Otter: $115 million reduction in unemployment taxes is ‘job one’

A reduction in the unemployment insurance tax that could save Idaho businesses up to $115 million over the next three years will be ”job one,” said Gov. C.L. “Butch” Otter, giving his 12th and final State of the State speech to the Legislature on Jan. 8.

The Legislature had attempted a year ago to pass the unemployment insurance bill, which would have reduced the unemployment tax multiplier from 1.5 percent to 1.3 percent, but Rep. Mike Moyle, R-Star, had appended an income tax reduction amendment that the Senate previously refused, which led to the bill’s rejection by the Senate. Otter said at that time that he planned to resubmit the bill during the following legislative session, retroactive to the previous year.

“We have a responsibility to act quickly during this legislative session to ensure that Idaho employers don’t pay for last year’s failure to enact unemployment tax relief,” Otter said. While it may cost the Department of Labor $75,000 to process the legally required tax notices, “that’s a relatively small price compared with the $115 million in higher-than-necessary taxes that Idaho businesses will pay over the next three years if we don’t make the simple but necessary change,” he said. He also called for lower corporate and personal income tax rates but didn’t provide specifics.

The Idaho Association of Commerce and Industry (IACI) had said during the Associated Taxpayers of Idaho meeting last December that reducing the unemployment insurance tax was on its slate of proposed tax cuts.

In addition, Otter said he was moving the Workforce Development Council from the Department of Labor to the governor’s office. The 36-member council, which provides strategic direction and oversight of Idaho’s workforce development system, has a budget of $8,553,100 and five full-time equivalent positions. Wendi Sechrist, formerly director of business outreach at the State Division of Career-Technical Education, was named executive director last fall. The organization is slated to meet Jan. 11 to discuss its role, according to a published agenda. He also called for more than doubling the budget of each of the state’s six workforce training centers, from $80,500 to $205,500.

Otherwise, the speech was slight on business-oriented specifics, focusing instead on public and higher education and healthcare. Otter also said he was calling for a 3 percent merit-based salary increase to state employees. The Legislature learned last year that the gap between salaries in state government and those in private industry was widening, making it difficult for the state to hire and retain employees.

Otter also said he intended to consolidate the director of information security and the staff of the Division of Information Technology at the Department of Administration into the Office of Information Technology. “This will standardize and optimize cyber capabilities throughout state government,” according to the budget document. “Critical enhancements are recommended to provide support, increase security, storage capacity, and enhance the ability of the state to connect with citizens through online tools.” He also called for additional funding for the state controller’s office to replace the state’s 30-year-old payroll system, which after five years will raise the $102 million necessary to update the system.

All the programs mentioned in Otter’s speech are proposals; the Legislature must enable and fund them before they can be enacted. In past years, the Legislature has not been entirely cooperative, most notably in elimination of the grocery tax, which the Legislature passed last year before adjourning. Otter vetoed the bill after adjournment, which meant the Legislature couldn’t override the veto. That led to a court case with the upshot that all bills now must be submitted to the governor before adjournment. At a legislative preview Jan. 5, Otter said he was against eliminating the grocery tax, but some legislators have already said they intend to pass another grocery tax bill this year, early, and that they have the votes to override a veto.