It was in the early hours of Saturday morning of May 3rd that the property tax relief and reform bill was passed. With the whole session of this bill being considered and massaged, it did not really have a whole lot of changes. Beginning in tax year of 2025, primary home tax credit will be raised from $500 that was passed last session to $1600. This tax relief will be funded by earnings from the state’s Legacy savings account to offset the burden of North Dakota homeowners’ property tax at a cost of $478 million. This property tax relief does not include bond issues that were voted on by the public or special assessments. That was the relief part with the reform policy coming in the form of a 3% cap on the annual growth of local property tax levels. This cap applies to cities, counties, townships, park districts and school districts restriction annual growth to no more than 3% over the previous year’s dollar amount, unless voters approve exceeding the cap. While this cap is intended to curb the growth of property tax, it is going to presents serious challenges for our pollical subs to fund their budgets. With inflation, staffing raises and insurance and operational expenses rising faster than 3% political subdivisions may find themselves facing budget shortfalls.
Some exemptions were included in this bill with one being for townships that that could vote for a greater that 3% growth from a majority of the township board under certain conditions. School tuition levees was also exempted. One exemption that should have been included was the school ability to access 60 mills required by state law. Currently the state will deduct the amount of the 60 mills from their state payment as the local contribution of the funding formula. If a school district valuation grows by more than 3%, a school district will not be able to access the 60 mills required for local contribution to the state. Recognizing that the risk of the 3% cap could force districts to levy less than the state-required 60 mills, this bill provides $30 million (which is estimated to be far short of what will be required) of gap funding to ensure districts are not penalized in the state funding formula. Districts that choose to levy less than 60 mills for reason unrelated to the cap are not eligible for the gap funding.
In my person views on tax relief, I was very disappointed that ag land and commercial land was not included in the property tax conversation. It seems it was not included because of cost and not what was real reform and that does not seem to be the best way to implement policy. There is intent language to include all property classes in tax relief in the future and I hope that is what happens. I was also disappointed in the way the school gap funding was address. I had brought this issue up all session, and it seemed that if the state is going to require school districts to levy 60 mill for local contribution then we should let them. The easiest way to do that was to exempt the 60 mills from the 3% cap. That did not happen because of decision was more for political reason and not what was best for the state. It looks like further work will be needed in tax relief and reform in the next few sessions.
Senator Don Schaible dgschaible@ndlegis.gov