North Dakota Property Tax Relief Probably Won't Last


The North Dakota state government’s approach to property tax relief, under Governors John Hoeven and Jack Dalrymple, has been to hide soaring local spending in state budget surpluses through buy-downs of that spending. Cumulatively, the state has bought down $1.5 billion in local spending. But don’t take my word for it. Governor Dalrymple himself used that figure in a recent op/ed:

“Since 2009, the North Dakota Legislature has provided about $1.5 billion in property tax relief as part of an unprecedented $2.4 billion tax relief package,” he wrote. “In the current biennium alone, North Dakotans will benefit from more than $850 million in property tax relief, including about $656 million provided through a new K-12 school funding formula that shifted the largest share of education costs from school districts to the state.”

The key word in that last sentence is “shifted.” The spending obligations didn’t go away. We taxpayers are still footing the bill. Only, we’re paying for it through state taxes instead of local taxes, and we’re not feeling the pain because at the state level coffers are stuffed full with oil-driven revenues. One day, though, that might not be the case, at which point the decision to shift all this spending to the state level might come home to roost in the form of higher state taxes to meet these obligations.

But, for better or worse, these property tax buy-downs are what we’re doing. But in a letter to the Grand Forks Herald, Rep. Mike Nathe points out that not all local governments are passing along the buy-down to citizens in the form of lower taxes:

As was our intention, a majority of schools districts have passed along most of the increase in state school funding to property owners in the form of tax relief. For example, as a result of the new education funding, Bismarck cut their property taxes 19 percent, Fargo 25 percent, Minot 25 percent, Linton 26 percent, Oakes 26 percent, Stanley 26 percent and Harvey cut 24 percent just to name a few. I applaud the school districts that provided significant tax relief to their property owners for doing the right thing.

Unfortunately, you can’t say the same for many of the city, county and park districts in North Dakota. Over the last four years, the state has sent property tax relief funding to local governments only to see many of these local governments use state funded tax relief funding to increase local spending instead of providing tax relief.

In 2013, the state funded an additional 12 percent property tax reduction for cities, counties and park districts on top of the new education funding. Unfortunately, again many city, county and park governments used the 12 intended for tax relief to fund increased spending. Don’t take my word for it, all you have to do is look on your property tax statement and you will see what I am talking about.

As a legislator, this outcome is extremely frustrating to see.

It’s extremely frustrating to taxpayers too, no doubt, but I’d point out that even in places that have lowered property taxes after the latest state buy-down – distinct from previous buy-downs in that it is an on-going obligation for the state – local officials are trying to convince voters to increase spending anyway. Minot voters, for instance, had a school bond issue before them that would have raised property taxes on the average home by hundreds of dollars per year. It failed, but it’s hard to imagine the school district even attempting an “ask” that large absent the legislature’s buy-down of property taxes.

Which is another reason why the legislature’s property tax efforts are doing more harm than good. Not only is the tax burden simply being shifted from local to state, but that shift clears the way for even more local spending. Granted, things like school bonds still have to be approved by voters, but other spending increases don’t. And you can bet with billions in tax burdens hidden in state budgets, in the coming years spend-happy locals will take advantage.

Some North Dakotans – but not all as Rep. Nathe points out – will be enjoying local property taxes in the short-term. But that enjoyment will be fleeting as there’s been nothing done to rein in future increases.