Not so fast.
Montana’s State Supreme Court on Nov. 22 upheld the Department of Revenue’s 95-mill levy for school equalization funds, ruling against a challenge by the Montana Association of Counties (MACo).
The court’s decision means that Jefferson County property owners most likely will face an additional tax bill to make up the difference between the 95-mill rate and the 77.9 mills that the county, like many others, charged on initial tax bills for 2023-24.
The school equalization levy, which is meant to even out the funding available to wealthier and poorer districts, respectively, is fixed by law at 95 mills. The state has argued that law requires that the full amount be collected by counties.
But in October, the County Commission voted to adopt the lower levy rate, effectively bucking the Gianforte Administration. The state, it argued, should be held to the same legal cap on property taxes as municipalities — and the 77.9 mill rate, it said, reflected the amount actually budgeted by the state this year for school revenue equalization. 49 of the state’s 56 counties ultimately did the same.
The Supreme Court’s decision, written by Chief Justice Mike McGrath, acknowledged “the recent dramatic increase in property values across Montana” that led to the dispute. For the current tax year, statewide property evaluations have increased by 39% for all classes of property and 48.5% for residential properties, it noted. The average residential increase in Jefferson County, before appeals, was 51%.
But the court ruled that the Department of Revenue is a government entity — a definitional issue MACo had challenged — and was therefore entitled to “bank” surplus tax funds from one year to the next.
Importantly, it also noted that “we generally defer to a state agency when its interpretation has ‘stood unchallenged for a considerable length of time.’” The Department of Revenue said it has banked surplus mills in each year from 2001 to 2017, and again in 2019 and 2021.
“DOR’s methodology has been untested for two decades, and its interpretation of the statute is consistent with the State’s constitutional directives,” McGrath wrote.
What happens now? County Treasurer Terri Kunz said she is waiting on legal advice from MACo. But most likely, she will recommend to the County Commission that her office adjust second-half tax bills to incorporate the higher state levy.
Residents who already have paid their property tax bill for the year in full would be sent a supplemental bill, Kunz said. The county has reserved funds to cover additional printing and postage costs, which Kunz said could total about $4,000.
The additional levy will amount to about $70 for a home assessed at $300,000, and $117 for a home valued at $500,000. Countywide, the difference between 77.9 mills and 95 mills will amount to about $750,000, according to the county.
“Personally, I think the DOR is wrong,” Kunz said. She noted that this year’s school equalization expense has already been accounted for in the state’s 2023-24 budget, so the additional $88 million raised by the 95-mill rate will flow into the general fund.
“I feel like it’s tragic that our taxpayers have to pay more for something that didn’t really affect schools.”
