Governor Otter's State of the State Address 2010

In his State of the State Address today, Governor Butch Otter gave nods to innovation, dug his heels in about federal intervention and, of course, gave a preview of what look to be dire budget cuts for the year to come.

To begin with, Governor Otter outlined what he calls the "basic tenants of the role of government" …

- “Number one, we must not raise taxes. It is not our place to impose an additional economic burden on the people of Idaho who already are struggling, or to put a damper our economic recovery.
- “Number two, we must continue to maintain some level of cash reserve against the prospect of our economic recovery taking longer and being less robust than we hope. . . Prudence demands that we act with caution.
- “Number three, we must do whatever we can to protect the educational opportunities and safeguard the potential of the next generation of Idahoans – our children and grandchildren. And as our recovery advances, one of our first priorities for new dollars should be our public schools and higher education.
- “Number four, we must do whatever we can to protect the health, safety and well‐being of our citizens – especially the neediest and most vulnerable among us.
- “And number five, we must do whatever we can to avoid any duplication of effort or any waste of the taxpayers’ hard‐earned dollars.”

* * *

Transportation infrastructure was the Governor's bully pulpit last year, and from his remarks today, it looks to continue to be on the legislative docket for 2010 …

“Transportation remains a very important priority for my administration – as I know it does for you. Our economic well‐being as individuals and as a state will remain in jeopardy without safe and efficient corridors of commerce. That’s why Lieutenant Governor Little is leading my Transportation Task Force – with the help of legislators and private citizens – to carefully study and consider the long‐term needs that still must be addressed once our economy turns around.”

* * *

Legislative pundits, and anyone who's been keeping up with current events, have been predicting dire budget cuts this year. The Governor’s speech contained few specifics:

“... My recommendations are based on zero revenue growth in Fiscal Year 2011. That threshold agreement on a starting point for our budget work was reached over four months of unprecedented discussions with legislative leaders.

"It reflects the relationship between economic recovery and revenue recovery, as well as our
continuing commitment to being frugal stewards of the people’s money.

“As a result, my budget eliminates more than 400 positions throughout State government –
including about 375 that now are vacant – and consolidates some agency operations.
And finally, I’m proposing that for the balance of Fiscal Year 2010 we hold back an additional $40 million from all State agencies and operations – including public schools.

“That is among the toughest recommendations I make today. But the fact is that while other Executive Branch agencies have cut their spending by $499 million as a result of holdbacks over the past two budget years, we have used almost $318 million from reserve accounts and federal stimulus funds during that same period to reduce the impact on public schools. . . Now legislative leadership and I are in agreement that public schools must participate in this new
effort to respond to sharp revenue reductions by paring an additional 1.6 percent from our spending for the remainder of Fiscal Year 2010. Our proposal would look to local school districts for their specific ideas on how to best achieve the savings, including their discretionary use of local reserve accounts and – in extreme cases – advances future State funding.

“To that end, I am recommending that we continue to carefully use our “rainy day” funds to
address some of our most immediate and pressing needs. Specifically, I’m recommending that we use almost $241 million from our reserve accounts – including the non‐endowed portion of the Millennium Fund – to address projected revenue shortfalls in the balance of Fiscal Year 2010 and in Fiscal Year 2011. That includes the $49 million that I asked you in late September to draw from the Public Education Stabilization Fund to cover the public schools portion of the tiered holdback I ordered at that time.”

Members of the press, including bloggers Betsy Russell from the Spokesman Review and Nathanial Hoffman of the Boise Weekly reported on a press briefing of the Governor’s full budget, including cuts to Idaho Public Television, the Department of Parks and Recreation and various smaller agencies.

From Russell’s Blog, Eye on Boise from Spokesman.com: “The twenty-five existing jobs at the state Department of Parks & Recreation would be eliminated as the department is abolished and combined with the state Department of Lands; however, Otter’s budget allows for keeping the Parks Department in place if non-general funds can be identified to operate it. His budget also calls for a four-year phase-out of state general funds for Idaho Public Television and six smaller agencies, including the Human Rights Commission, the Hispanic Commission, and the Digital Learning Academy. The agencies wouldn’t be eliminated; instead, they’d operate with other funds.”

* * *

Governor Otter put forth several potential measures to mediate the budget cuts:

“I am proposing that we continue preparing for tomorrow’s work force by:
- Providing funds to handle the tremendous enrollment growth at the College of Western Idaho,
- Fully funding our commitments to cooperative medical education programs,
- Continuing to invest in the ground‐breaking work being done at the Center for Advanced Energy Studies in Idaho Falls,
- And by providing $1 million in Opportunity Scholarships to help our deserving students stay here at home to continue their education.”

And …

“We need our Idaho young people to stay here on the land. . . That’s why I’m proposing that we invest $1 million to continue implementing the Comprehensive Aquifer Management Plan that’s showing such great promise in protecting and preserving our precious water resources.

* * *

With regard to protecting Idaho’s natural resources, the Governor gave a nod to ongoing battles with the federal government:
“I also want to congratulate Nate Fisher at the Office of Species Conservation, other State agencies, local units of government and especially the landowners who worked so well together to protect and preserve the southern Idaho desert plant known as slick spot peppergrass.
“Unfortunately, the federal government in its infinite wisdom concluded that local folks weren’t up to that task, so it imposed Endangered Species Act protections.
“Yes, the feds are casting aside the collective judgment of the people born to this land and who care most about it in favor of bureaucratic nonsense and an invitation to endless court battles.”

And ….

“I also am continuing my fight to keep the feds from using Idaho as a dumping ground for its
elemental mercury. We have worked too hard protecting the Snake River Plain Aquifer and building a strong and collaborative relationship with our partners at the Idaho National Laboratory to allow it all to be put at risk by a misguided federal decision.

“I will not allow Idaho to become the nation’s dumping ground for its elemental mercury!

“There is a similar policy‐making sleight‐of‐hand going on with the federal administration’s efforts to foist the cost of a budget‐breaking entitlement program onto our backs. The so‐called health care “reform” bills being promoted by the President’s party in Congress could add as much as half a billion dollars to Medicaid costs in Idaho."

Legislative Energy, Environment and Technology Interim Committee Updates

The Joint Energy, Environment and Technology Interim Committee met early this month for updates on transmission projects, a proposal for the establishment of Energy Independence Districts, how projects utilizing woody biomass are progressing (or aren’t), and how the Governor’s Office of Energy Resources is poised to utilize stimulus funding.

Transmission Project Siting
Ron Williams from LS Power updated the Committee on the progress of two transmission projects that will form a regional transmission hub through southern Idaho and that together represent more than 1,000 miles of transmission: The Southwest Intertie Project (SWIP) and the Overland Intertie Project (OIP). The SWIP will be the most advanced high voltage project in the west. Construction on this $1 billion capital investment project is slated to begin next year. It will provide a connection to areas southwest of Idaho where renewable energy generation is available. The OIP represents east/west transmission to and from points in eastern Wyoming.

LS Power is still engaged in siting both of these projects and is including public input in an alternate routing study currently underway. The preferred route is through the site established through right of way established through the Gateway West Transmission Plan.

Energy Independence Districts
Reporting on behalf of the Idaho Department of Commerce, Lane Packwood described a legislative initiative the department is developing for residences and small businesses to finance renewable energy projects. Their intention is to remove financial barriers to consumers – who want to retrofit their properties – by developing a framework for property secured municipal financing. Packwood noted that 12 other states have established laws allowing municipalities to establish local improvement districts. Such districts would be opt-in rather than geographically defined, and would allow for a tax assessment on the property to finance improvements at a much lower interest rate and longer term than traditional financing.

Senator Kate Kelly noted that her biggest concern is the constitutionality of the proposed legislation, although Packwood asserted that at least 4 other states had similar concerns regarding constitutionality and found ways to address them.

Senator Kelly remained skeptical. “What we have seen, time after time, is the legislature doing something creative with the constitution,” she said, “and seeing it challenged in court.”

Woody Biomass
If you have been tracking the developments of this committee for a while, you may be wondering about whether anything has developed with the utilization of woody biomass as a renewable resource. Examples of woody biomass projects in Council and Kellogg have been touted as successful: heating schools and other public buildings at a fraction of the cost and emissions of coal or fuel oil.

Experts note, when looking at all other sources of renewable energy combined, biomass is the only renewable energy source that can close the gap in the 25’x25’ initiative: a nonpartisan public policy initiative to get 25 percent of our energy from renewable resources like wind, solar and biofuels by the year 2025. Idaho is participating in the initiative as a part of the 2007 state Energy Plan.

Several members of the committee have expressed concern for the lack of development in this area. Who is coordinating efforts? Among the issues to be resolved is access to biomass material – which can be expensive to gather, bundle and haul. Jim Reilly of the Intermountain Forest Association noted that a lack of technology is not the impediment to this sector, and that there are small forests that could supply the market, plus substantial fiber available on federal lands. The problem is the gridlock that keeps those lands from contributing to this market. The best opportunities in the biomass industry come from improving the efficiencies in moving biomass from the forest to the power plant.

Representative Eric Anderson voiced extreme frustration with the red tape associated with accessing biomass material on federal lands.

“You should be paying people to take dead and dying material out of the forest, not charging them a permit fee,” he said to US Forest Service’s Andy Brunelle.

The committee elected to draft a letter to the Governor’s Office of Energy Resources, strongly encouraging it to take a lead on the woody biomass issue. They also voted to send a letter strongly encouraging the Idaho Department of Lands to grant stewardship grants for access to fuel sources for periods of ten years or more.

Stimulus Money to Fund Energy Audits for Schools
The committee heard from the Governor’s Office of Energy Resources about their plans to utilize $30 million in stimulus funding to conduct energy audits on each of the 700 schools in Idaho. The state has until 2015 to conduct the audits and make the repairs. The OER has recruited Maria Barratt from the Department of Financial Management to oversee the management of the stimulus funding. Thus far, the OER has contracted with licensed engineers from across the state to conduct the audits.

Is It a Resolution or isn’t it?
Senator Elliot Werk submitted draft copy for a concurrent resolution that would clarify responsibilities outlined in the 2007 Energy Plan and ask for a detailed report from the Office of Energy Resources every two years.

The 2007 Energy Plan was established before the OER, which has the responsibility for energy planning, policy and coordination in the state of Idaho and should, says Senator Werk, be held accountable for addressing the plan and how they’re spending stimulus funds.

Some discussion was held as to whether a concurrent resolution was the proper vehicle for this message, or if a letter outlining expectations would be more appropriate. Senator Patty Anne Lodge wondered if the committee should be asking the agencies to add to their already considerable workload.

Representative Wendy Jaquet pointed out that this committee has fallen short of its duties by not outlining specific accountabilities to the Public Utilities Commission as aligned with the Energy Plan.

Co-chair George Eskridge noted that Idaho could expect to receive federal mandates. “We’re in a far more serious position than we were two years ago,” he said. “All we’re asking for is a report.” The committee will invite the PUC to present at the next meeting on their alignment to the Energy Plan and on efforts to establish shareholder incentives to meet efficiency targets.

Who should pay for new growth?
House Bill 52 was introduced last year, which would allow the PUC to assign some of the costs of utility development to new growth. Upon its introduction, it was met with opposition from realtors and contractors who had no input in its development. Representative Bert Stevenson noted that they’re planning to reintroduce the bill, inviting opponents to submit their input. The Supreme Court has ruled that new growth can’t be responsible for paying all of the costs for new utilities. Legislation going forward needs to address how the partial costs of construction could be allocated to new growth.

Codification of the Office of Energy Resources
The Office of Energy Resources is currently a creature of the Governor’s executive order which has approximately the force of law but not quite, according to Senator Kelly. If the office is codified, it would be continued from one administration to another. Senator Kelly has met with Director Kjellander and David Hensley of the governor’s office and got a lot of input from them. Senator Kelly asked for input from the committee on her draft proposal to codify the Office of Energy Resources.

Renewable & Energy Conservation Tax Credit
John Watts made a presentation on a piece of legislation for one of his clients: Renewable & Energy Conservation Tax Credit. It has been through three drafts so far.

Thirty-nine other states have a renewable energy tax credit.

It’s a proposed 35% investment tax credit on facilities located in Idaho for con-generation facilities. Some with no taxable income could pass the credit along to someone else who can use the tax credit. This is not to exceed $20 million on overall project cost.

The program would reside within the Office of Energy Resources and be financed by taking 5% for administration. Investors could re- capture 7% per year.

Other Stimulus Projects
Ken Eckland for Office of Energy Resources outlined the projects that are being funded with stimulus funds:
- Energy tune-ups for energy efficiency: $17 million

- Pilot project on solar roofs for five schools. $2,750,000. A consultant will audit to make sure the most competitive projects are funded.

- Renewable Energy Enterprise Zones Project forming private-public partnerships for renewable energy projects: $1,500,000

- Micron Technology LED conversion to produce LED lighting at its existing Boise facility. The research and development is on track to convert the lines that have been shut down to produce light emitting diodes. DOE approached Micron for a proposal: $5 million.

- Competitive block grant for smaller cities and counties: $5.5 million. OER is encouraging cities and counties to team up for projects.

- Methane gas project: $1.15 million.

- Building code upgrades: $500,000.

- Biomass: $500,000.

- PV Solar: $300,000.

The next meeting of the Energy, Environment and Technology Interim Committee has been scheduled for October 21st and 22nd.