BOISE — Lawmakers on a joint panel exploring how to better fund Idaho's school construction needs had positive reactions to a tax-reform proposal from a group of school advocates on Thursday, but also indicated they may not be ready to endorse such sweeping changes to the state's tax code.

"They've done some incredible work for us and we have a place to start," said Sen. Janie Ward-Engleking, D-Boise, after hearing the two-bill plan presented by TOADS, which stands for Totally Optimistic Advocates Dedicated to Students. The group, led by former Idaho Supreme Court Justice Robert Huntley and including an array of former top Idaho education officials, presented its plan during Thursday's meeting of the Legislature's joint Funding Construction of Public Schools working group.

There was more vocal support for proposals in one of the group's proposed bills, which would tap state surplus funds next year to fund a big batch of Idaho school needs, from paying off existing supplemental levies to fixing deteriorating schoolhouses to boosting teacher pay.

The second bill proposed by TOADS, which would take effect only if lawmakers approve it next year and then voters back it in a referendum, would lower the sales tax from 6% to 4%, while removing more than half of the current exemptions to the tax and extending it to services. That would result in an increase of $1.2 billion in collections, which would then be routed to the same school needs as those addressed by the one-year surplus bill.

"That surplus gives us a one-time shot," Huntley told the committee. "The 2023 Legislature has a once-in-several-generations opportunity to make major advances in funding education. We think you are up to that task, and we respectfully request that this Legislature do so."

Kathy Dawes of the League of Women Voters, a member of TOADS, told the lawmakers the League has been studying and working on the issue for years. "The League of Women Voters of Idaho is very supportive of these … well-balanced proposals to improve state sales tax policy, provide property tax relief and improve funds for education," she said. Sen. Dave Lent, R-Idaho Falls, the committee's cochair, said, "Having read the two pieces of legislation, they're well-done and we appreciate that. They're certainly of value for us to consider."

The committee also heard a presentation from staff at the state Department of Education on federal COVID aid to schools and whether some of it can be used for school facilities needs. The answer, for the most part, was no. While some of the funds can be used for construction, Lisa English, pandemic relief funds coordinator for the state department, said all the funds already have been allocated to specific projects.

So far, just four of those are approved construction projects, one for a new cafeteria; one to house new weight rooms for physical distancing; and two bus barns to allow for cleaning and disinfecting buses.

Under the requirements of the federal funding, any construction project the funds are used in must comply with an array of federal regulations, English said, including prevailingwage requirements; and if a facility constructed with the funds is ever sold, the money must be paid back to the federal government.

Outgoing Sen. Jeff Agenbroad, R-Nampa, said, "It'd appear there's a number of hurdles. … One of the biggest hurdles may be that the horse is already out of the barn with these dollars, and it's kind of hard to round 'em up and redirect them in this area." Plus, Agenbroad, a banker, suggested the federal regulations may make using those funds for school construction a losing proposition. "It may even put us in a deficit," he said.

The panel also heard a presentation from legislative budget staff on existing line items in the public school budget related to facilities; and heard from Agenbroad on his proposal, outlined at earlier meetings, to tap school endowment payments for facilities; and from Sen. Kevin Cook, R-Idaho Falls, on possible savings from having standardized school building plans.

In an open discussion at the end of the meeting, committee members agreed with Huntley that the state has a rare opportunity to address the issues with its big budget surplus.

Ward-Engelking said she favors Agenbroad's endowment proposal, which would keep school budgets whole by replacing the endowment payouts from the $330 million lawmakers allocated as new annual funding for K-12 schools during their Sept. 1 special session, while routing the endowment funds into a new facilities funding program including a funding stream that could cover $500 million in bonding over 20 years. But, WardEngelking said, "It's not enough to meet the current need that we're seeing in the state." That's where the surplus comes in, she said.

Lent said, "Could we do a combination of the two? … I think that makes sense.

The guiding principle here is how do we take one-time money and leverage it for long-term returns."

Rep. Julie Yamamoto, R-Caldwell, said, "That sounds like a really intelligent thing to look at moving forward, looking at the endowment plus a sizable one-time contribution. It makes good sense to me."

Yamamoto is the newly named chair of the House Education Committee; Lent is the newly named chair of the Senate Education Committee.

In 2021, a legislative performance audit prepared by the Office of Performance Evaluations found that Idaho has no process to review its many tax exemptions that are on the books, while 34 states have systematic reviews required by law, including Montana, Oregon, Utah and Washington. The report suggested the state look at enacting a review process and provided guidelines for making it successful. But lawmakers never acted on that.

Lent said the interim working group will now begin preparing its report to the 2023 Legislature, summarizing the solutions it's identified and calling out potential legislation.

The panel itself likely won't vote on specific legislation, Lent said, "but certainly members of the committee might be interested in carrying some specific legislation, that then we all might choose to be co-sponsors as well. That might be the way that it works. We'll work on that."