County wades into battle over 95-mill levy

There’s a battle brewing between state and county governments regarding the 95-mill levy, which helps balance school funding levels between richer and poorer counties across Montana. On Wednesday, Lake County was poised to step in the middle of it.

The commissioners met at 10 a.m. (after the Leader’s deadline) to consider whether to reduce the 95-mill levy approved by the county last month when they submitted the Consolidated Levy Sheet to the Department of Revenue, as required by state law. Instead, the county would authorize 77.89 mills to fund school equalization, which they say is the correct amount, given this year’s significant jump in property valuations.

Lake County isn’t alone in protesting the state’s demand for 95 mills. According to Commissioner Gale Decker, several, if not most, Montana counties have taken or are considering a similar action.

Two lawsuits have also been filed in this fast-moving skirmish.

On Monday, Gov. Greg Gianforte’s administration filed a lawsuit seeking a judicial ruling on whether the state has the authority to require the counties to collect the full 95 mills.

The issue has also landed in Yellowstone County District Court, where state Sen. Brad Molnar is asking a judge to weigh in on whether the state is subject to the same cap that counties face when it comes to the 95-mill levy. The suit seeks class-action status on behalf of Montana taxpayers.

The difference to Montana taxpayers is substantial, according to information released by the Montana Association of Counties (MACo). If Lake County were to levy the full 95 mills, county taxpayers would contribute an estimated $10.4 million to the general fund for the court-mandated effort to equalize school funding across Montana. If the county drops that levy to 77.9 mills, local taxpayers would spend around $8.5 million, a savings of close to $2 million.

If every county in Montana were to assess the lower amount, it would save Montana taxpayers $78.7 million, according to numbers compiled by MACo.

The 77.9 mills would still raise about $20 million more for school funding than was generated last year, while the 95 mills would raise almost $100 million more.

According to the website of the Office of Public Instruction, the School Equalization and Property Tax Reduction Account, where those 95 mills land, will contain around $426 million for FY2024 – that’s about $11 million less than MACo estimates the 95 mills will raise, and about $68 million more than 77.9 mills would generate.

Polson Sen. Greg Hertz argues that reducing the 95-mill levy would largely benefit large corporations and landowners, with corporations such as Northwestern Energy saving an estimated $4.5 million in taxes. The same chart shows that the owner of a home valued at $354,600 in Lake County would save around $80.

“We could do better with the increased revenue from the 95 mills,” he acknowledged. He said HB-587, passed last spring, will redirect increases from the 95 mills in 2024, and the issue will be a priority for the 2025 Legislature.

“Property taxes need to be further addressed by the Legislature,” he wrote in an email. “Going to court could make matters worse.”

According to MACo, the Department of Revenue’s own calculations showed that 77.89 mills would raise enough to finance the state’s obligation to equalize school funding. Nonetheless, Gov. Greg Gianforte’s administration is asking counties to levy the full 95 mills.

“If we were to reduce the 95 public school mills, our students, our public schools, and nearly

all school districts would suffer,” Gianforte wrote Sept. 8 in a letter to county commissioners. “We will not do it.”

In the same letter, Gianforte noted that residential property values have risen by an average of 46% since the last reappraisal in 2021, and encouraged commissioners to “reaffirm to your

constituents you will hold the line on new spending, provide for essential services, draw down mill levies that are within your control, and keep property taxes as low as possible.”

MACo maintains that the state is subject to the same cap on raising tax revenue when it comes to the 95-mill levy that counties and municipalities face: they can only raise taxes by half of the three-year average of inflation (that’s 2.4% this year).

Beaverhead County asked Attorney General Austin Knudsen for an opinion, but he declined, suggesting the courts were a more appropriate venue for settling the matter.

The packet distributed by MACo suggests two possible courses of action for counties who oppose levying 95 mills this year:

• Commissioners could levy the 95 mills (as Lake County has already done) and explain to individual taxpayers who oppose paying the additional 17.11 mills on their property tax bill how to file a protest.

• Commissioners could levy the 77.89 mills, which may trigger a court action. To do so, commissioners need to amend their original resolution or issue a new one, and resubmit it to the DOR (that’s the action that was on the table yesterday).

The result, Decker predicted, “could be a patchwork,” with some counties opting to levy the full 95 mills, and others choosing to levy the reduced amount.

At last week’s MACo conference, when the issue was discussed in depth, county representatives were asked to raise their hands if they might levy 77.89 mills. “Every hand I saw went up,” Decker said.

Decker, a former teacher and county superintendent of schools, said his major concern is whether schools will suffer from the reduction in mills. Some organizations, including MACo and the Montana Taxpayers Assoc., say the funding level will remain the same, since it was set by the Legislature in House Bill 2. If the state collects a lesser amount, they contend, it would impact the ending balance in the General Fund, not local schools.

However, the Montana School Board Association and the governor disagree, contending that any decrease in anticipated revenue could result in significant funding cuts.

“To anyone asking us to reduce the 95 public school mills to the detriment of Montana students, the state hasn’t done it in the more than 30 years since the Legislature established the 95 public school mills. We won’t start now, and we won’t act against the interests of providing each Montana student with a quality education.”