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Details on the new income tax reduction and school construction proposal for Idaho

Updated: Feb 9

A major new tax relief and school facilities funding bill has been proposed by the chairmen of Idaho’s tax committees, Rep. Monks and Sen Ricks, along with Speaker Moyle. HB 521 is in response to Governor Little’s request to provide $2 billion to address the condition of school facilities in the state. Along with providing additional funding and accountability mechanisms for the school facilities funding, HB 521 would also continue the state’s ongoing income tax rate reduction efforts to help improve regional economic competitiveness.

The combined corporate and personal income tax relief proposed under the bill is estimated to be around $59.1 million for Fiscal Year 2025. According to the Tax Foundation, moving from a 5.8% to a 5.695% individual income tax rate would help improve Idaho’s ranking from 33 to 29 for all states and from 24 to 20 for those states where wage income is taxable.

Here is the intent section for HB 521:

“SECTION 1. LEGISLATIVE FINDINGS AND INTENT. (1) The Legislature finds that the burden of taxation on the people of Idaho is too great. (2) The Legislature further finds that the primary drivers of this burden are the need for school districts to resort to property taxes to pay for the construction and repair of school facilities and an income tax rate that is in the second highest quintile among states. (3) Therefore, it is the intent of the Legislature to amend state law to provide income tax relief and reduce the need for and likelihood of school districts resorting to property taxes to meet their school facility needs, including by restricting opportunities to increase school property taxes and directing additional state tax revenues to school facilities, while ensuring accountability for the same.”

“This legislation provides the largest state investment in school facilities through three main avenues. First, it dedicates $125 million in ongoing sales tax revenue to the new School Modernization Facilities Fund for bonding, while providing the legislature with expanded options to cover annual service on the bonds in the event of economic downturns.

Second, this legislation increases the funding to the School District Facility Fund in two ways. It increases the sales tax revenue directed to the fund from 2.25% to 3.25% which is projected to be $25 million in FY 2025, and redirects existing lottery dividends to the fund, which is projected to be approximately $50 million in FY 2025. This fund will help school districts with paying down school bonds, levies, and plant facility levies, with any remaining funds being used at the district level for additional school facility projects.

Third, this legislation reduces income taxes from 5.8% to 5.695%, allowing Idahoans to have more money to better support local bonds and levies related to school facilities.

Additional changes and technical edits are made to related Code provisions. Combined, this bill provides unprecedented state support for school facility improvements in every school district in the state while ensuring appropriate accountability.”

As for the school facilities funding parts of the proposal, Section 4 (2)(D) of the bill states:

“Any moneys that remain following the payments provided in paragraphs (a) through (c) of this subsection may be: used for construction of a new school facility, renovation, or maintenance needs; used to secure and make payments on a new school facilities bond; or saved in a reserve account by the school district for future school facility needs. Uses of funds shall include regular and routine facilities maintenance, including preventive maintenance, building repairs, and building security, and periodic major facilities projects that involve planning, design, construction, renovation, retrofitting, and replacing of buildings and building systems, components, and features, as well as site acquisition, site improvements, and new construction.”

Sections 18 and 19 of the bill specify the criteria necessary for a school to be eligible to access the new funding and the approved uses. In addition, Section 19 (4) says:

“A model school facility council shall be created by July 1, 2024, to research, adopt, and recommend a model school facility plan that schools shall abide by when using school modernization facilities fund moneys…”

According to Idaho Reports:

"Additionally, the bill would remove the August election date on which schools can currently run bonds and levies. That would leave just the primary and general elections for school funding measures after HB 292 eliminated the March election date last year."

SB 521 is currently waiting to be scheduled for a public hearing.

UPDATED (2/9/24)

Governor Little issued the following statement today on SB 521:

“I am so grateful to my partners in the Legislature for supporting improved school facilities across our great state while delivering EVEN MORE tax relief for the hardworking families and businesses of Idaho! We all agree Idaho students deserve to learn in a productive, safe environment, and the broad list of supporters for our bill is growing daily. This top priority bill proposes the largest investment ever in school facilities and lowers income taxes even further. It also has the added benefit of long term property tax relief because the state is footing the bill for many improvements local property owners would otherwise cover. Thank you, Idaho Legislature, for putting kids and families first!” 

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