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Measure 2 will confound local government finances

More and more local officials are becoming alarmed over the impact of Measure 2 on the June ballot that proposes to repeal all property taxes and dump the mess into the laps of the state legislators.   

 Instead of offering specific solutions to specific problems, the sponsors of the measure have been offering a variety of specious claims and generalities that are not supported by the language in the proposed constitutional amendment.

Some have suggested that the money can be found by firing 12,000 public employees; others say that the measure will not require replacement revenue for local governments. Neither of these claims is substantiated by the language in the measure.  Here is the exact language on the ballot:

"The legislative assembly shall direct a share of sales taxes, individual and corporate income taxes, insurance premium taxes, alcoholic beverage taxes, mineral leasing fees, and gaming taxes and any oil and gas production and extraction taxes, tobacco taxes, lottery revenues, and financial institutions taxes not allocated to elementary and secondary schools to counties, cities and other political subdivisions according to a formula devised by the legislative assembly to fully and properly fund the legally-imposed obligations of counties, cities, townships and other political subdivisions."

It is clear that this amendment, if passed, would require the legislature to take money ($800 million annually) from the state treasury and pay local governments for the money lost by the repeal of the property tax.

All we need to do is look at the number and complexity of local governments to understand the problem in developing a payback formula.  North Dakota has more local governments per capita than any other state in the Union.

 We have 53 counties, 350 cities, 1100 townships, over 300 fire districts, around 175 school districts, over 200 park districts, around 50 soil conservation districts, nearly 75 water resource districts, close to 95 libraries, and scores of ambulance districts. Each of these local governments has a unique financial structure with varying degrees of reliance on property taxation.

Take counties, for example.  According to the latest posting by the State Tax Department, Bottineau reported an average of 129 mills for the county; Slope reported 152; Grand Forks reported 379 mills, and Morton reported 363.  All other counties fell in between.

What these figures tell us is that county governments across the state have varying needs for property revenue and they also have a wide range in the services they offer their citizens. Consequently, a simple one-size-fits-all solution will not work for each and every county government. We can bet that schools, cities, townships and the hundreds of other local governments have unique budgets as well.

 A single solution, such as flat across-the-board percentage refunds to all, would give huge windfalls to some local governments while short-changing hundreds of others.  Because each political subdivision is unique, the only fair and rational approach would be for a legislative committee or some state agency to review the budget of each local government and dole out money accordingly.

To protect the uniqueness of local governments, representatives from our 2200 local governments would have to travel to Bismarck to justify their budgets and convince some state entity or legislative committee that their budget needs are legitimate.  This process would certainly threaten local control of local services.

The problem of getting money required by the measure back to the local government is only one problem in this simplistic approach to state and local finance offered by Measure #2.  An arbitrary change of this magnitude requires the deliberative process of the legislature over a 10-year period.