Montana Viewpoint


February 11, 2001

It’s one of the largest, yet most unsung issues the Legislature is facing is encompassed in a behemoth document known as “The Big Bill,” HB 124. The bill does two things; it rearranges the collection and distribution of a multitude of fees now collected and distributed by the County Treasurer, and replaces tax revenue taken away from local governments by previous legislatures. I don’t know that it needs to do both simultaneously, but it does. I’ll take the issues one at a time.

In 1995 the legislature began serious efforts to lower property taxes for businesses. The way this was done was to lower the tax rate on “business equipment.” Business equipment is pretty much anything a business uses to make money that isn’t nailed down: if it can be moved, it qualifies. Thus the gamut runs from computers to the turbines used in a dam to make electricity. An oil refinery, for example, is around 90% movable equipment. Since 1995, the tax rate on business equipment has been cut from 9% to 3%. While this results in a business paying 2/3rds less tax on the equipment, it also means that the local fire department, or school, or county, receives 2/3rds less tax to operate.

Virtually all property tax goes to fund local government agencies such as counties, towns, schools, weed districts, etc., etc., etc. Since the state has lowered the property value of local governments, it should make up the difference to those same local governments, right? Well, it has, sort of, but when times get tight, the Legislature likes to cut back on that refund. Basically, the Legislature gets to have it both ways: it gets to cut taxes, and it doesn’t feel the pinch. During the last Legislature, while they were cutting tax revenues to local governments by another 50%, someone got the picture that local governments were going to be having a hard time making ends meet, so a committee to improve local government funding was formed, and HB 124 is their brainchild. Never mind that local governments did just fine before the Legislature took all their money away; “we’re from the government, and we’re here to help you.”

Well, OK, one half of HB-124 is to give local governments back the tax revenue (but not the tax base) that the Legislature took from them. Local governments like this part. The second part is a little more dicey. The “Committee to Fix Everything” found that local County Treasurers were having a difficult time collecting and allocating, among other things, motor vehicle fees, district court fees, and fees on livestock. Frankly, I’ve never heard a County Treasurer complain about this, but the Montana Department of Revenue has complained, and has determined the County Treasurers need to have a problem they’ve never complained about fixed - if you get my drift. The collection part is pretty simple. The money comes in to the County Treasurer’s office and goes directly to the Department of Revenue. The distribution part is a little more dicey, and works through a formula so that everybody who previously got money from the County Treasurer will get exactly the same amount from the Department of Revenue.

Well, I remain skeptical. In a bill 187 pages long there’s a lot of room for The Law of Unintended Consequences to take effect. The bill has been heard in the House Local Government Committee, and has been referred to a “select committee” to iron out the problems and accommodate people’s concerns. Since I’m on the Senate Local Government Committee, where the bill will end up after it passes the House, I’m spending my Tuesday and Thursday nights in the company of this select committee, listening to some pretty complex, boring, but very important issues. I’ll keep you posted.

Jim Elliott
Phone: 406-444-1556
Mail: State Senate Helena, MT 59620