95 mills: Counties committed to fiscal responsibility

Dear Governor Gianforte,

We hope this letter finds you well. The Montana Association of Counties (MACo) Board of Directors wishes to address several matters of concern as well as provide feedback on the recent legislative session and tax policy.

Montana counties value the relationships we have with the State. Your administration has been excellent to work with at the agency level, and you should be proud of the team you have assembled to work on behalf of the state of Montana.

We too have assembled a team to work on our behalf, which enables us to fulfill the duties of our offices and administer the county governments in which we live. We feel there is some confusion on our Association functions. MACo is our member-services organization, comprised of Montana’s county officials and led by Montana county commissioners who are elected by our peers to leadership positions within the organization.

We, the board, provide the policy direction which is in turn carried out by our executive director and staff and would like to emphasize that we support our executive director and will continue to retain his service to us.

During the past session, our membership was actively engaged in the legislative process, both outside the Capitol communicating with their senators and past presidents, along with our staff, were present for all negotiations on significant bills, diligently carrying out our directives through advocating for local decision-making, local control, and local elected officials.

Measures such as HB 176, HB 262, HB 299, SB 98, SB 143, SB 173, SB 174, SB 220, and SB 229 originated directly from our members. We worked with our staff and individual legislators to introduce these bills, and we appreciate your willingness to sign them into law.

However, we wish to highlight some areas where our experiences and perspectives differ in terms of advocating for local decision-making, local control, and local elected officials. In particular, the letter you wrote and distributed on Sept. 8 to county commissioners describes “wins” for counties in the form of various legislative actions, which does not align with our interpretation and experience in the Legislature.

For example, HB 424 does not provide funding for local governments but instead supplies additional contingency funds for your office via unanticipated general fund excess revenue. Specifically, it increases the governor’s emergency appropriation from $16 million to $20 million. We hope the state never needs to use those funds, but we must clarify that those are not local government funds as indicated in your letter.

You cited in your letter that HB 355 undeniably benefits Montana’s counties; however, it’s specifically limited to incorporated cities and towns via Section 4 (3), which explicitly excludes counties from accessing the funds.

HB 267, although important for state road and bridge projects, does not include provisions for county projects. Similarly, HB 251 is a great investment for the state of Montana; however, these funds are allocated to help the state be debt free —absolutely no dollars go to the counties. Likewise, HB 321 provides no direct benefit to counties, but instead provides a stable funding source for conservation districts, and keeping conservation districts operational is a direct benefit to the State of Montana.

We appreciate the consideration to keep the counties whole when the state makes policy decisions impacting our revenues. Yet, we must make it known that each subsequent year since the business equipment tax exemption of 2021, newly taxable business equipment under that exemption does not come onto the tax rolls. This was a one-time-only adjustment that was only applicable to what was taxable as of the implementation; therefore, we believe that subsequent years would require ongoing adjustments to reflect the actual loss in revenue.

Additionally, HB 174 increases the reimbursement for state inmates who should be serving time in state facilities but are instead held in county detention centers awaiting placement to a state facility. While beneficial, the increase does not cover the actual costs and therefore county property taxpayers continue to bear the cost of the difference between the actual cost of incarceration and what the state is willing to provide in reimbursement. We hope to see improved compensation to counties for this critical service in the future.

Although you signed SB 536, it was strongly opposed by your administration and heavily amended in the House to funnel money through the Department of Transportation rather than deliver needed funding to counties. On a positive note, our collective staff worked on the process to make funds available for county bridges, and we are grateful that in the end a large portion of the funding is intended to help with county bridge infrastructure.

We also appreciate the cash infusion from HB 569, but it must be clarified that the state-administered Sheriff’s Pension System doesn’t reach solvency via the one-time appropriation but instead by increasing the employer (county) contribution from 9.535% to 13.115%. This is a 3.58% increase paid entirely by property taxpayers in each county. Property taxes will rise again via a mechanism in the bill that increases contributions when/if the actuary determines there needs to be an increase.

Moreover, while HB 587 ensures that a portion of the property tax collected by the state for schools via the 95 mills actually gets to schools, and that 55% of the excess funds are to be directed at teacher retirement levies, it’s also property over-taxation collected by the state with a portion provided to reduce another property tax established to fund teacher retirement and transportation.

Regarding the 95 mills, we urge you to consider the property tax burden shift to residential taxpayers in Montana. Counties take their fiscal responsibility very seriously, and we believe it’s essential to follow MCA 15-10-420 guidelines, ensuring that the appropriate amounts are levied not only by the counties but by the state. While the mills are authorized to be levied at 22, 33, and 40 per Title 20, they are all “subject to 15-10-420” as an additional levy cap.

When values increase rapidly, mills subject to that provision-in-law (MCA 15-10-420) are intended to be limited to the amount actually assessed in the previous year plus half the rate of inflation. This year, the calculation shows that the state has 77.89 mills to levy, but the counties are nonetheless being asked to levy the full 95 mills with the explanation that there are “mills in reserve.” Since the creation of those mills, the state has never levied less than 95 mills, which means there are no mills in reserve.

Lastly, we feel it is imperative you be made aware that you are misinformed about the reduction in the mill levy impacting school levies or school funding — that is 100% incorrect. School funding and local mill levy authorities are in no way tied to the revenue the state receives from the equalization mills. All of the revenue from the 95 mills goes to the state general fund. The schools will still receive the same amount of money they have been appropriated in the past. We urge you to take your projected 20% increase in revenue, year-over-year, and make do with what you have.

We share your commitment to fiscal responsibility and transparency in government, and we strive to provide essential services and maintain infrastructure while keeping property taxes as low as possible. We think it would be beneficial to meet and further discuss the concerns outlined in this letter so we may all ensure the best possible outcome for our constituents.

Thank you for your attention to these matters, and we look forward to continued collaboration for the betterment of Montana.

The Montana Association of Counties board of directors is led by elected county commissioners.