“This is an extremist measure and we think it should go away,” said North Dakota Chamber of Commerce President Andy Peterson about Measure 2 on the June ballot earlier this year. “Can I say this any more directly? This is not the right thing for North Dakota.”
That measure would have abolished property taxes in North Dakota, and replacing those revenues with state appropriations. Peterson was one of the most vicious critics of the bill, railing against it and insulting its proponents every chance he got. His group was also the primary force behind Keep It Local ND, a coalition group started to oppose the measure (and expunged from the internet the moment the measure was defeated). As their name suggests, their primary argument was that it is too “extreme” to replace local property tax revenues with a state appropriation because that would require local officials to lobby the legislature for their needs.
They won that argument. Measure 2 went down in flames.
But now Governor Jack Dalrymple, in his executive budget delivered to the state legislature, is proposing a $714 million appropriation to local governments to replace local property tax revenues. Here’s what Dalrymple proposed in his budget address:
In the last biennium, we reduced property taxes by $342 million through a reduction of approximately 75 mills in school district levies, simultaneously raising the state’s share of school funding. In this budget we are proposing that we increase the state’s share of school funding again and provide even more tax relief to our citizens by lowering the property tax in an average school district by an additional 60 mills. Altogether our taxpayers will save $714 million in property taxes from both mill levy reductions. Furthermore, we are proposing that the total property tax relief for the upcoming biennium be made a permanent part of the state school funding formula and the local share of the cost of education be permanently reduced. This level of property tax relief is sustainable far into the future and is what the people of North Dakota want.
So, the North Dakota Chamber of Commerce, the North Dakota Association of Counties, the North Dakota League of Cities and all the other groups who opposed Measure 2 because it was “too extreme” will now be attacking the governor for his “extreme” proposal, right? After all, with most school funding coming from the state under this proposal, wouldn’t local leaders have to go to the state to fund their needs?
Of course, the local governments are eating this up. Not only is Dalrymple giving them an enormous windfall from the state’s coffers, but he’s leaving the property tax in place, allowing local governments to continue taxing away. We might see a temporary reduction in local property taxes (in exchange for an enormous new obligation for state spending), but as we’ve seen with previous state buy-downs of local property taxes, it will only be temporary. The growth never stops, as this chart showing the “blip” in property tax revenues around the time of the first property tax buy down in 2007 shows:
At best Dalrymple’s plan re-sets the property tax down a lower level (in exchange for shifting a huge amount of local spending to state revenues). But it would do nothing to hold off costs. Local taxing entities would be free to continue growing property taxes as they have in the past until, in a decade or so hence, we’re right back where we are now only with more state spending obligations.
We’d be better off doing nothing on property taxes than doing this.