least diminished. Many things about the Idaho economy are vastly different today, yet the tax structure remains pretty much the same. No less an authority, and advocate for Idaho business, than former Idaho Association of Commerce and Industry President Steve Ahrens outlined what needs to be done at a Boise City Club event during the first days of the legislative session back in January. Was anyone listening?

A question for the next Idaho Legislature is how much more cutting can the state really stand? At some point, a 21st Century economy will require new investment and new thinking about a 21st Century education system. Good jobs require better schools and a trained workforce. The millions in revenue lost to Internet sales (at a detriment to hometown businesses) or left untaxed due to exemptions may not represent comfortable rocks to look under, but the alternative, if Idaho wants to grow a 21st Century economy, is unsustainable.

At the federal level, a few smart people know that spending restraint and tax increases are the only way to get the ballooning federal deficit under control. At the state level, lawmakers have done the cutting. It will take real political courage – and a view to the long term – to confront the need for new revenue.

The 2011 Idaho Legislature will need a Pete Cenarrusa, a Perry Swisher, a Cecil Andrus and a Phil Batt. Those guys, and others lost to history, made the tough decisions in 1965 that put in place a tax system that served the state well for a generation and ushered in the modern Idaho. What next?

Last One Out Turn Off the Lights

I have started to believe that Idaho Democrats have been down for so long that they might be suffering from the Stockholm Syndrome. That’s the psychological phenomenon named after a small group of hostages in Sweden in 1973 who, despite being held against their will, came to closely identify with their captors.

OK, I’m being a little facetious. Still as one who believes that a genuine two-party system just might serve Idaho better in the long run, it’s difficult when looking at the shape of the 2010 contests not to think that Idaho Democrats are destined to be down for a long, long time. Like the Stockholm captives, they have gotten so very used to the GOP calling all the shots it has become difficult for Democrats to envision an alternative reality.

The Idaho Statesman’s Dan Popkey noted, as of the election filing deadline a week ago, that Idaho Democrats have already conceded two of every five legislative seats statewide. There is no serious candidate on the Democratic side for the U.S. Senate, the 2nd Congressional District, Lt. Governor or Secretary of State. No Democrat filed at all for Attorney General, Controller or Treasurer. Furthermore, the D’s lost some of their best legislators, people who might actually be able to run for something else some day, when Senators Kate Kelly and Clint Stennett and Rep. James Ruchti all opted not to seek another term.

Surveying those puny pickings leaves the battered Democrats with only a trio of seemingly serious hopefuls at the top of the ticket. All the marbles are on races for Governor (Keith Allred), the 1st District Congressional seat (incumbent Walt Minnick) and Superintendent of Public Instruction (Dr. Stan Olson). Even in Idaho’s largest city, where Democrats have made inroads and held them over the last 10 years, no Democrat filed for the Ada County Commission.

By contrast, and by my quick count, Republicans filed against all but three incumbent Democratic state legislators and the GOP will have contested primaries involving more than 20 of their incumbents. It’s not hard to see which party enjoys the enthusiasm advantage headed toward November. Democrats better hope for many, many nasty GOP primaries but, in politics like football, basing your strategy on a hope that the other side will fumble is not a very smart path to end zone.

Randy Stapilus has a pretty good round-up of the filings at Ridenbaugh Press.

So, what do Democrats need to do in Idaho that they haven’t been doing? Where to start. Here are three steps that might begin to form a strategy.

First, Idaho Democrats need a full-time party chairman. That chairman should then go to school on Phil Batt’s playbook when he brought Idaho Republicans back from a series of defeats that culminated in Democrats reaching their high water mark of modern political success in 1990. After that election, ancient history now, Democrats held three statewide offices, both congressional seats and managed an even split in the state senate. Republicans were stunned and turned to Batt to devise their comeback. He downplayed ideology, traveled the state, held countless meetings, preached the gospel of organization and cooperation, recruited candidates and, not incidentally, positioned himself to run for governor and win in 1994.

Batt did most of this work out of his own pocket, which would be ideal for Democrats who are always strapped for money. No matter. Reality dictates that resources must be found – or donated – or the Democratic status quo will continue. The work Batt did for the GOP was hard, time consuming, under the radar organization and planning. It is the type of work that Idaho Democrats have never been very good at doing.

It’s darn hard to begin a comeback without a leader and Idaho Democrats haven’t really had a “face and a name” since Cece Andrus left the stage in 1995. A full-time chairman would provide a focus and a face.

Second, Idaho Democrats must embrace a youth and minority strategy. At the national level, thoughtful GOP strategists realize that unless Republicans find a way to consistently appeal to younger people, Hispanics and African-Americans they will be the minority party forever. No less a big political thinker than Karl Rove knew that the GOP had to make a stronger appeal to Hispanics and he crafted an approach for his boss that did just that in 2004. The one sure demographic that will grow in Idaho over the next decade are folks of Hispanic heritage and new, first time voters. Democrats better get after them.

Third, Democrats need to stand for something that has broad appeal. And they have to systematically sell to Idahoans a version that is different – and better – than not just being a Republican. They also need to shun litmus tests. Any appeal must take into account the fundamentally conservative nature of most Idahoans.

The message is about jobs, schools and a place to recreate on the weekend. As governor, Andrus was a champion of all that, but especially education. So was John Evans. Both spoke with conviction about creating a “quality of life” in Idaho that combined jobs, good schools and a conservation ethic built around hunting and fishing. The GOP-dominated legislature has just approved significant cuts in education, at every level, for the second year in a row. I know, we’re in a recession and every state seems to be cutting education, but some day – I hope – the economy will improve. Meantime, what do Democrats really stand for? How do they articulate what a better education system looks like and what it will do for kids, the economy and more and better jobs? Where is the personality? Where is the brand? Without a vision – and a much more compelling message – the party perishes.

Re-building ain’t easy even with Republicans offering up some tempting targets and struggling with their own Tea Party problems. A Democratic resurrection in any of our lifetimes will require the small handful of real leaders in the state party to admit the obvious. What they have been doing clearly isn’t working. A little public soul searching wouldn’t hurt. Maybe the party need to convene a very public discussion about priorities and shortcomings. They need to take some risks and they might start by airing out the corpse.

The first step on any road back is to have a plan – a real plan – that realistically puts one foot in front of another on the long slog back. As they say, the definition of insanity is doing the same thing over and over again and hoping for different results.

For Idaho Democrats, the 2010 election looks a lot like 2008, 2006, 2004, 2002…and the captives don’t seem very restless.