042617 Week Sixteen Report, Rep. Rick Holman, ND District 20

It’s been quite busy over the past several days. Wednesday, April 26th is the 76th day of the allowed 80 days to finish our work.  By the time you read this we should be done. I started with eight conference committees and now am down to just one, the biggest. With a budget of three and one-half billion dollars the Human Services Department touches the life of just about every North Dakotan. After a host of amendments on the conference committee, seven hour-long meetings and passage on the House and Senate floor, we should be set for the next two years. Over one-hundred thousand senior citizens, disabled, children, and those with behavioral health issues are receiving assistance from this agency. We also have depleted some reserve funds and used much of the money from the fund which used to support Breath ND.  The budget crunch due to lower taxes has caused the amounts to be lower than the past cycle but the agency will still take care of and provide services to those in need.

Starting in 2011 when oil prices were much higher than now and drilling was at a high pace, the state’s tax collections from oil and related sales tax was at record levels. Combined with the strong farm economy, the state treasury showed significant increases. Taxes were lowered and spending was increased. Now things are different. Oil production has stayed the same but drilling is down and the price is much lower. Ag prices have lowered to traditional levels.

Tax experts have used the analogy of the three-legged stool to explain how we set up our tax structure. For years, the tax on income, sales and property have supported government operations.
Adding oil tax as a fourth leg have made the stool a little wobbly. Most of us have had to shorten leg on a stool or table or place something under a leg to make it balance. At the legislature, we are doing that by draining reserve funds and moving money between accounts to create a balanced budget. We’ve done that to create balance for the next year or two but some of the supports are not likely to hold for the long term.

During the recent boom time, the legislature funded new buildings and major increases in transportation with one-time funding. Major rebates of local property taxes were included in the spending, but those payments to schools and counties were not forwarded with the same one-time message. Upgraded infrastructure will be permanent but property tax rebates must be renewed every two years. The depletion of most of the reserve funds and lowered tax collections are making it difficult to fully cover the tax rebates promised.

Your last tax bill had two major areas where the state picked up part of the local costs of government. School funding went from about 50% of the cost to 80% with the state increasing the payment for each student from about $6000 per student to about $9000. That’s $3000 per student of formerly local taxes now paid by the state.  As I write this  it looks like the school funding will continue for the next two years with no inflationary increases.

Another 12% property tax rebate was given to cover taxes levied by the county. This will go away in the next cycle with a partial replacement coming with the state picking up a portion of social service costs mandated by the state. County rebates to replace the 12% will range from 5% to 10% depending on the local social service costs. To maintain a stable budget the difference will have to be added to the county tax bill.

You will not see much change for the current year since the new budget does not start until July or August, lessening the impact in 2017. The impact of these adjustments will show up in your 2018 tax bill. If the economy stays stable or strong, and property valuations increase, you could see a significant increase in what many see as the least liked tax. Finishing this session in 76 of the allowed 80 days will, leave four days in case we need to return to make adjustments.
Enjoy the spring weather.
Rep. Rick Holman, ND District 20