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Legislative Issues '~,~ 'c~ ~: ~ c/~_~_. ~
Special Sexsion - 2000 ~ //T~,,~
The Legislature met ~or ~our days last month in a special sesszon called bfi /~ .
the Governor w ~und economic development programs suspended by a court
decision invalidating the appropriation of the coal t~ trust account. This
irregular meeting was loaded with explosive po[itical elements. [t was
scheduled a month before the prima~ election. It wa~ a last shot ~or many
term-limited Senators and'Representatives. There was friction be~een the
political parties, the execut&e and le~s[ative branches and many o~ the
various ~actions that have developed in recent years. Finally, there
appeared to be irreconcilable differences o~ opinion on revenue and finance
policy, particularly the dimension and consequences of an array o~ t~
reduction proposals.
The expected blowup was a dud. Instead, the House and Senate leadership
and the Governor negotiated a compromise that will reduce property taxes
about 7 percent, increase state support of schools and provide additional
reimbursement payments to local governments next fiscal year. This deal
also established a $37 million general fund reserve account to guarantee
property tax reimbursement payments through FY 2003.
The Legislature passed two bills of specific interest to cities and towns.
House Bill 4 - The tax and revenue compromise came together in this
measure. It increases state support to schools by more than $23 million,
distributes $8 million to local governments to cover lost motor vehicle
revenues, and sets up a $37 million general fund reserve to g'uarantee future
reimbursement payments. The bill also assures that cities and counties will
retain $3.1 million in local option vehicle tax revenue, if voters approve the
flat fee referendum in the fall.
[n the past, the Legislature reduced property taxes which forced local
agencies to raise levies or cut budgets to balance the books. This time, the
Legislature increased state transfers, which will allow local governments to
drop levies while maintaining budgets at reasonable levels.
State Reimbursement Programs - The Legislature has passed a collection
of business tax reductions over the last l O years that have depreciated local
property values. The Legislature approved reimbursement programs to fill
the holes. ~ Distributions to local governments come from three separate
accounts that do not adjust for inflation or carry a warranty stronger than
the good intention of succeeding Legislatures to keep old promises.
A Local Government Finance and Structure Committee has been meeting for
the past year. The members are ~vorking to develop a more reliable and
realistic method of reimbursing cities, counties and schools for the loss of
revenues attributable to Legislative tax cuts.
The League has suggested calculating future reimbursement payments as a
percentage of state personal income tax collections. This proposed system
has several advantages.
The Legislature approved business tax cuts with the hope that lower rates
would touch off an economic boom. If this assumption proves correct,
wages, profits and income tax collections will increase. Reimbursement
payments wilt be on the same track and local governments will share
directly in the benefits of expansion.
Dedication ofa percentage of the income tax also offers a better guarantee
of future reimbursement payments than fighting the biennial battle to include
a statutory appropriation in the general fund budget.
State Transfer Payments - Last year, cities and towns received $51 million
in state reimbursements, grants, tax distributions and direct transfers. The
interim committee has considered plans to simplify and consolidate these
payments. This proposal ran out of steam, because there is no fair and
effective way to account for all the differences in the formulas that control
the distribution of these funds.
Simplicity has some value, but it is not sufficient to support changes in state
transfer payments that will set up a long and likely contentious argument
between the winners and losers.
The Legislature can lessen the effects of option authority on business
patterns and rural residents by narrowing the list of taxable items to the
non-essential goods and services that make up the tourist economy.
The vote on the local option bill was close in 1999. Term limits may have
removed some of the most stubborn opposition. Comments by incumbent
Legislators have been generally favorable, and finalty the patience and
persistence of cities and towns may decide this issue.
Lodging Tax - Montana spends more per capita on travel promotion than
all but one other state. At the same time, cities and counties are cutting
programs, laying off employees and stretching dollars to the limit to survive
under the subsistence budgets mandated by the Legislature. The League has
argued that the Legislature should realtocate bed tax receipts to account for
the cost pressures exerted by the 9 million tourists who visit Montana every
year. This argument is logical, and while it has not been totally persuasive
in recent years, reallocation of the bed tax is an issue the 2001 Legislature is
likely to consider.
Treasure State Endowment Program - The money in the Treasure State
Endowment Program increases each year. The special session added $3
million to cover a supplemental list of projects, and it is possible that the
2001 Legislature will continue this increased level of funding.
Building Codes - Cities have burned many hours de.~bnding the extra-
territorial jurisdiction of municipal building code programs. Conservatives
see city code enforcement as taxation without representation, while cities
focus on public safety and consumer protection. It will be difficult to
reconcile these differences, and it may be time to try a different strategy.
A possible solution would be to allow counties to enforce building codes in
densely populated areas near cities. They could provide inspection or
contract for the work with cities. This approach would allow for the
application of codes where they are really needed while eliminating the
political friction that goes with government agencies operating beyond their
boundaries.
Privatization - There have been numerous bills in recent sessions of the
Legislature that would have required public agencies to privatize a variety
of services, including street and road maintenance, utility operations and