Supreme Court rules counties must levy 95 mills

A rebellion waged by counties against the Department of Revenue’s assessment of 95 mills for school funding was curtailed last week when the Montana Supreme Court unanimously ruled in favor of the State.

In its 7-0 decision, issued Nov. 22, the court declared that the department has exclusive authority to calculate school-equalization mills, and that counties must levy them consistent with the department’s calculations.

Lake County was among 49 of Montana’s 56 counties that opted not to assess the full 95 mills mandated by the Department of Revenue. Instead, property owners were assessed 77.9 mills – an amount, the counties argued, that would raise sufficient money for schools given this year’s hefty increase in property tax valuations.

Fewer mills would have generated $80 million less per year statewide, but still increased money for schools over 2022 levels, thanks to the leap in residential property values across Montana, estimated at 44% in Lake County and 46% statewide.

On an individual level, the decrease in mills would have saved about $80 for a Lake County resident who owns a house valued at $354,000. The big winners would have been corporate entities and industrial properties, which would have reaped tax savings in the thousands, and in some cases, millions of dollars.

In asking for a declaratory ruling from the High Court, the Montana Association of Counties (MACo) argued that the total amount of mills levied should be decreased to offset the impact of rising property values on Montanans, and it asserted that counties have independent authority to make that decision.

The Supreme Court thought differently.

“Counties have authority to levy mills according to local interests. They also have authority to bank certain mills and levy them later. In the case of statewide mills, however, that authority rests with the State alone,” wrote Chief Justice Mike McGrath, on behalf of the court.

MACo argued that the same statute that requires counties to levy fewer mills in response to increased property values should apply to the State as well.

In Lake County, the full 95 mills will generate more than $10 million for Fiscal Year 2024 (that’s $3 million more than last year) due to the higher property valuations. The 77.9 mills would have raised $8.5 million, which is still an increase of $1.8 million over FY23.

Statewide, the full 95 mills will generate an estimated $99 million in additional revenue.

Opponents have also contended that there’s no guarantee those extra dollars will actually go to education, since revenue from the 95-mill levy flows directly into the state’s general fund, making it challenging to accurately track.

In a press release, Gov. Gianforte said the Supreme Court’s decision brought clarity to the law surrounding the 95-mill levy “which the state collects and returns in full to school districts. Today’s decision reaffirms what has guided us: we have an obligation, both constitutional and moral, to ensure each Montana child has access to a quality education, and we won’t defund our public schools.’

He added that while property taxes are too high, he remains committed “to enacting further long-term reforms that keep property taxes as low as possible, including holding the line on local spending that drives property tax increases.”

City and county officials have taken issue with the Governor’s assertion that local spending is responsible for higher taxes, pointing out that they are required under state law to hold the line on spending to one half the average rate of inflation over three years, which amounts to 2.46% in 2023.

With payment of the first half of property taxes due Thursday, Lake County Commissioners have been meeting with the county treasurer and chief financial officer to chart a path forward. Commissioner Gale Decker said Tuesday they had decided to issue supplemental bills in January or February of 2024. 

"The seems to be the least confusing way of handling the situation," he said. "By then we will know which taxpayers paid in full in November and which paid their first half in November."