Feb 12 2013
Dave Smith, a certified public accountant, right, converses with Idaho Lt. Gov. Brad Little following a City Club of Idaho Falls luncheon. (photo/Mark Mendiola)
Idaho Lieutenant Governor Brad Little says the crushing federal debt that has burgeoned from $4 trillion in 2000 to $16 trillion in 2013 and existing future obligations most concern him when considering challenges for Idaho’s economy and how the Legislature will tackle them.
“Today we’ve got new challenges. As always, you’ve got the international economy and what kind of curves that’s going to throw America and Idaho,” Little said, commending the downward trend in Idaho’s unemployment rate. “But we’ve still got … way too high an unemployment rate, but even more critical an underemployment rate.”
Unfunded future liabilities such as Social Security and Medicare have gone from $20 trillion to $80 trillion as the U.S. population ages, Little said. Average retirees have paid $110,000 into Medicare, but will take out $350,000 at a rate of 10,000 retirees a day, he noted.
“So, you don’t have to be a rocket scientist to know that that’s unsustainable,” he recently told the City Club of Idaho Falls. “Unfortunately, the president and Congress … have kicked the proverbial can down the road. … The problem with that can is it’s getting a lot bigger and a lot harder to kick in the fact that they haven’t addressed it.”
Little said Idaho’s congressional delegation has been in the forefront of addressing the deficit crisis, but the task is not easy. If Congress tomorrow were to eliminate every federal employee, it would not cut the annual operating deficit by half. “That’s the magnitude of just the cash deficit that’s out there. So, there are going to be hard decisions that are going to need to be made on the federal level.”
That’s important to Idaho because 30 percent to 40 percent of the money appropriated by the Legislature comes from the federal government. A large percentage of the money used by Idaho cities, counties and highway districts also comes from the same source.
“So, when Congress inevitably does the right thing, we know there’s going to be consequences.”
With the exception of oil-rich states like North Dakota, Montana and Oklahoma, Idaho has led the nation in recovering from the last recession, the lieutenant governor said.
It did so by prudently setting aside rainy day funds, not raising taxes, cutting spending by 20 percent and adhering to a structurally balanced budget, which essentially means one-time money is not spent on ongoing programs, Little said.
“I can tell you even though 40-some states require balanced budgets, there’s very few of them with the exception of those energy states that are in the same position we are.”
What’s even more critical is budget issues cannot be resolved in Idaho or the nation if the economy does not grow. “So that’s a delicate balance that has to take place on both the national level and the state level.”
Retaining existing businesses, recruiting new ones and diversifying the economy are crucial for resilience, he said. “The status quo as far as business is not going to be adequate for us to grow to where we’ve got that shock absorber when those waves of whatever it’s going to be come to us from the federal government. We don’t know and frankly they don’t know, but I think all learned souls back there will tell you it’s inevitable.”
Maintaining the state’s infrastructure always comes down to education, Little said, applauding Gov. Butch Otter and the Legislature for the wisdom and innovation to create the Center for Advanced Energy Studies (CAES) in Idaho Falls, which leverages Idaho’s universities with the Idaho National Laboratory’s assets and affiliated businesses.
“Taxes need to be fair, simple, predictable and competitive,” Little said, adding that Idaho’s tax system is envied by other states despite its warts. “We are competing against the other states.”
Renowned economist Meredith Whitney, who accurately predicted the 2008 banking meltdown due to the nation’s housing implosion, now forecasts the next macroeconomic impact to hit the United States will be the exodus of companies and work forces from states like California and Illinois, where energy expenses, housing costs and taxes are extremely high, hurting job creation.
“That’s one of the reasons I’m pretty bullish on where we are in Idaho,” Little said. “But our mantra in Idaho can’t be that we’re just not California. We have to talk about the strengths that we have.”
The word is getting out about Idaho’s strengths, including its people and culture, Little said:
· The Kauffman Foundation recently ranked Idaho first as a place to start and operate a new business.
· CNBC ranked Idaho fifth for work force quality and availability.
· The Council on State Taxation ranked Idaho as one of the top five states for fair, efficient, customer-focused tax administration. “Our taxes when you add them all up are some of the lowest when you add up all the taxes from all sources of all the states,” Little said.
· The Fraser Report ranked Idaho one of the most favorable from a regulatory standpoint.
· The Commonwealth Fund said Idaho offers the most affordable single family health insurance premiums and the second lowest for small businesses.
· Fitch Ratings ranked Idaho as one of the top five states for fiscal solvency.
After considering two other states, Chobani Yogurt decided to spend $450 million and create 400 jobs to establish the world’s largest yogurt plant near Twin Falls, taking only 326 days to construct the million-square-foot plant that houses 20 acres under roof.
“It’s state-of-the-art, most modern food processing plant that has been built in the world,” Little said.
Chobani executives selected Idaho because speed matters, and they liked the seamless working relations between state, county and city governments. The state’s efficient permitting process, ability to train an available work force and infrastructure are why they decided on Idaho.
“Like the last 150 years, hard work, wise decisions and entrepreneurialism have advanced Idaho through the tough times. We will successfully navigate the challenges ahead of us,” Little said, alluding to Idaho’s sesquicentennial.
The lieutenant governor said there is no question Idaho’s personal property tax is an unfair tax. It raises $142 million in annual revenue for cities and counties. There’s “a little better than odds on chance” the personal property tax will be repealed this legislative session, he said, mentioning when Idaho enacted a state sales tax in 1965, its inventory tax was eliminated.
Unlike other corporate members of the Idaho Association of Commerce & Industry, Monsanto has opposed repealing the business personal property tax because of its adverse impact on Caribou County, where it employs hundreds who mine phosphate and process it into elemental phosphorus. That county could suffer a 45 percent cut in revenue if the personal property tax is repealed, he said.
On the other hand, Phoenix-based ON Semiconductor, which operates a semiconductor plant in Pocatello, has strongly backed the business personal property tax’s repeal.
StateImpact Idaho, a collaborative effort between Boise State Public Radio and NPR, shows that if the business personal property tax were repealed Monsanto would save nearly $490,000 and ON would save nearly $698,000 in annual taxes, based on Idaho Tax Commission figures.
“There’s still some question about the three-part test about what’s real property and what’s personal property,” Little said. “I’m not a big fan of saying we’re just going to let everybody off and leave one group hanging out there to pay it from a fairness standpoint.”
On the other hand, some businesses are competing against businesses in other states where everything they have is designated real property while theirs is taxable personal property. “There’s a fairness issue there that needs to be addressed also,” Little said.
The Emmett rancher said he and Gov. Butch Otter like local option taxes, but “the devil’s in the details.” They must be regional and broad-based to work effectively and be fair, he said.Share on Facebook