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Democrats worried about property tax relief in tough budget times

North Dakota Democratic leaders are raising alarms about whether the state will be able to continue to provide property tax relief during tough fiscal times, but others don't appear worried.

North Dakota Democratic leaders are raising alarms about whether the state will be able to continue to provide property tax relief during tough fiscal times, but others don't appear worried.

The state has eased property taxes, which are levied by local governments, through a 12 percent buydown. For the current two-year budget cycle, the state set aside $250 million for the buydown.

But reduced tax revenue, largely attributed to a slowdown in the oil industry and lower farm commodity prices, led Gov. Jack Dalrymple to order a 4.05 percent budget cut in February. That slashed about $10 million from the $250 million the Legislature planned for the property tax relief credit.

But Pam Sharp, director of the North Dakota Office of Management and Budget, said it appears the state will have enough money to cover it. She pointed out this year's bill was $116 million, giving the state about $124 million left when the check comes due early next year.

"If the bill comes in more than $124 million for that 12 percent, the Legislature is in town and they would deal with that," Sharp said, referring to the legislative session that begins in early 2017.

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Still, Senate Minority Leader Mac Schneider, D-Grand Forks, said policymakers shouldn't cross their fingers. Democrats have called for a special session in which legislators would, among other things, transfer more than $10 million from a tax relief fund to the state's general fund to make sure the state has enough for the buydown.

Dalrymple has declined Democrats' call for a special session.

"There may be enough money to fund the whole 12 percent property tax credit," Schneider said. "I think it's possible, if not probable that there won't be enough money to fund that whole 12 percent tax credit this biennium."


'A sensitive matter'

The 12 percent buydown is one way the state provides property tax relief, Sharp said. Another is through the state's K-12 school aid formula, which isn't affected by the allotment process.

Since the 2007-09 biennium, the Legislature has set aside almost $2 billion in property tax relief programs, according to a breakdown provided the North Dakota Legislative Council. That number doesn't include property tax relief from the school aid payments during this budget cycle, however.

"We understand that property taxes are a very sensitive matter," Grand Forks City Administrator Todd Feland said. "That's why I think the state has gotten involved in helping lower those."

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Still, some have raised frustrations that a number of local governments have used the state tax relief to raise spending.

Lawmakers are also eyeing a takeover of county social services programs as a way to lessen property tax burdens. The Legislature already approved using $23 million to transfer some social service costs to the state.

"That's our main goal, that they would provide the same services but then also give the citizens permanent property tax relief," said Rep. Jason Dockter, a Bismarck Republican who is chairman of the interim committee exploring the idea.

The change would mean counties would no longer be able to levy for social service programs, but the state would provide funding through a formula that's similar to the one that exists for K-12 education, Dockter said. But whether the state can go through with the plan is unclear, given its estimated cost.

"The $1 million question is, 'What's our budget going to look like?' " Dockter said. "Because once we take this over, the state will have these liabilities for the future."

Despite those budget questions, Terry Traynor, assistant director of policy and programs for the North Dakota Association of Counties, cited OMB projections in arguing "the revenue is expected to be in place to continue property tax relief."

"Obviously there's going to be greater pressure from all sorts of directions to maybe reprioritize that. However, I think the Legislature has made a commitment in the area of property tax relief," he added.


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Candidates' views

Fargo businessman Doug Burgum, who is challenging Attorney General Wayne Stenehjem for the Republican nod in the June 14 primary election, said property tax relief will be "competing" with other services as long as it's a line item in the state's budget.

"Until we figure out a way to make it permanent, it's always going to be at risk," he said.

Stenehjem was optimistic about the state's ability to continue providing property tax relief, adding he supports the 12 percent buydown. Burgum supports property tax relief, but said the current format is "not perfect" and has some mechanisms that need to be looked at.

Both candidates said it's worth looking at the county social service takeover.

State Rep. Marvin Nelson, the Democratic candidate for North Dakota governor, shared Schneider's concerns about the future of property tax relief if tough economic times persist.

"The easy thing for the Legislature to do is to not raise taxes and push the responsibility to the local level, and force the local level to pay for it," Nelson said. "Without a substantial raise in state taxes, one that I don't think is going to happen, it's almost impossible that we would not have a substantial increase in property taxes."

Meanwhile, local government officials such as Feland are keeping an eye on the state's budget situation and how it will trickle down to their towns. But he appeared cautiously optimistic about property tax relief.

"I think it's everyone's concern," Feland said. "But what I've heard from our local legislators is that's one of the last things they want to have to cut."

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