The seven seats and court of the Montana Supreme Court (Photo by Eric Seidle/ For the Daily Montanan).
The Montana Supreme Court on Wednesday ordered all 56 counties in Montana to submit responses during the next month to a request from the Montana Quality Education Coalition that the court require each county to levy the full 95 state education equalization mills as some counties try to levy less from their residents because of property tax increases.
The MQEC filed a petition for a writ of mandate with the court on Tuesday asking justices to decide whether counties can reject the state Department of Revenue’s interpretation of how it calculates the amount in statewide equalization mills taxpayers have to pay, and to require each county to levy 95 mills in the current fiscal year that started in July.
“If the (counties) are allowed to levy fewer than the 95 mills mandated by the DOR, (MQEC)’s member districts and other school districts stand to lose millions of dollars in revenue earmarked for education and therefore request that this Court preserve the status quo under current law and issue a writ of mandate requiring (counties) to defer to the calculation of mills performed by DOR,” the filing says.
In September, the DOR and Office of Budget and Program Planning told counties that the maximum statewide school equalization levy would stay at 95 mills – 40 for the state equalization aid levy, 33 for the county elementary equalization levy, and 22 for the high school equalization levy. Some county commissioners had in August requested clarification on the formula.
Disagreements over DOR’s interpretation
Several counties in recent weeks have proposed or passed measures to collect less than the 95 mills the state says is required by law, and the state sued Missoula County earlier this month when it proposed levying only 77.89 school mills – a plan commissioners approved despite the lawsuit.
But the plan hasn’t just moved forward in Missoula. Commissioners have followed suit in Flathead, Beaverhead, Fergus, Gallatin, Lake, Yellowstone and Richland counties with either proposing or approving similar levy reductions for their taxpayers.
The Gianforte administration argued in its lawsuit that the counties’ interpretation of the statutes would lead to a decrease in school funding and an abdication of the state constitution’s requirement that the state “fund and distribute in an equitable manner to the school districts the state’s share of the cost of basic elementary and secondary school system.”
Some counties have interpreted statute as allowing them to lower the number of mills levied for education, and say that the 40%+ jump in property taxes should even out the amount of money the state collects from the mills paid even at 77.89.
One mill is equal to $1 for every $1,000 of a property’s assessed value, so proponents of lowering the mills levied argued that the sharp hike in property taxes collected from residential property owners could still fund public schools without handing the state more general fund money.
The board of directors for the Montana Association of Counties on Oct. 4 sent Gov. Greg Gianforte a letter asking him “to consider the property tax burden shift to residential taxpayers in Montana” surrounding the 95 mills.
MACo argues that mills subject to a provision of Montana law surrounding levy caps “are intended to be limited to the amount actually assessed in the previous year plus half the rate of inflation.” The organization said while the calculation shows the state has 77.89 mills to levy, the state is still asking the counties to levy all 95 mills despite MACo’s contention “there are no mills in reserve” since the state has always levied 95 mills for the past 30 years.
“School funding and local mill levy authorities are in no way tied to the revenue the state receives from the equalization mills. All of the revenue from the 95 mills goes to the state general fund,” the board wrote. “The schools will still receive the same amount of money they have bene appropriated in the past. We urge you to take your projected 20% increase in revenue, year-over-year, and make do with what you have.”
Education groups believe reduced mills would cut education funding
But several public education groups have balked at the plans by those counties and some of the arguments from MACo, saying reducing the mills levied would cut tens of millions of dollars from education during the biennium and into the next.
MQEC, represented by attorneys at the Missoula-based Kaleva Law Offices, argued in the filing that if counties across the state all agreed to impose 77.89 mills instead of 95, the amount collected would be $79 million less than the legislature’s revenue estimates and than lawmakers put into the budget for school equalization.
They argue that would reduce the end-fund budget at the end of the biennium by one-third and would require lawmakers in the 2025 session to pass a supplemental $160 million package in House Bill 3 to backfill the loss of revenue.
MQEC asked for a writ of mandate for immediate action by the state’s high court because Oct. 16, next Monday, is the deadline to send out tax bills. The organization said the court should consider their request for a writ to require the 95 mills, lest public schools face irreparable harm because of disruption to the school funding formula.
Elizabeth Kaleva, one of the attorneys who filed the petition for the writ, said the group was thankful the court was willing to consider the issue even if the 30-day window for counties to respond will fall far outside of the Oct. 16 window when tax bills will have to be sent out.
“While I’m not sure how counties are going to handle their tax bills going out at this point, it doesn’t look like the court will have a decision prior to any sort of bills going out. So, we’ll just have to take it as it comes from the court,” she said.
Doug Reisig, MQEC’s executive director, said the group got involved this week because though it is pleased that the Gianforte administration sued over the planned reduction in Missoula County, it believes the court case will move too slowly and render any decision moot by the time it is made.
He said he was happy the court did not simply immediately dismiss the case and that he believes the court will side with MQEC, which represents more than 100 Montana school districts and five statewide education groups.
He explained that since the legislature already built a budget for the biennium, a change in the amounts of mills levied would put a hole in the education funding that MQEC does not believe could be filled with reserves and would have to come from cutting other programs.
“And it looks like schools are the ones that are being targeted to take the hit. And even though there are counties out there and people representing them that have said, ‘Oh, it won’t impact schools. It will have nothing to do with schools. It’ll just be a general fund issue with the state,’ that’s simply not true.” Reisig said. “It will impact schools negatively, and that’s something that we have at least got to try to mitigate, if not totally mitigate, because our kids deserve that.”
Reisig said MACo, which had argued the mill rate statutes are subject to levy caps, is misinterpreting statutes on what the state must levy.
“When they look at one section of law, they’re not looking at that part of it. And that’s the one that we’re looking at to discuss. It doesn’t say ‘may;’ it says ‘shall,’” Reisig said.
The executive director of MACo and a spokesperson did not return a phone message seeking comment on the court’s order on Wednesday.
Reisig said he understands the concerns over the property tax increases across most of the state but said they should not lead to cuts in education funding.
“I’m not looking out for money to put in my pocket. I’m looking at what we can do to provide equitable and quality educational opportunities for our children so we can actually meet the mandates that are contained in Article 10, Section 1, for Heaven’s sakes, for our kids,” he said. “… At the 11th hour, to change the game and potentially damage funding for K-12 schools, that’s something we had to try to address.”
Lance Melton, the executive director of the Montana School Boards Association, also said he was “enthused” the Supreme Court did not immediately dismiss the case.
He said he believes that some counties could simply move forward with the 77.89 mills despite the court’s request for a response. But he believes that with the court’s order, counties should err on the side of the 95 mills and reserve the right to right to reduce them later so there isn’t another tax hit later on for their residents.
“I hope everybody just kind of keeps their powder dry and makes the right decisions to keep the system stabilized at this time,” he said.
Governor’s office says state will hold at 95 mills
In an email, governor’s office spokesperson Kaitlin Price said the governor has been clear the state will continue to collect the mills in full and send them back to school districts. She said the state’s lawsuit over the mill reductions should bring clarity to the issue.
“The governor won’t cut the mills, defund our public schools, harm Montana students and educators, or put the burden on hardworking Montanans. Those who benefit most from such a foolish cut to public schools are a few large corporations and rich Californians with mansions in Montana’s exclusive resort communities,” Price said.OP 23-0592 Respond to Pleading -- Order
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