Monday, August 08, 2022

How spending impacts property taxes

by Kendall Cotton
| August 4, 2022 12:00 AM

While Montanans are tightening their belts amid skyrocketing property taxes, inflation and increased cost of living, many of our local governments are continuing a spending spree.

Local governments around the state are yet again proposing to spend record amounts of taxpayer dollars, blaming inflation for bloated budgets that require tax hikes. The truth local government leaders don’t want to admit is that the crushing property tax burdens felt around Montana are a direct consequence of years of reckless spending.

The metric of population growth plus inflation is one way economists measure economic growth, providing an effective benchmark for responsible government spending by accounting for the growth in demand for government services and the cost of providing them. Many local government budgets have far exceeded population growth plus inflation over the last 10 years, leaving taxpayers on the hook for millions in excess spending.

Missoula of course is ground zero for wasteful spending. Since 2014, the city of Missoula’s budget has grown from $119 million to $244 million, 70% over population growth plus inflation over the same period. Missoula County is not much better — their budget has grown 18.5% over population growth plus inflation. If inflation really was driving Missoula’s budgets higher over time, there would be far less spending than there is now.

Had Missoula’s governments both passed responsible budgets for the last 10 years, limiting spending growth to no more than the rate of population growth plus inflation, combined they would have spared taxpayers from nearly $103 million in excessive spending in FY 2022.

Missoula, however, isn’t alone in its spending gluttony. Taxpayers in the cities of Helena, Bozeman, Billings and Kalispell are all feeling the pinch as budgets for these cities have outpaced population growth plus inflation over the decade by an average 56%. Lewis & Clark, Gallatin, Yellowstone and Flathead counties have also been big spenders, with budgets for those counties on average growing 23% over economic growth for the last decade.

Officials might say all this spending is needed to keep up with essential services, roads, maintenance, etc. But here’s just some of the new spending requests local governments are considering for FY 2023:

• $41,000 for the city of Missoula to lobby the Legislature in the upcoming session.

• $194,000 to hire a second full time employee + supplies for the City of Missoula’s diversity and equity initiatives.

• Gallatin County is doubling its annual pay raise for elected officials from 3.5% to 7%.

Statewide, local government budgets have been far outpacing population growth plus inflation for years. The notable exception among more populous areas is the City of Great Falls and Cascade County, which have each held spending to less than population growth plus inflation for the last 10 years. This fiscal responsibility has protected taxpayers with nearly $39 million in less spending and enabled significant tax relief. In FY 2021 for example, the City of Great Falls passed a budget with no increases to property taxes, assessments, or utility rates. Imagine that! By placing firm limits on the growth of spending, other local governments could be doing the same.

Local government leaders should be laser focused right now on keeping the growth of spending within the bounds of what average taxpayers can reasonably afford, but often instead they are focused on spending every last dime from taxpayers they can get their hands on. Tax relief is possible, but it starts with adopting fiscal responsibility.

Kendall Cotton is president and CEO of the Montana-based Frontier Institute.

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