Property tax fund cut in exchange for state-funded services
Strapped for cash and unable to extend a hefty tax relief fund for homeowners, North Dakota’s Republican-led Legislature has decided instead to use some of the money set aside property tax subsidies to help balance the state budget and pay counties’ social services costs.
The complex 31-page bill passed Monday by the House and on Friday by the Senate after weeks of negotiations is seen by many in the legislature as a temporary salve in a decades-long debate over in North Dakota over property taxes, historically one of the stickiest issues faced by lawmakers.
The legislation requires the state to take over social services costs for the 53 counties under a two-year pilot program that would eliminate counties’ ability to tax for those services. In exchange, the bill would end a fund that was used to give property owners a 12 percent buydown of property tax rates, which cost $232 million the past two years. That provision, put in place six years ago when North Dakota was flush with money from the oil boom in the western part of the state, is no longer sustainable with a downturn in oil and crop prices, lawmakers say.
The fund is expected to have $300 million when the current two-year budget period ends on June 30. The measure allows the state to use about $140 million from the fund to help balance the state budget, while the remaining $160 million would be applied to cover the costs over the next two years for social services, which include aid to the poor and an assortment of other needs.
Extending the so-called tax relief fund over the next two-year budget cycle would cost the state $280 million, said Allen Knudson, the lead budget analyst at the Legislative Council, the Legislature’s research arm.