Montana counties, governor spar over property tax that funds schools

This story is adapted from the MT Lowdown, a weekly email newsletter digest containing original reporting and analysis published every Friday. It was originally published under the email subject line “Why counties want you to see the governor’s tax bill.”

Months of finger-pointing between state-level Republicans and local government leaders over who to blame for rising property taxes escalated last week as the lobbying organization that represents county governments sent a late-night press release that, among other points, singled out Gov. Greg Gianforte’s personal property tax bill.

The release, sent by the Montana Association of Counties at 8:30 p.m. on Sept. 13, said the association’s math shows that taxes on Gianforte’s personal home in Helena’s mansion district neighborhood are likely to decrease next year, even as broadly rising property values cast the shadow of higher taxes over many Montana homeowners. That’s because the governor’s property, now appraised at $776,700 by the Montana Department of Revenue, appreciated more slowly than the typical home in Lewis and Clark County — and because the county’s local governments scaled down their tax rates to account for higher property values.

The governor and other prominent Republicans have consistently argued that rising property taxes are the fault of counties, cities and school districts failing to keep their budgets in check. Many local government leaders have countered that the governor and GOP-controlled Legislature haven’t taken state-level action that could lower taxes on homeowners.

In their release, county officials argue that they’re keeping spending down as they set their budgets this summer. The only part of the governor’s Helena tax bill that’s likely to increase, they say, is the portion controlled not by local governments but by the state.

“Surprisingly, his taxes will DECREASE year over year because his appraised value only increased 7.59%,” Mineral County Commissioner Roman Zylawy said in the release. “The limitations on local government result in a decreased tax burden for his home, with the exception of the State levies, which haven’t followed the statutory limitations that cities and counties must follow.”

(Governors also have access to a publicly owned governor’s mansion in Helena, which has been under renovations, and Gianforte owns a home near Bozeman, which saw its appraised value rise by 54% to $1.3 million. Official tax bills will be sent out by county treasurers later this fall.)

There are many facets to the property tax issue, but the county association is focused particularly on the state’s “95 mills,” which produce dollars the state then passes along to schools to even out the funding available to richer and poorer districts.

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Most property tax rates scale to match the dollar amounts of local budgets, which in are in turn subject to growth limits specified in state law. However, the 95 mills rise in direct proportion to property values. With assessed values up dramatically in this year’s reappraisal cycle, that means an estimated $91 million a year in additional collections.

The counties maintain that the governor could and should have scaled down the 95-mill tax to avoid pulling that extra money from taxpayers. In fact, they argue, a correct reading of the state’s local government tax cap statute requires the reduction.

The governor disagrees, noting the state has treated the 95 mills as a constant-rate tax exempt from the cap for decades and expressing skepticism that he could order the reduction without attracting a court challenge. Additionally, Gianforte argues that the equalization tax performs an important role in ensuring highly valued mines and resort properties help pay for schools beyond their immediate communities — costs that would otherwise fall on homeowners in predominantly residential districts.

“Drawing down the 95 public school mill rate not only would provide a windfall for a few large industrial corporations and a few school districts already flush with resources, like Big Sky, but also over time would increase the tax burden on Montanans in most local jurisdictions,” Gianforte wrote in a letter to county commissioners Sept. 8.

Also opposed to such a reduction is the Montana Federation of Public Employees, which represents most public school staff.

“By writing that letter, those county commissioners are literally suggesting the defunding of their neighborhood school. It’s just craziness,” MFPE President Amanda Curtis told Montana Free Press. She added that she also faults Republicans for failing to pass legislation that would have kept residential property taxes in balance with those paid by businesses.

Mike McGinley, a Beaverhead County commissioner, said in an interview that the reappraisal has produced a windfall for schools. He added that he believes any shortfall produced by scaling back the equalization funding could be made up for out of the state’s General Fund, which is filled primarily by income taxes.

For now, at least, the debate is in the hands of Attorney General Austin Knudsen, whom Beaverhead County officials have asked for a legal opinion backing their interpretation of the tax cap law. According to McGinley, that response was still pending as of last week.