Port: Burgum's biggest challenge will be unwinding the state's property tax mess
During his State of the State address to lawmakers this last week, Gov. Doug Burgum said he wants to get the state government out of "the property tax buy-down business."
Burgum is referring to the approach taken under past governors Jack Dalrymple and John Hoeven to address the perennial property tax rancor which permeates North Dakota politics.
Under their leadership, the Legislature sought to lower — or, at least, hold in check — property taxes by buying up local spending in various ways from taking over more K-12 education spending to appropriating millions to buy down property tax mills.
This was always a shell game, taking spending from local budgets and putting it in the statewide budget where it could be hidden by the budget surpluses of past biennia.
Burgum, rightly, wants it stopped.
"First, it's not free money," he told lawmakers. "It's tax money coming in and then being redistributed in an attempt to lower other taxes. Second, it's an unsustainable expenditure line that continues to grow. But perhaps most dangerously, it acts as a subsidy which entices communities to make long term investments they may be ill equipped to afford."
He went on to say that the state needs an "off ramp" for this policy.
That's spot on. It was my favorite part of Burgum's speech. The problem is, any given off ramp might lead us right into a ditch.
When the state government began the property tax buy downs it opened a can of worms. If the state ends them, local governments are going to respond with a massive tax hike.
It's something Burgum's opponent, Democrat Marvin Nelson who has retained his seat in the state House, warned about during the election in an interview with KXNews reporter Jim Olson. "(T)his is shaping up to be one of the largest property tax increases that people are ever going to be able to remember in history," he said back in April, warning that cuts to state spending at the local level would inevitably mean hikes in local taxes.
"Everyone is taking pledges saying we won't raise any taxes and we won't do this. But really what that just means is that they're just going to shove it all back down on the local level," he continued.
Nelson didn't accomplish much with his gubernatorial campaign, but on this subject he had a point.
The Hoeven/Dalrymple approach to property tax relief has left the state government between a rock and a hard place. Continuing the buy downs is unsustainable, as Burgum rightly pointed out, but ending them would probably mean property tax hikes.
Burgum said the solution to property taxes is to "reduce the cost of local government," but local governments have gotten used to the state subsidizing their spending growth. Left to their own devices, they'll likely opt not for spending cuts but tax hikes they can blame, as they have in the past, on the Legislature and the governor.
Any attempt to institute state controls on local spending/taxing policy would prompt cries of an assault on "local control" from the local governments and their lobbyists.
That this is hypocritical — local leaders expecting local control of spending policy while shifting blame for rising property taxes to state leaders — shouldn't be lost on the public.
Still, it's a sticky wicket for Burgum. He has correctly identified a problem many — including this humble observer — have been talking about for years. But solving it is another matter entirely.
Burgum is often credited with being something of a visionary.
The property tax mess will be his first opportunity to show that he can turn his vision into implemented policy.