City officials from Whitefish, Kalispell and Columbia Falls met with Flathead legislators last week to stake out their positions in advance of the 2011 session on a host of issues, from property taxes to the state public defender program.
Key among those issues is the state entitlement program, which is the formula that determines the amount of tax revenues allocated to local governments. Enacted in 2001, the program – based on a five-year rolling average of state gross domestic product and per capita income – is intended to provide municipalities with a stable, predictable revenue stream upon which to plan budgets. But with the state facing a budget deficit potentially as large as $400 million, some analysts are calling to freeze the entitlement payments at current levels, although the program’s payments are scheduled to increase.
“We’re not lobbyists to the Legislature, we are like their little sister,” Susan Nicosia, the finance director and city clerk for Columbia Falls, said. “And the Legislature controls 90 percent of our revenue.”
Nicosia and other city leaders stressed that cuts or freezes to the entitlement for municipalities could force local tax bills to increase to make up the difference. Also complicating matters is the state public defender program, the costs of which routinely outstrip its budget. Cities contribute a set amount annually to cover its costs, and officials made clear they did not support using state entitlement funds to help cover costs of the defender program.
“We will fight to not have you whittle away our state entitlement to maintain funding for the state public defender program,” Nicosia said.
Lawmakers, for their part, didn’t state their positions outright, but mainly questioned city officials to determine their needs and concerns for the session, with Sen. Bruce Tutvedt, the chairman of the Taxation Committee, and Sen. Ryan Zinke asking what funding levels cities wish to see under the entitlement program. Sens. Jon Sonju and Verdell Jackson, and Reps. Bill Beck, Derek Skees, Keith Regier and Randy Brodehl were also present.
But the Republican lawmakers, with majorities in the House and Senate, also described the limits to what they may be able to accomplish on signature campaign issues, like the elimination of the business equipment tax and property reappraisal. For cities with large industry, like Columbia Falls and Billings, eliminating the business equipment tax could also affect the local tax base. Discussions are underway to set triggers, such that the business equipment tax is phased out as economic activity increases. Tutvedt and Zinke said any revenue lost from the state general fund by doing away with the tax would have to be backfilled somehow – but they also want to make it easier for small businesses to operate.
“We don’t want to raise taxes or do a tax shift,” Zinke said. “My personal preference is to protect the little guy.”
On property reappraisal, which Tutvedt will oversee on his committee, he said he may call for a full statewide reappraisal in 2012, though he cautioned it might not dramatically lower tax values from the most recent, controversial cycle.
“A reappraisal would get at the falling values,” Tutvedt said. “There would be some change in taxes, not a drastic amount.”
Jackson cautioned that legislators from eastern Montana, where property taxes decreased, might be reluctant to support major reappraisal overhaul proposals.
“I’m not sure we get the votes from eastern Montana to straighten out our problems here,” Jackson said. “I think you can expect a box of trouble in terms of these appraisals, not only in the session but in the lawsuits that are going to come up.”
Skees questioned city officials on whether they could save money through privatizing departments like parks and recreation. Kalispell City Manager Jane Howington described areas, like the city’s ambulance service, where attempts to privatize prompted backlash, but said Kalispell is instituting those changes where possible.
The meeting’s atmosphere, overall, was not confrontational, as state and municipal leaders stressed that their goals were broadly similar.
“We balance things out a little bit as a partnership,” Howington said. “It’s been working, it should continue to work.”
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