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Special legislative session proposed to address Montana tax increases

Posted at 7:00 PM, Nov 27, 2023
and last updated 2023-11-28 14:57:44-05

HELENA — Montana lawmakers will soon decide whether they want to hold a special session early next year to address tax-related issues – including a state Supreme Court ruling that settled a dispute over property tax calculations.

Last week, the Montana Freedom Caucus – a group of staunchly conservative Republican lawmakers – announced its members were making a formal request to call a special session Jan. 15 focused on tax relief. On Monday, a spokesperson for the Montana Secretary of State’s Office confirmed the request met the requirements under state law and said they would begin mailing ballots to all lawmakers by Friday.

A majority of the Legislature – at least 76 members – must vote in favor for the special session to take place.

In a news release, the Freedom Caucus members said they wanted the Legislature to consider four proposed pieces of legislation. That includes two directly related to the monthslong debate over school equalization property tax mills, commonly known as the “95 mills” – the one share of property taxes set by the state instead of local governments.

This year, dozens of Montana counties tried to levy fewer equalization mills than the state Department of Revenue directed them to, arguing that state law required those mills to be capped based on inflation, as local mills are. However, last week, the Montana Supreme Court ruled that counties must charge the full amount of mills the department calculated.

The Freedom Caucus called for changing state law to adopt the counties’ view on how the equalization mills should be capped. They also proposed reducing the total number of mills from 95 to 85 to reduce tax collections.

In addition, Freedom Caucus members called for returning the state’s projected surplus of around $230 million to taxpayers, and for holding a referendum on a system to automatically return surplus revenue without requiring legislative action.

Lawmakers will have 30 days to return their ballots after they’re mailed.

In a statement Monday, Democratic legislative leaders said they would oppose the proposal for a special session.

49 out of 56 counties voted to charge 77.9 equalization mills this year – the number county leaders believe would have been appropriate if the state share had been capped. One additional mill means $1 in taxes on every $1,000 of a property’s taxable value. Taxable value is a property’s total assessed value multiplied by a percentage rate – 1.35% for residential property and 1.89% for commercial property.

For a home worth $300,000, charging 95 mills instead of 77.9 would amount to roughly an additional $70 in property taxes. Statewide, charging the higher mill rate will bring in another approximately $80 million from all property owners.

Gov. Greg Gianforte responded to the Supreme Court’s ruling last week with a statement.

“I appreciate the Montana Supreme Court bringing clarity to the law around the 95 public school mills which the state collects and returns in full to school districts,” he said. “Today’s decision reaffirms what has guided us: we have an obligation, both constitutional and moral, to ensure each Montana child has access to a quality education, and we won’t defund our public schools. Ultimately, property taxes are too high. In the short-term, our $1,350 property tax rebate provides the average Montana homeowner with relief that more than offsets property tax increases this year and next. I remain committed to enacting further long-term reforms that keep property taxes as low as possible, including holding the line on local spending that drives property tax increases.”

Beaverhead County Commissioner Mike McGinley was one of the leaders of the counties’ effort to challenge the state’s property tax calculation. In an open letter to Gianforte and to a local newspaper, he said he was disappointed in the Court’s ruling, but he would abide by it.

“The educational value of researching and understanding how the school, local government and state school funding is calculated on a tax bill was worth the effort,” he said.

However, McGinley pushed back against Gianforte’s statement, saying state leaders have unfairly put the blame for property tax increases on local governments. He said Beaverhead County agencies decided not to levy the full mills they had authority for because they knew taxpayers were facing significant increases.

“Check your tax bills and you will see all levied mills are less than last year,” McGinley said in his letter. “Now, the only line on your tax that will remain the same is the first line called State School Levy. This is where $600,000 of your property tax dollars will go.”

The Montana Association of Counties backed the counties in their legal effort. On Tuesday, MACo's president, Fergus County Commissioner Ross Butcher, said in his own letter to Gianforte that they recognized the court's decision and appreciated justices providing clarity. However, he said the ruling only said the state could charge 95 mills – not that they had to. He urged state leaders to voluntarily lower the number of mills they charge, saying the vast majority of property taxpayers are now expecting to pay 77.9 mills.

“The State will receive an additional $20 million in revenue this year over last year if you exercise discretion and levy what the current calculations allow,” Butcher said in his letter. “No school funding will be impacted, taxpayers in all classes will save, and you won’t be intentionally taking advantage of increased appraised values by levying more than your current levy authority. Using banked mills, according to the Montana Supreme Court, is allowable but not required. Please exercise discretion and demonstrate the greater fiscal responsibility you’ve asked county commissioners to demonstrate and levy the current year maximum mill levy calculation of 77.9 mills.”

EDITOR'S NOTE: This story has been updated to include a letter from leaders with the Montana Association of Counties.