BOISE — Gov.-elect Brad Little and top legislative leaders from both parties hinted Thursday that Idaho may not be able to remove its 6 percent sales tax from groceries this year — even though both Little and lawmakers support the move.

Little said he’s always conditioned his support for repealing the grocery tax on the state being able to afford the move, without hurting its commitment to education, including the upcoming fifth year of a teacher “career ladder” pay plan.

“I won’t do it if it interferes with my commitment there,” Little told reporters at the annual AP Legislative Preview at the state Capitol.

Legislative leaders sounded similar concerns, particularly with state revenues falling tens of millions below forecasts, due largely to lags in individual income tax withholding.

“My feeling is it’s going to be very difficult to actually address the grocery tax this year,” said House Minority Leader Mat Erpelding, D-Boise, who noted that he voted for the repeal of the tax two years ago. That bill passed the Legislature but was vetoed by Gov. Butch Otter.

“There are some things we can do,” said House Speaker Scott Bedke, R-Oakley. “I agree with Rep. Erpelding that there is uncertainty out there with regard to the revenue stream. But there are some things that can be done.”

He listed reworking the definition of what qualifies as food — to possibly exclude sugary snacks or sodas, which would have been included in the exemption lawmakers backed two years ago. “This is not meat, vegetables and dairy products, this is everything,” Bedke said. “I don’t think that Diet Coke qualifies.”

And, he said, “You can always increase the grocery tax credit that Idahoans enjoy right now.” That would continue to narrow the gap between what Idahoans get back from the credit and what they actually pay out in sales taxes on food, Bedke said. “I think that there are things that we can do preparatory to the removal of the sales tax on food.”

Removing the sales tax from groceries, as proposed two years ago, while also repealing the grocery tax credit, would cost the state general fund a net $79 million a year. That includes spending more than $26 million a year to up revenue-sharing proceeds to cities and counties so they don’t lose funding due to the move.

Senate Minority Leader Michelle Stennett, D-Ketchum, said, “We have to do what we’re statutorily and constitutionally required to, first.” And that includes funding Medicaid expansion, she said, which Idaho voters endorsed by more than 60 percent in a November initiative.

MEDICAID EXPANSION

Little, who will be inaugurated as Idaho’s 33rd governor on Friday and will give his first State of the State address to a joint session of the Legislature on Monday, said, “We will implement it (the Medicaid expansion), but we will implement it in an Idaho manner.”

“Every year the Idaho Legislature addresses Medicaid in one form or another,” Little said. “Last year we expanded dental benefits. It wasn’t a big news story. It was a pretty big deal. But we always address it.”

Little said it’s one of his “fundamental tenets” that “it’s our obligation to have a safety net, but we ought to have spring in the safety net.” That includes pathways for people to make their way back out of it once they can stand on their own, he said.

“We want to put in the utmost incentives for people to move from Medicaid onto other coverage,” Little said. “We don’t want to have incentives for people not to work. We want to have incentives for people to continue to raise themselves out of that safety net.”

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Both he and GOP legislative leaders said that might mean something short of work requirements, such as requirements that people covered by an expanded Medicaid program undergo job training or look for work.

“We don’t have to do anything for it to become law,” said Senate President Pro-Tem Brent Hill, R-Rexburg. “What we have to do is fund it.”

Bedke said, “A work requirement, while that sounds good in certain circles, a training requirement or being on a track that puts you to a better place is probably the responsible thing to do with taxpayer dollars.”

Erpelding said, “How we fund our 10 percent (match) is the real question. All the other stuff is just kind of finding ways to further kick a can that’s been kicked down the road for six years, and the voters finally said enough is enough.”

INDUSTRIAL HEMP

Little and GOP legislative leaders also expressed some concerns about the possibility of legalizing industrial hemp production in Idaho, as 35 states already allow; the most recent farm bill that passed Congress opens the way for its legalization nationwide, if states go along.

“I’ve looked at the hemp bills for years,” Little said. “The hurdle for me was, is hemp camouflage for the marijuana trade? Does the law enforcement community, are they concerned that if you have a hemp-shipping contract, that you can smuggle commercial grade marijuana ... inside that? And that’s the hurdle for me.”

“Maybe technology will be to the point where that isn’t a problem,” Little said. “I’m a farmer, I love farmers. I don’t want to do anything to restrict ‘em, but I am not convinced, and I’d have to be convinced, that it doesn’t create an opportunity for commercial marijuana to be shipped around the state.”

Little added, “I’m not saying no, but I’m saying I want people to know that’s the hurdle I have to get over.”

Both Bedke and Hill said they shared Little’s concerns. “When it comes down into the nuts and bolts and the practicalities of drug enforcement, that’s where I’m all about making the police and law enforcement’s lives easier rather than more complicated,” Bedke said. “It’s easily distinguishable at the lab, but it’s not easily distinguishable at the traffic stop. So those are the issues.”

LOCAL-OPTION TAX

The legislative leaders from both parties also said they thought it was unlikely that the Legislature would pass local-option tax authority this year, though several bills are in the works. “It always does better in the Senate than it does in the House,” Stennett said. “I’m really hoping the Legislature will entertain it.”

Bedke noted that tax bills start in the House, and the House Revenue & Taxation Committee has been hostile to local-option taxing authority, even though that forces most local governments to rely on the property tax, the state’s most-hated tax.

“I just don’t think there’s going to be support in that committee to do that,” he said. “I don’t see that happening, but I’ve been wrong in the past.”

Betsy Z. Russell is the Boise bureau chief and state capitol reporter for the Idaho Press and Adams Publishing Group. Follow her on Twitter at @BetsyZRussell.

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