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HomeMy WebLinkAboutMontana Taxpayer July/Aug 2000Volume 34 Number 5 July/August 2000 Legislative Interim Committees continue to meet each month to discuss special studies recommended during the 1999 Session as well as perform oversight of state agencies. Most of the committees will summarize their recommendations and legislative proposals in September and October. Some plan to hold public meetings in November to present their findings and take additional input. We will keep you posted in the newsletter as dates, locations, and agendas are finalized. Local Government Funding & Structure Committee met July l la' and 12th in Helena. The first item on the agenda was a proposal to simplify local government accounting and budget statutes. Currently, cities and counties have separate sections of statute outlining the framework for accounting and determining budgets. A group of representatives from local government and the Department of Commerce presented draft legislation that would combine sections of statutes and provide additional flexibility that represents today's accounting and computer environment. Representatives from the Clerk and Recorder's and the Treasurers requested additional time to review the proposal and offer input. Their recommendations will be presented at the next meeting. The committee received additional options for simplifying the transfer of funds between local government and the state. The simplification was to be designed to provide for no net gain or loss to either the state, local governments or schools - to be revenue neutral to taxpayers as well. Following the last meeting, the DOR prepared spreadsheets outlining the dollar effects of various assumptions. Two of the options resulted in large shifting between the state general fund, schools and local governments. A third option would require the state to collect 'and redistribute through entitlements, a variety of revenue sources. Although most proposals will undoubtedly cause some shifting, the committee believed simplification of revenue transfers is still a goal worth pursuing. The committee requested the DOR to re-examine some of the assumptions in the proposals including the possibility of changes in district court funding. Perhaps the most important discussion continues to center around local option taxes. Various options for increasing local governments' ability to utilize different funding have been discussed by the committee. Still on the table for discussion are an expanded local option sales tax, (currently only areas defined as resorts are allowed to impose a local option sales tax), franchise fees, realty transfer taxes, impact fees and allocating portions of the general fund to local governments. The Montana Taxpayers Association continues to oppose a local option sales tax as currently proposed. Our belief is that although tourist revenues could be captured, the local option sales tax as proposed singles out specific industries in Montana, promotes urban/rural differences, and creates "islands of prosperity". Other proposals, such as franchise fees, tend to be more regressive than other types of taxes and also singles out specific industries. The remaining tentative dates for meetings are: September 5 s & 6th- finalize recommendations. October 6" - meet to discuss final report. November 16th - public hearing. Court Funding and Structure Committee has made the following decisions: 1. The state should fund 100% of the district courts, excluding the Clerk of District Court, their staff and operating expenses. As the Clerks of District Court have a strong preference to remain county employees, the committee does not intend to transfer the clerk of district court staff and operating expenses to the state with the other district court functions. 2. The committee will deal only with district courts. Justice of the peace and city courts should not be affected by the decisions of the committee. -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 E-mail - mwhitt@montax.or¢ phyatt@inontax.org Business Office: 506 North Lamborn evdvvdvvorevvvordvvvvdvdv OFFICERS AND STAFF CHASE T. HIBBARD, Helena.... Chairman, Board of Directors BILL SPILKER, Helena, Vice Chairman, Board of Directors MARY WHI117INGHILL, Helena.... President PAM HYATT, Helena.... Office Manager rddvvrrvvdvdo?dddvvvdrvd DIRECTORS Contractors-John Harp, Kalispell Wining- Russ Niter, Helena Cooperatives- Jeanne Bamam, Malta Milo' Carriers -Ken Gripper, Missoula Director at Large-Tom Rdle,Helena Railroads-Al.V,.1nL Texas Farm Machinery - Gomon Nelsen, Conrad Real Estate-Bill Spilker, Helena Financial- Craig Anderson, Billings Retail-Marlyn Hudson,Helena Gas 8 Electric - Ernie Kindt Bufte Sheep a Wool-Chase Hibbard. Helena Grain Growing-Daryl Ayers, Denton Telmmmunicalions- Barbara Ram, Helena Hardware Stores- Tarty Taylor, Colstrip Timber Produms- Doug Mood, Seeley Lake on financial complexities of funding the courts. Structural changes will be made only as the structural change is related to a financial change. 4. The transition from county to state funding will be Jaiy 1, 2001. 5. The committee draft legislation creates a Judicial Council to establish administrative procedures for the state funded district court program. The Council is to have direction from the Supreme Court and address issues related to workload indicators, hiring policies, court procedures, information technology, and any legal issues that may rise from the state funded system. The Council will be composed of four Judges, two juvenile probation officers, and the Court Administrator. The Supreme Court shall appoint two judges and one juvenile probation officer. The Judges Association shall appoint two judges and one juvenile officer. 6.The committee will request funding for 8.5 additional full time equivalent personnel (FTE) in the judicial branch of government to administer the district court program on a statewide basis. The committee will edit the final report, fiscal note, and legislation at their next meeting on September 286i. Revenue and Taxation Committee's meeting on August 186i will include discussions on proposed income tax reforms. The Montana Society of CPAs will be presenting different options to the committee for consideration. The Department is preparing fiscal impact information based on the options being proposed which will be available at the meeting. Other topics to be covered in August will be establishing potential revenue sources for a housing trust fund, a clarification on BB540 (referendum on motor vehicles), and a proposal on revising the debt limit provisions for local governments. The Legislative Council considered options from Dave Bohyer of the Legislative Services Division (LSD) on changes to the interim study and activities process. Preliminary approval was given to a recommendation that would require agency proposals for legislation be, reviewed by one of the interim committees prior to a formal request for a bill draft. This proposal helps alleviate the demands placed on human resources in the LSD and gives legislators an opportunity to review proposed legislation and make changes prior to drafting. Another option approved, would expand interim committees' authority to recommend that an interim study requested by resolution or assigned by the Legislative Council either not be done by that interim committee or not be done at all. The Legislative Council would consider the recommendation and, in consultation with the interim committee, reassign the study or omit the study from interim consideration. There will be proposed legislation to change the name of the Business, Labor and Agriculture Committee to the Committee on Economic Affairs. The name change more clearly describes the activities currently undertaken by the committee. This committee would serve as a central coordinating body for economic development. proposals that involve business, labor and agricultural interests. Business, Labor and Agriculture Committee reviewed draft legislation regarding public/private competition and a requirement for full cost accounting for state agencies. LC8587 would require the Department of Administration to develop and implement a full cost accounting pilot program for certain state agencies. Since this would be a pilot program, the committee agreed that agencies would only need to utilize full cost accounting for twenty-five percent of their budget. There was also some interest on including additional programs of specific agencies in addition to the twenty- five percent. The committee voted to include the following six agencies for the pilot: Environmental Quality, Transportation, Administration, Corrections, Commerce and Public Health and Human Services. -2- The other proposal, LC 8588 provides for a private sector preference for the delivery of certain goods and services, provides for a commercial services inventory and specifies ongoing legislative monitoring of agency competition with the private sector. The legislation is aimed at ensuring public agencies are not directly competing or offering services that the private sector could provide at a comparable cost. As expected, this proposal generated a good deal of discussion ranging from the possibility of increased litigation from the private sector (if they are not allowed to provide certain services) to the desire of accurately measuring the avoidable costs of no longer providing the service publicly (severance pay, increased unemployment). While this testimony was certainly interesting, it is not clear that this is the result of the legislation. This. legislation simply seeks to identify areas where agencies might be providing services that could be provided for by the private sector (the commercial services inventory) and begins the process of establishing a framework to guide state agencies and the legislator in making the decision on various services. The inventory of services would be reviewed by the governor, the board of regents and/or the Business, Labor and Ag Committee to determine if further action should be taken. In any event, if a decision is made to recommend privatization, "a full review of fiscal and program considerations completed by the Office of Budget and Program Planning," must be completed. Updated draft legislation will be reviewed at the next meeting to be held on August 31. The Environmental Quality Council will recommend the legislature appropriate $2 million each biennium for grants to cities, towns and counties based on a report by the Land Use/Environmental Trends Subcommittee. The following proposals will be drafted into bills for consideration: establish a grant program for cities, towns and counties to pay for development and implementation of growth policies; statutorily allocate county land planning funds to a grant program for cities, towns, and counties; increase the percentage of coal severance tax revenue allocated for five programs including county land planning; eliminate the automatic county land planning payments; and authorize use of the Treasure State Endowment Program funds for the grant program. The EQC will communicate in writing to the Local Government Structure and Funding Committee of the need for and benefits of local growth policies and to encourage them to identify options that can address this need. They will also recommend that the lodging facility use tax continue to be considered a potential source of funds to pay for development and implementation of growth policies if new revenue becomes available. The EQC will continue to monitor the revenue raised by this tax as well as the use of that revenue. Proposed legislation will be voted on at the next meeting to be held in Helena on September I Ph and 12'h. Department of Revenue Stakeholders Mary Bryson, Director of the Department of Revenue has appointed members for the Stakeholder Advisory Council. The Montana Taxpayers Association is represented on the council. The purpose of the council is to review and comment on department operations and business proposals. More importantly, council members will communicate with and elicit feedback from the public concerning the department's operations and convey this to the department. At the first meeting, members were given an overview of current operations in the department. Proposed legislation from the department was shared as well. The Governor's Office will not decide until later this month which legislation will go forward, so these ideas may never materialize as draft legislation from the department. Nonetheless, it gives taxpayers an idea of possible direction of the department. Discussion on the proposals was limited to the concept and therefore council members did not communicate to the department support or nonsupport at this time. Following are some of the proposals. Enhancing Compliance •Encourage taxpayers to return self-reporting and income/expense forms for property tax purposes. Failure to return the forms would result in the taxpayer forfeiting their tax appeal rights. (Editor's note: this received big thumbs down from most members on the council). •Clarifies the department's legal ability to enter private property to conduct official department business (appraisal and audit work). •Clarify filing responsibilities for pass through entities: (partnerships, sub-s corporations, limited liability, and limited liability partnerships). The legislation would clarify filing responsibilities, impose penalties for failure to comply, and provide greater consistency between Montana tax law and federal tax law. *Reclassify television cable systems from Class 8- business equipment to Class 13-centrally assessed telecommunication services companies. (Note: although these two classes currently have the same tax -3- rate of 3%, reclassification could result in a new valuation methodology). #Authorize the department to send one notice of assessment for each parcel of real property, regardless of the underlying undivided interest in the property per a recent Supreme Court decision (Kneedler v. Jefferson County and League Wide. Enterprise-wide Processing and Collections #Request additional state agency participation in DOR's revenue processing center. •Transfer responsibility for processing county collection report from Department of Administration to DOR. #Provide the department's w is be filed in one central location rather than in ea?' ounty. •Allow for the accrual of penalt it hat may be assessed after a warrant for distraint has li filed. •Provides that a notice of levy whT issued has the same force and effect as a writ of execution and is continuous until fully satisfied. •Allow the DOR to charge a one-stop licensing fee to the business consumer to help cover costs of processing. Geographic Information Systems (GIS) •Provide funding to maintain the Montana Cadastral Data base project (a public/private cooperative effort to create a digital ownership database statewide). *Provide funding to support further enhancements to a statewide GISss`r???lr lrrl??E?lrrrrr€1'°'???u?i1rr?lrlr??,r?r? ?,! Confidential Records ?Specifies that certain tax returns, reports and records for centrally assessed property (railroads, public and private utilities, and airlines) are confidential. As legislation is drafted or approved by the governor, we will solicit your input. Mary Bryson also indicated, that as proposals are cemented, affected taxpayers will have an opportunity for input. At this point, no major tax reform legislation was presented. The Montana Taxpayers Association is very interested in hearing your comments on these proposals as well as other legislation or tax reform you have in mind. Let us know what you think. Reminder: Make sure and mark your calendars for our Annual Meeting coming December 6. More details will be coming in the following issues. Quote of the Month "An honorable government does not keep taxes to which it is not entitled. " Pimbu h & Midway Cod Mining Co. v. Ari=n An=9 Supreme Coml. July 1989. The following is taken from `Where the Montana Tax Dollar Goes, November, 1931, Bulletin, published by the Montana Taxpayers Association. The partial confiscation of property by taxation is not a twentieth century situation, but rather a condition existiag shme the -4?egiaithng - if'- tiliac. - -. `. Biblical history teaches us taxation ruined the °W6eV'6Hs?'ael and so on down through the pages of history mighty dynasties have fallen because of excessive taxes and over-much government. There is not a single exception to this historical fact. Our governments, federal, state, county and city, have been built up and expanded by politicians wishing to comply with the every-constant urging of tax beneficiaries.