BOISE, Idaho (AP) -- Gov. C.L. "Butch" Otter on Monday proposed eliminating Idaho's personal property tax, a move that would cost the state $141 million in revenue but provide a boost to business leaders who say the tax is a drag on the economy.
Otter outlined his intentions during his State of the State address, which he used to unveil a slightly larger state budget and discuss health care and education plans for the new legislative session.
Business leaders have urged lawmakers to do away with the personal property tax, which applies to items from office desks to transmission lines and machinery in semiconductor factories. They say that the tax prevents them from growing their businesses and hiring more workers.
To make up for the money that local governments would lose out on, Otter set aside $20 million to pay cities, counties and school districts.
The Republican governor also advocated giving local leaders more flexibility to raise sales taxes in their districts, not to make up the entire amount, but to help fund courts, public safety, education and roads.
"That isn't necessarily about using state revenues to make counties 'whole,' " Otter told nearly all the 105 representatives and senators, as well as their guests in the galleries above the House floor.
"In fact, my preference is granting local-option taxing authority that enables county voters to decide for themselves how to address their most-pressing needs," he added.
Otter also proposed a $2.8 billion budget for fiscal year 2014, about a 3 percent increase. He said the proposal was conservative because it grows less quickly than the state's overall anticipated revenue.
Otter also used his seventh State of the State address to express his priorities for lawmakers as they meet for the next three months for the session that convened Monday.
The two-term governor promised quick legislation for Idaho to begin crafting its own insurance exchange, envisioned by Obama's health care law as a federally-subsidized online marketplace for individuals and businesses to compare and shop for insurance coverage. Lawmakers must still approve the bill, something hardly guaranteed in Idaho's conservative Legislature.
He's avoiding another, related fight, however, by not endorsing the expansion of Idaho's Medicaid coverage to include more than 100,000 additional low-income residents whose bills would largely be paid for with funding from Washington.
This comes despite a recommendation in November — from Otter's own, hand-picked panel — that rejecting such an expansion could cost Idaho $284 million by 2024.
Instead, Otter plans to study revamping Idaho's federal-state funded health care system for the poor. Meanwhile, he'll continue funding an existing insurance fund for indigent people, costing Idaho about $40 million for the coming year.
"We have time to do this right," he said, on what he calls a "broken" Medicaid program. "I hope to return in 2014 with specific proposals."
In addition, he used his speech to ask lawmakers to increase state funding of public schools by 2 percent, to about $1.28 billion, or $63 million more than the current year. He did not propose pay raises for teachers and most state workers.
The governor acknowledged Monday that he and Superintendent of Public Instruction Tom Luna made mistakes in pushing through the "Students Come First" public education overhaul in 2011 without more public support, a problem that led to voter's rejection of the plan.
He reiterated hopes a panel he's assembled comes up with new proposals.
"I'm convinced that acting too quickly or without due deliberation will generate needless distraction," he said.
Aides for the governor said he hopes lawmakers can agree on some overhauls during the current legislative session.
About half of the increase Otter has designated for education, or about $33.9 million, is earmarked for such changes, if they emerge.
"I am neither calling for nor expecting major school improvement measures this year," Otter said.
"But I believe there are areas in which we can make progress," he added. "And I encourage you and all citizens to engage in that public discussion."