Otter suggests tax cuts

BOISE - Gov. Butch Otter laid out his plan for boosting Idaho's economy with his State of the State address Monday, suggesting up to $60 million in tax cuts and a pay raise for state workers and teachers.

The two-term Republican governor in his remarks to open the 2012 legislative session highlighted his faith in cutting government rather than establishing new programs to spur economic growth. For example, his tax reductions would dwarf a separate, $5 million initiative to create technology jobs and spur university research.

Otter left it open to lawmakers on how to implement his proposal, but recommended they start by reducing the state's top individual income tax rate to 7.6 percent from 7.8 percent, saying it would help small businesses. Also, he suggested continuing to increase the annual credit Idaho residents get to offset taxes on food.

"There remains a wide diversity of opinion on how best to target tax relief," Otter said. "But there's also broad consensus on the need to reduce the burden both on our hard-working taxpayers and on those employers who are looking for opportunities to grow our economy while creating careers and livelihoods."

Lawmakers have until about April to debate Otter's proposals, and the Republican majority members said they like what they've heard, so far.

"He gave us the parameters on how much money is available and then he said, 'Do what you think is best,"' said House Majority Leader Mike Moyle, R-Star.

However, Democrats immediately panned Otter's lack of specificity on tax cuts.

They fear a blank slate will lead to jockeying among Idaho's most-powerful lobbying groups, including those who want to do away with Idaho's $120 million personal property tax on business equipment, rather than a focus on the best public policy.

"I don't think an undefined tax cut plan, the bulk of which is likely to go to special interests with the best lobbying effort, is the best way to spur job creation and economic development in the state," said House Minority Caucus Chairman Brian Cronin, D-Boise.

More praiseworthy, Cronin found, was Otter's new jobs and research initiative, the Idaho Global Entrepreneurial Mission, or IGEM.

Long a dream of Idaho's technology advocates, IGEM is modeled after a public-private program in Utah that aims to spur startup companies, lure top researchers and speed commercialization of ideas developed at universities.

But Idaho's effort, at least in initial funding, will pale in comparison to the Utah Science Technology and Research Initiative, the recipient of some $240 million in taxpayer funds and bond-sale revenue since 2006.

Otter said this modest $5 million in seed money isn't a reflection of his confidence in the program, just a sign of taking it slowly.

"It's extraordinary, for us, even in this tough time, to put a $5 million bet on what I believe is going to be a long-term and a growing program," he told reporters after his speech. "I also want to walk before I run. It's not hard, when you've got a lot of money, and you want to start passing it out, to get receivers to show up at the gate and say, 'Give me some money."'

Otter said he hopes to use growing revenue - the state expects to bank about $103 million at the end of the fiscal year in June - to help replenish rainy day accounts that have been drained to nearly nothing from $384 million four years ago.

Senate President Pro Tem Brent Hill supports that plan, saying that building up reserves "will give us that buffer, so we don't have to lowball future budgets."

The governor's budget also includes a $41 million, 3 percent pay bonus for state workers, teachers, university professors and faculty - but only if tax revenues stay on track.

Missing revenue targets next June and January could erase the money, Otter warned.

University of Idaho President Duane Nellis said he would have rather seen a permanent pay raise for employees at his school.

Still, Nellis said he hopes the governor's proposal, which includes directing $226 million to four-year universities, or 8 percent more than a year ago, represents a first step in clawing back ground that institutions in Moscow, Boise, Pocatello and Lewiston lost since the recession first hit.

All told, they've seen $80 million in cuts since 2009, reducing state higher-education spending to its lowest level in a decade.

"I'm very encouraged," Nellis said following the speech. "The governor has seen higher education as an instrumental vehicle to a more prosperous economic future."

Otter also recommended $32 million to pay for last year's disputed "Students Come First" education reforms, which include laptops for students and merit pay for teachers.

He promised lawmakers he would be joining public schools chief Tom Luna to rally against measures on next November's ballot asking Idaho voters to throw the reforms out.

"I'm committed, along with Superintendent Luna, to ensuring the success of those reforms," Otter said.

Otter proposed spending $2.65 billion in fiscal year 2013, 4 percent more than this year.