With New Budget Forecast Looming, Property Tax Reform May Be In Danger

Lawmakers are anxiously waiting for the revised budget forecast to be presented on Thursday, March 9th. The forecast will be used to justify budgetary decisions the remainder of this session. I don’t know that anyone is anticipating a dramatic uptick which means deeper cuts will likely be pursued. One of the areas that lawmakers are looking to short relief is with permanent property tax reform.

First, a little history. You may recall the arguments used against Measure 2 in the primary election of 2012. Opponents made it clear if people voted against the measure to eliminate property taxes they’d work with the Legislature and make a serious effort to tackle property taxes. 76% of voters rejected the measure. For full disclosure, I opposed Measure 2 and thought it was ill-advised. Though it was defeated, the consensus was property taxes are a major concern to North Dakotans.

As a result, the Legislature and Governor Dalrymple pushed more state money into school districts to provide relief. The program has been popular and successful. They also pumped in state money that was equal to about a 12% property tax buy down. The popular property tax buy down program has already been swept aside. During the August 2015 Special Session, Republican lawmakers refused Democratic efforts to transfer the money necessary into the buy down program. Senator Rich Wardner, the majority leader in the Senate, stood on the Senate floor and promised they’d shore up money for the buy down in the next session which started in January of 2017. What happened instead was newly elected Governor Doug Burgum declared the state was getting out of the property tax buy down and the legislative leadership was eager to follow his lead. Another broken promise from the special session by Republican lawmakers.

Instead of the 12% buy down program, the state would look to take over the funding of county social services. This transfer to state responsibility makes sense since these programs are mandated by the state. An unfunded mandate not so different from the federal mandates these same state lawmakers constantly bemoan. SB 2206 is the vehicle to accomplish this, and it comes with a price tag of $275 million. The bill was the result of discussions started in 2015 and studied in the 64th interim. Here is the study of the Political Subdivision Taxation Committee. It passed the Senate with only two Senators voting against it.

Well, it appears to potentially be on its path to defeat in the House if Majority Leader Al Carlson gets his way. During the cross over break, Al Carlson publicly came out in opposition to the state take over. With the elimination of the state’s 12% buy down program and the pending defeat of this bill, the Legislature will potentially do nothing in the way of property tax relief or reform this session. How do you think this will impact people’s property taxes over the next biennium without state relief? Get your checkbooks ready.

The revenue forecast on Thursday will be used as the tool to show the state cannot afford to provide this reform right now. Its important to consider where the Legislature provided permanent tax relief over the past four sessions. Rather than tackle permanent property tax reform, out-of-state corporations and the oil industry received hundreds of millions of permanent tax relief. Only one of those tax relief programs is potentially going away and its not the one benefiting Wal Mart or Continental Resources.

It is all about priorities, and it is tough to say property tax payers have been a priority in the Legislature. We will be waiting and watching for Thursday’s forecast.