County Commissioners Followed Gianforte's Directive to Lower Property Taxes

Now his administration is suing to make them stop

In an effort to end the contentions between the Gianforte administration and Montana’s County Commissioners, the Montana Association of Counties (MACo), which represents all 56 of Montana’s counties, has asked the Montana Supreme Court to render decisions on the existing lawsuits. The conflicts arose during the Department of Revenue’s (Department) reassessment of the Statewide School Equalization Mills. The maximum allowable mills per year for the school equalization fund, regardless of property values, is 95. The maximum number of mills the Department calculated for the next property tax cycle to adjust for the massive increase in property values is 77.89 mills. Mill levy adjustment is the mechanism by which the State keeps property tax assessments/revenue relatively stable. This allows Montana property owners to plan for taxes in their budget, and for state and local entities to plan their budgets around a stable income source. The Counties, through MACo, maintain the State is violating its legal obligation to limit property taxes in order to enrich the general fund by $80 million. The State is not legally obligated to give that money to the State Equalization Fund.

MACo claims this case arises out of the Department of Revenue’s “historical misinterpretation and misapplication of § 15-10-420, MCA, which has resulted in all Counties consistently levying the statutory maximum rate for the Statewide and Vo-Tech Mills rather than adjusting the mill levies according to the calculation required by the plain statutory language. For the current tax year, statewide property values have increased by 39% for all classes of property and 48.5% for residential properties. Property taxes resulting from local mill levies, however, are projected to only increase approximately 4.3% due to the efforts of local jurisdictions to reduce their mill levies.”

The Court filing goes on to state, “In contrast to the overall taxes and the efforts of local jurisdictions, the State and Department are attempting to increase the Statewide Mills taxes by nearly 30%. The Department’s actual calculation of the Statewide Mills indicated the Statewide Mills should have decreased by 18% (from 95 to 77.89 mills) to offset some of the impact of increased values. Even with the decrease, the aggregate taxes from Statewide Mills would increase nearly 6%. However, instead of notifying Counties of its actual calculation as required, a Department policy analyst applied 17.11 “banked” mills to keep the statewide mill levy at 95 (and similarly kept Vo-Tech Mills at 1.5 mills). In doing so, the Department has impermissibly attempted to increase statewide property taxes by nearly $80 million.”

The dispute before the Court is whether the Department has authority to “bank” or save mills beyond the statutory maximum in one year and then apply them in future years when the mill calculation would otherwise require the Statewide and Vo-Tech Mills to drop. For instance, if 95 mills is the maximum that can be assessed in a year for an item and property values drop to the point that the calculated mill levy is 100, it is legal in some cases to save the 5 mills that can’t be assessed in one year to add to a future assessment. In any event, MACo claims that the State has exercised its full levy authority since inception and has no banked mills to apply.

The Department provided numerous Counties with a copy of the excel spreadsheet it prepared for the current tax year (the “Department Spreadsheet”), which showed that the “CURRENT YEAR calculated mill levy” is 77.89. Court documents reveal that a Senior Property Tax Analyst acting alone has claimed responsibility for the decision to apply purported banked mills to reach the statutory maximum rate for the Statewide Mills.

When asked why there is so much confusion around not only how much should be levied but where those funds go, Eric Bryson, Executive Director of MACo, reflected, “Historically, the revenue from the 95 mills went to the State General Fund.  But, with adoption of HB 587 in 2023, those revenues, for the first time ever, are directed towards school funding starting this biennium.  Regardless of HB 587, the mechanics of which don't go into place until 2025 (intentionally to take advantage of increased appraised values for class 4 residential), school funding is set this biennium.  It is probably an immaterial fact to parse out the revenue from the 95 mills now vs last year (last year went to the general fund, next year to a restricted revenue account) because under either scenario school funding is set and the General Fund pays accordingly.  

“And remember,” he concluded, “this conversation is about the State General Fund having excess reserves even as the State is asking to levy more property taxes than the calculation authorizes.”

On September 8, 2023, Governor Gianforte wrote a letter to Montana County Commissioners urging “do everything in your authority to limit the growth of both government spending and property taxes in your county,” and “draw down mill levies that are within your control, and keep property taxes as low as possible.” Carbon County Commissioners and Commissioners around the state are doing just that. In return, Gianforte’s administration is suing the Counties to raise property taxes and mill levies in what the Commissioners perceive as not only a violation of the law, but also of the trust that their constituents have placed in them.