An eastern Idaho school district is suing the state, saying a groundbreaking facilities law puts nearly $7.7 million in funding in limbo.
In the July 17 lawsuit, the Oneida School District says the wording of the new laws threatens state funding that was earmarked long before the 2024 session — and before lawmakers and Gov. Brad Little agreed on an omnibus plan to pour $1.5 billion of state dollars into school facilities.
The lawsuit appears to be the first filed over the state’s facilities funding plan. The outcome won’t just affect Oneida, a rural district tucked against the Utah border. The case could affect how much money the state can distribute to other school districts.
The arcane lawsuit centers on a 2023 bond issue, and the wording in one of the new facilities laws.
In March 2023, the Oneida district passed a $29 million bond — with 86.7% backing that easily cleared the state’s two-thirds supermajority threshold. The money will go toward a new elementary school, which will open next year.
Oneida’s plan to pay off the bond issue, on an accelerated three-year schedule, relied heavily on state support. The district expected to receive $7.7 million from a bond levy equalization fund designed to offset some local facilities costs. (Several factors played into Oneida’s payment — including average daily student attendance, which swelled as Oneida rapidly grew a statewide online school that dwarfed its local brick-and-mortar schools.)
Fast forward to 2024.
The Legislature and Little agreed on the complicated House Bill 521 — which, among other things, cuts income taxes, pours an unprecedented sum of state dollars into school facilities and eliminates the August date for school elections. The law also eliminates the bond levy equalization fund.
In a follow-up to HB 521, which passed unanimously, the state promises to provide districts with the money they had expected to receive from bond levy equalization.
That “hold harmless” language appeared to address the Oneida situation; in a March 28 committee hearing, House Speaker Mike Moyle said the wording would affect only Oneida. But here’s where things get even more complicated, because of a provision in the “hold harmless” language.
In order to qualify for this state money, a district needed to collect property taxes for bond repayment. In 2023, Oneida didn’t collect property taxes to put toward the bond passed earlier in the year. Instead, Oneida used reserves and state revenues to cover its $5.2 million March 2024 payment.
In other words, the “hold harmless” language jeopardized Oneida’s funding, Superintendent Jon Abrams said Thursday.
“It took millions of dollars from us,” Abrams told Idaho Education News. “I thought it was there to protect us.”
The state hasn’t formally responded to the lawsuit.
“We received the complaint last week and remain in contact with counsel in the Office of the Attorney General to assess appropriate next steps,” Idaho Department of Education spokesman Scott Graf said Tuesday.
Abrams hopes the district and the state can settle out of court. But the lawsuit puts the Education Department on the clock. By Aug. 31, the department is supposed to distribute nearly $203 million to school districts, as required under a 2023 property tax relief law, and any money for Oneida would come from this fund.
“The amount distributed to the district will affect the amount available for distribution to all other Idaho school districts,” attorneys with the Boise law firm Hawley Troxell said in the lawsuit.
Meanwhile, Oneida is looking at its options, in case it doesn’t get the $7.7 million from the state. But Abrams declined to elaborate Thursday.
“We’re just sitting on those plans,” he said.
