From the Capitol cloakroom

The 69th Legislative Assembly began its work on Jan. 6. There are a number of major, controversial measures which will be discussed, argued and voted on including:

THE CONTINUATION OF MEDICAID EXPANSION

The Affordable Care Act, popularly known as Obamacare, contained a provision which allowed states to expand Medicaid coverage to people who had limited or lacked health insurance coverage. Passage of the state law necessary to implement “expanded Medicaid coverage” contained a sunset clause which causes the program to expire in 2025.

The 2026-2027 Biennium State Budget contains funding for the continuation of the program but a separate piece of legislation is required to either remove or extend the sunset clause.

All Medicaid spending in Deer Lodge, Granite and Powell counties totaled about $62 million during the most recently concluded fiscal year with “Medicaid Expansion” making up $18.3 million or,30% or the total. Medicaid Expansion is a particularly important revenue stream for the area’s three hospitals as well as for helping people obtain medication and physician services.

Notwithstanding the assistance it provides to many of Montana’s citizens, continuation of the program is not assured. It faces a very difficult path forward in the State Senate.

RESIDENTIAL PROPERTY TAX RELIEF

There are already hundreds of bill titles in the legislative bill drafting system to “revise taxes,” principally residential property taxes.

Notwithstanding the outcry over the increase in appraised values for property in western and south central Montana and the associated taxes which hit homeowners, there is no simple fix for this situation. If the Legislature acts to reduce residential property valuations, it reduces the amount of taxable value available to fund local government and the schools. When that happens, the governing bodies of those entities face two choices — reduce spending by curtailing services, which is never a very popular idea, or increase the tax rate by raising the mill levy. When the second option is employed, it reduces the amount of tax relief the homeowner receives.

The residential property tax relief concept, which is drawing a lot of attention in Helena at present, calls for granting residents a homestead exemption in some amount to reduce the value of the property for tax purposes. This exemption would apply to a resident’s primary residence and those structures used as long-term rentals. Implementing that concept would certainly provide residential tax relief but it would also significantly reduce local government revenues. To offset that potential loss, the second part of the concept would be to increase the tax rate on second homes and those facilities used for short-term rentals by increasing the property assessment factor from its current level of 1.35% to something approaching the commercial assessment rate of 1.89%.

It’s a promising approach but it does have one significant problem — it will have wildly differing effects from one jurisdiction to another. Areas with large numbers of high-value second-homes and vacation rentals such as Seeley Lake, Granite County and the Philipsburg School District could very well benefit from this approach. In contrast, other jurisdictions without a lot of high-value second homes such as the City of Deer Lodge, the rural school districts in both Granite and Powell Counties and, potentially, Anaconda-Deer Lodge County, could be harmed. More to come.

95 MILL PROPERTY TAX LEVY FOR THE PUBLIC SCHOOLS.

State law contains a provision which allows the Department of Revenue to levy a statewide tax on all property of up to 95 mills to help fund the state’s public schools. Since its inception, the levy has always been 95 mills.

Following the large increase in residential values in 2023, a number of county commissioners across the state, started a movement to drop the levy to 77 mills. Ultimately, 49 counties jumped on the bandwagon. The matter went to the Montana Supreme Court where the Department of Revenue prevailed and the 95 mill levy stayed put.

The 95 mill levy is a way of taxing high value industrial and residential property located in specific areas of Montana such as Big Sky, the Flathead and Colstrip for the benefit of schools throughout the state.

There will be an effort in the session to lock in the 95 mill levy as a fixed number to forestall another effort like that, which occurred in 2023 to reduce the levy. The effort will be supported by the schools and, most likely, opposed by the Montana Taxpayers Association.

Deer Lodge, Granite, and Powell Counties are all “tax importing counties.” That is, they receive more revenue from the inflow of the 95 mill money than is collected locally. In the absence of that cash from the 95 mills, local property taxes for the schools would be higher, perhaps, significantly higher. Think of it as a Robin Hood-like device, which brings money from much richer counties in Montana like Gallatin, Madison and Carter back home for the benefit of our public schools and the local taxpayer’s wallets.