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HomeMy WebLinkAboutMontana Taxpayer December 2001MONTANA TAXPAYER MONTANA TAXPAYERS ASSOCIATION HELENA, MONTANA 80'" Annual Meeting The Board of Directors and staff of the Montana Taxpayers want to thank all of our members who were able to attend the 80'h annual meeting on December 6 in Helena. To those of you who were unable to attend, we want to thank you for your continued support and look forward to seeing you next year for our 81" Annual Meeting on December 5, 2002. The members of the board are listed on page 2. We would also like to thank all the speakers who made this conference a success. Governor Judy Martz concluded the event by congratulating. the association on the success and accomplishments over the past eighty years. She stressed the importance of working together to make economic growth, tax reform, education funding reform and energy development our top priorities. Excerpts from the Governor's message to the Association: "Our rural heritage and our sense of community make us who we are - resilient, resourceful and determined people. If Montana is to experience the growth needed in this new century - we must work as one, united to the core. We are in this together - and only to ether shall we overcome our challenges to build new jobs - new futures - a new Montana. Our tax structure must make sense for people to live, and do business in Montana. We must have a tax structure that gives Montanans the incentive to turn their ideas into jobs -- their visions into realities. That is why organizations like the Montana Taxpayers Association are so critically important in this state. You have a long history of working toward equitable taxation and fiscal policies, and you have an outstanding reputation for providing common sense ideas on state taxation. We know that tax reform is key to a competitive business environment in Montana. Competitive tax rates directly impact business location decisions and the ability to hire. Like you, we want to promote a healthy tax climate for both individuals and businesses. We want equitable solutions to current tax issues that benefit all taxpayers. We are striving to build government accountability and efficiency at all levels. And, we are continually looking for ways to reduce government spending to a level that taxpayers can afford, while reflecting the services requested by you - the citizens of this state." In all of these areas, I commit to you that we will not leave this office without making Montana a more business-friendly state. And to do that, we need your help, input, and advice. Together, we will put Montana ,on the business map'. With quantifiable goals and objectives, we will create a climate that will keep our kids working and raising families in Montana. Our vision is to make our new Montana a better Montana, by building on the traditional values that have always made us great. We must be aggressive. And, collectively, we must send a message loud and clear, that Montana is open for business. I know that if we all roll up our sleeves and work together, we can make this a better place for all of us. Thank you, and God Bless." Thank you Governor Martz. Public Education Funding in Montana The K-12 Public School Funding Advisory Council are finalizing their recommendations to present to the Governor. The Governor will submit a preliminary report to the Local Government and Education Interim Committee on January 11. The Legislative Committee must then analyze the report, hold public hearings on the report across the state, provide a summary of the hearings, and make recommendations for changes to the report to the Governor by August 1, 2002. The 9-member council is comprised largely of school officials with the Governor's policy advisor on education as chair. The advisory council has amassed a wealth of information on school funding which is available electronically at: www discoverinemontaua com/bud"et/ Ed Committee/Reports.htm Determining an appropriate school funding formula and level of spending is no easy task, either in Montana or -1- Montana Taxpayer Address all communications to, MONTANA TAXPAYERS ASSOCIATION P.O. BOX 4909, HELENA, MT 59604 Telephone (406) 442-2130 FAX (406) 442-1230 Web Site - www.montax.org E-mail - mwhitt@montax.o phvaughnontax.org Business Office: 506 North Lamborn V V V V V V V V V V V V V V V V V V V V V ?/ V OFFICERS AND STAFF CHASE T. HIBBARD, Helena.... Chairman, Board of Directors BILL SPLICER, Helena, Vice Chairman, Board of Directors MARY WHITTINGHILL, Helena.... President PAM HYATT, Helena.... Office Manager V V V V V V V V V V V V V V V V V V V V V V V Contractors - John Harp, Kalispell Cooperatives - Jeanne Bamand, Marta Director at Large-Tom Rohe, Helena Farm Machinery - Gordon Nelsen, Conrad Financial -Craig Anderson, Billings Gas 8 Electric - Emie Kindt Butte Grain Growing - Daryl Ayers, Denton Legal Profession - Louise Galt Helena Motor Carriers -Ken Cdppen, Missoula Railroads -Alec Vincent, Texas Real Estate - Bill Spilker, Helena Retail - Marilyn Hudson, Helena Sheep 8 Wool-Chase Hibbard, Helena Telecommunications -Rick Hays, Helena Timber Products- Doug Mood, Seeley Lake Utilities - Tom Ebzery, Billings nation. The committee accomplished a great deal in paving the way for future discussions on school funding, but we have concerns on the impact of some of the recommendations. • Countywide BASE (Basic Amount for School Equity) Budget Levy - The council spent a considerable amount of time focusing on equalization of mill levies between districts. Montana relies heavily on property taxes to fund schools. Districts with large taxable values tend to have lower mill levies than districts with low taxable values. The council concluded that equalization at the state level had too large an impact and settled for a countywide approach. Although this proposal is revenue neutral for schools, there is large shifting of tax burdens among taxpayers. HB 124 Block Grants - Historically, the state reimbursed districts when the legislature reduced tax rates on certain classes of property. The reimbursement was intended to prevent local levies from increasing due to the loss of taxable value. HB124 changed the terminology from a reimbursement to a block grant which sunset after this biennium. Initial discussions contemplated the grants be distributed through the state GTB which would also increase the shifting of tax burdens among taxpayers. The council decided the HB124 block grants for the district general fund should be applied to reduce the countywide BASE budget levy. • Expand county retirement levy to include budget authority for health insurance - the county levy for retirement would be expanded to allow districts to budget for the cost of health insurance. The council acknowledged that the rising cost of health insurance is interfering with the ability of districts to direct resources to educational programs and services to the classroom. Due to the large differences between districts in current health insurance expenditures by FTE, it is difficult if not impossible to estimate the impact. The estimates range as high as $88 million in increased spending. Since the levy would be permissive, there is potential for a dramatic increase in mill levies. (Note: Taxpayers felt the impact of an even more modest proposal with the passage of HB409 which allowed local districts to permissively raise mill levies - see October newsletter). Ultimately, the council would like to see the adoption of a statewide pool for medical insurance for school districts with some sort of rate per FTE similar to the rate for state employees. -Average declining enrollment over a 3-year period, but not for increasing enrollment - Since budgets are in a large part driven by the number of students, declines in enrollment decreases allowable budgets. There is no provision to smooth out the decline. The council is recommending districts with declining enrollments be allowed to average the decline over a 3-year period. The estimated cost is $14 million. • Provide an annual inflator tied to the Consumer Price Index - The council concluded that the budget presented to the legislature include an annual inflator that is tied to the Consumer Price Index in order to provide the same level of services to schools that was provided in the last budget year. We will provide a more detailed analysis of the final recommendations after they are presented to the interim committee in January. The council most likely will also recommend further discussions on the adequacy of school funding in Montana. The question "what is adequate?" will continue regardless - either in the form of a study or a potential lawsuit. We asked Lance Melton, Executive Director of the Montana School Boards Association to comment on the recommendations of the council as well as their intentions on adequacy. Mr. Melton stated: "As the Governor's Advisory Council completes its work, a number of issues regarding the adequacy of funding have been left on the table. School funding expert John Augenblick of the Education Commission of the States visited with the Advisory Council in October and suggested that they limit their inquiries to issues of equity and declining enrollment, and the Task Force did so. Nonetheless, one of the key issues, how much it costs to provide the education system guaranteed by the constitution, has not yet been answered. The Montana School Boards Association is involved in pursuing private funding for completion of such a study. The key is to define what is meant by "a basic system of free quality public elementary and secondary schools, which the Legislature is obligated to -2- fund under Article X of the Constitution. MSBA is interested in contracting with school funding experts to provide an answer to this question, using a process that will include input from both the legislative and executive branches." Approximately 32 school districts, (40% of the state's K- 12 public education population) are contemplating litigation at this time. A final decision on filing the suit is expected in January 2002. Not all the school associations support a new round of litigation. During the recent Montana Rural Education Association Board of Directors meeting an update and review of the School Funding Lawsuit being spearheaded by Helena Attorney Jim Molloy was conducted. MREA's Board of Directors re-affirmed the position taken during the Summer Conference and Annual. Meeting not to support the lawsuit as an association. Board members voiced a number of concerns regarding negative implications that could affect Montana's rural and small schools as a direct result of the lawsuit. Department of Revenue - Proposed Administrative Rules Change in Hearing Date - Notice 42-2-681. The department filed a notice of hearing on January 9 to consider proposed changes to rules relating to the retail communications excise tax. The department has been requested by several taxpayers to republish the notice of hearing, due to a scheduling conflict. The department. has indicated the proposed rules will be republished and the new hearing date will be no sooner than February 20`h or 21s`. Notice of rule hearing 42.2.682. The department will hold a rule hearing on January 18 to amend rules relating to motor vehicles and special equipment of centrally assessed companies. The rule is necessary due to the change from a market value to a fee in lieu of property taxes passed by the voters in 2000. Historically, the department would reduce the unit value by the market value of the vehicles based as determined for motor vehicle licensing. Now that the vehicles pay a fee in lieu of property taxes, the unit value will be reduced by the net book value of the vehicles multiplied by a cost/market factor. The Association believes this is an appropriate change in rule. Notice of adoption - 42.22.678. The department held a public hearing on November 15, 2001, where written and oral comments were received from interested parties, including the Montana Taxpayers Association. Following is a summary of the comments and the response of the department. Comment No. 1: Oral testimony was presented to the department concerning ARM 42.26.204. Those comments addressed the change to the rule, which requires the filing of combined reports in certain circumstances when the threshold of 50% ownership has been achieved, that change is a substantial change to Montana's tax law, and existing law does not support the change to the rule. Response No.1: The department believes that the amendment simply clarifies that unitary business must file a combined report with the department. Section 15- 31-301, MCA, requires any business that has business activity taxable within and without the state to allocate and apportion its net income. This income is reported to the department by filing a combined report. The rule implements and addresses how the returns are to be filed. With regard to the statement that existing law does not support the proposed change, the department believes that it is supported by law, and in fact, is required to implement the statute. Comment No. 2: The department received comments regarding the deletion of (1)(a) of ARM 42.26.263, and asked the department to not adopt the changes to this rule. They stated that the amendment removes the provision that allows gains from extraordinary transactions to be excluded from the sales factor and that amending this rule violates the uniformity goal of the Uniform Division of Income for Tax Purposes Act (UDITPA). Response No.2: The department believes that this amendment is necessary and will adopt the change as proposed. ARM 42.26.259 addresses how the department treats gains in the sales factor, and the change to ARM 42.26.263 makes it clear that is how they will be treated. This change does not violate the uniformity goal of UDITPA as it applies to the sales factor. States signatory to UDITPA treat items included in the sales factor in a variety of manners, including the manner adopted in this rule. UDITPA does not require exact uniformity among its signatory states. The rules will be effective on December 21, 2001. MAR Notice 42-2-680 - Relating to Universal System Benefits Credits On November 29, the Department held a hearing regarding proposed changes to the publication and challenge timeframes for claimed credits under the USB (Universal Benefits) program. The USB program was established to ensure continued funding of new expenditures for energy conservation, renewable resource projects and applications, energy conservation measures for irrigated agriculture and low-income energy assistance. Utilities and large industrial consumers can receive credits for internal programs or activities that qualify as USB programs. Currently, the department is required to publish notice of claimed credits within 10 days of receipt of an annual report by a utility or large customer (annual reports are due by March 1). Interested parties are allowed 60 days from the date of receipt to challenge a claimed credit. -3- The department proposed a single publication date, 15 days after the March I deadline, which would have extended the challenge period for taxpayers filing before the March I deadline. The Montana Taxpayers Association objected to the proposed changes as the statutory language in 69-8-414 states challenges of any claimed credit must be filed within 60 days of the department of revenue's receipt of the credit claimant's annual reports. The department has indicated they will modify the proposed language to publish within 20 days after receipt of the annual report to reduce publication costs. The publication will list the date of receipt of the claimant's annual report to clearly indicate the 60-day timeframe for a challenge. Current statute does not require public notice of the initial receipt of the annual report. The public notice requirement is only required when the department determines that a formal review of a challenged c necessary. The publication notice for receipt annual report was implemented at the beginning of - program to provide a mechanism to notify interested parties certain taxpayers had claimed credits. In the two years the department has been publishing in the notice in the 6 major newspapers, there has been only one interested party who questioned a claim. Perhaps this is one of those services that could be eliminated to save taxpayer dollars. 27" Annual Montana Economic Outlook Seminar: Investing in Montana University of Montana, Bureau of Business and Economic Research With the reverberations from the tragic events of September II still being felt across the nation and the U.S. economy plummeting, it can be difficult to focus attention on everyday problems such as potholes in our streets, rising power bills in our mailboxes, and the quality of the workers in our job pools. Yet these problems all represent areas of our economy that determine our prospects for long-term economic growth. Transportation, energy resources and human capital form key 13a1b .lA it i impact our economic future. It is only through investments in such areas of our economy that we can substantially increase our prospects for future growth. How can we target such opportunities for investment in our economy? That question will be explored at the 27th Annual Economic Outlook seminar series, presented by the Bureau of Business and Economic Research. Shoring up the basic building blocks of our economy is more important that ever, given the faltering national economic picture. The after-effects of the recent national events and the impending U.S. recession will be addressed by Bureau Director Paul Polzin in his national and state outlooks. Other speakers will offer insights on the implications for specific Montana industries. In addition to this packed agenda, the Bureau economists will offer individual economic forecasts for each seminar city. And a special luncheon speaker will take a closer look at the energy situation in Montana. Steve Holland, director of the Montana Manufacturing Extension Center, will discuss the long-term impacts of this ever-important aspect of our economy. The Montana Economic Outlook Seminars are supported through a partnership with First Interstate Bank and will be presented in nine communities across the state. The seminar registration fee is $70 and includes a proceedings booklet, lunch and a one-year subscription to the Montana Business Quarterly (a $35 value). Continuing education credits are available. Contact the Bureau of Business and Economic Research at 406-243-5113 for more information or visit the Bureau's web site at www.bber.untt.edu. ++++++++++++++++++++++++++++ FULL SEMINAR SCHEDULE All seminars begin at 8:00 a.m. and end at 1:00 p.m. Helena-January 29, 2002 at the Best Western Colonial Hotel Great Falls-January 30, 2002 at the Holiday Inn Missoula-February I, 2002 at the Holiday Inn Parkside Billings-February 5, 2002 at the Radisson Northern Hotel Bozeman-February 6, 2002 at the Comfort Inn Butte-February 7, 2002 at the Red Lion Hotel Kalispell-February 12, 2002 at the WestCoast Kalispell Center Hotel Havre-March 12, 2002 at the Duck Inn O iCul 8 Z X30 ! .. 1""lur.....lur•••••n°•ur•I•r•r°•Ir•rrl.l.l OL00-"06S 1W lainel 01, XOS Od JoAew Q lame-1 p Apo 069 0t7VH 80=1-l-iv.oi v.. Ili 'Nmo.iad LN rw fpli tl096S ;u auaiaH IIt'd ,,l 606b Xag •fl•d _ tt.104me•3 tl7-toN 905 d X011VIDOSSd SH3AddXVI VhIVINOW