Bill Description: House Bill 521 would create a new School Modernization Facilities Fund for bonding, shift sales tax revenue to the facilities fund, slightly reduce individual and corporate income tax, and remove the bond and levy election date in August.
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NOTE: We score this bill as neutral. Many of its provisions would result in new policies and statutory changes — some would be positive, others, negative, The bill also would clean up some existing matters in Idaho code. Additional money for schools would come both from an increase in the facilities fund, which has prescribed spending tiers, and a new school modernization fund, which has $125M annually for bonding; for a total bond issuance of about $1 billion. This is debt that must be repaid. The bill also has several components that could be useful. Bonding under this bill is limited to 10 years with a 10-year sunset, and that means up to a 20-year tail for this bonding. The bill consolidates control of the Office of the State Board (OSBE) in the office of the governor, who now will appoint both the president and executive director of the OSBE. There are tax cuts in the bill, which are small but ongoing. There is also a sunset provision, but it only applies to the section on distributing funds, not to the transfer of funds from sales taxes for facility funds or modernization funds. So the ability to distribute funds for bonding will end, but not their diversion into the school modernization facilities fund. And the district facility fund, which is the smaller piece, is ongoing. So this is a major policy shift for Idaho: It uses state funded bonding on behalf of local school district facility needs, with a view that it will put downward pressure on some property taxes.
The overall cost to the General Fund is $213 million in FY25 and $215 million in FY26. Of that, about $60 million is the impact of the individual and corporate income tax cut. Consequently, H0521 increases spending on schools 2.5x the amount it cuts taxes. The bonding provision means that the state is now replacing local units of government for much of the school bonding costs in Idaho.
Does it create, expand, or enlarge any agency, board, program, function, or activity of government? Conversely, does it eliminate or curtail the size or scope of government?
House Bill 521 creates a new School Modernization Facilities Fund for bonding for local school districts, using an annual $125 million revenue stream from sales taxes. This is a major policy step, using General Fund revenues to pay for local bonding. The bill does provide oversight because annual reports by school districts are required, along with the facility plans submitted, and then oversight by the SBOE’s executive director — who will be appointed by the governor. There is a provision for suspending annual distributions during a recession — when sales tax receipts fall below previous years’ levels. But there is no guaranteed backstop for districts.
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H521 repeals the bond levy equalization program, removes it from levy computation and rolls the lottery funds, about $50 million annually, into the facility fund formula. In essence, this puts downward pressure on property taxes via the updated formula from House Bill 292 from last session.
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H521 increases the cap in the public education stabilization fund (PESF) from 8.334% of state funds for public school support to 15% and shifts any amount over the cap from bond levy equalization to the school district facilities fund. The value of the second half of this provision doesn’t outweigh the demerits of the first, for it allows about $200 million more of General Fund dollars, which could be returned to the taxpayer, to be squirreled away in the PESF, which is unnecessary. Total reserve funds are now over $1.2 billion and the PESF balance of $238 million, not including the reserve fund balances at the district level. This is an unnecessary policy change.
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Does it directly or indirectly create or increase any taxes, fees, or other assessments? Conversely, does it eliminate or reduce any taxes, fees, or other assessments?
Individual income tax rates are reduced from 5.8% to 5.695%, retroactive to Jan 1, 2024, for a projected annual reduction of $47-$48 million
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Corporate income tax rates are reduced from 5.8% to 5.695%, retroactive to Jan 1, 2024, for a projected annual reduction of $12 million.
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Does it increase government spending (for objectionable purposes) or debt? Conversely, does it decrease government spending or debt?
This bill increases the sales tax revenue directed to the facilities fund, from 2.25% to 3.25%, or about $26 million in the first year. However, this fund is used to offset existing bond and levy payments and for new facilities or maintenance. So the bill enacts a tax shift.
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A major policy change is the creation of a School Modernization Facilities Fund structured to allow the State Department of Education to issue bonds on behalf of local school districts, meaning that the state’s credit rating is tied to school district facility bonding.
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H521, in Idaho code, 57-811 increases the appropriation for the public defense fund from $36 million to $39 million, from FY24 to FY25. That is an 8.3% increase in this newly created fund in one year.
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Does it in any way restrict public access to information related to government activity or otherwise compromise government transparency, accountability, or election integrity? Conversely, does it increase public access to information related to government activity or increase government transparency, accountability, or election integrity?
H521, in section 7 (limitations upon elections), shrinks the list of allowable dates on which schools and community colleges may hold an election for bond indebtedness. These taxing entities would no longer be allowed to hold a bond election in August. Forcing them to hold their elections in months more likely to attract voter interest increases accountability.
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Does it violate the principle of equal protection under the law? Examples include laws which discriminate or differentiate based on age, gender, or religion or which apply laws, regulations, rules, or penalties differently based on such characteristics. Conversely, does it restore or protect the principle of equal protection under the law?
Section 18 adds several provisions related to requirements a school district must satisfy to qualify for modernization facility funds. Among them are a 10-year facility plan, adherence to a 5-day school week with some exceptions (a debatable requirement), and compliance with Idaho Code 33-138 on dignity and non-discrimination. The bill adds to the final subsection of code a requirement that any participating district attests that it “does not require job applicants to sign written diversity statements.” This final phrase is a new addition that does not exist in code.
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Does it violate the spirit or the letter of either the U.S. Constitution or the Idaho Constitution? Examples include restrictions on speech, public assembly, the press, privacy, private property, or firearms. Conversely, does it restore or uphold the protections guaranteed in the U.S. Constitution or the Idaho Constitution?
Many sections of this bill address tax policy, bonding, public defense funds, election dates, DEI statements, changes in the management of the State Board of Education, the creation of a new school modernization fund and other topics. Taken together, this bill violates Article III, section 16 of the Idaho Constitution, “unity of subject and title.”
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