Cascade County officials voted during a special meeting Oct. 11 to set the state education equalization mills.

The Montana Department of Revenue has directed counties to collect 95 mills for the statewide tax that supports public education funding.

The Montana Association of Counties has argued that the state’s mills are also subject to state law which limits increases to the amount actually assessed in the previous year plus half the rate of inflation. That’s the same cap local governments are subject to when adjusting property taxes.

That amount, under the cap, is 77.9 mills, according to several counties and the Montana Association of Counties.

Cascade County Commissioners voted 2-0 to set their levy at 77.9 mills. Commissioner Joe Briggs was out of town.

Commissioner Rae Grulkowski said that “either way we go, it appears there could be issues.”

Carey Ann Haight, chief deputy attorney for civil, said she expects the issue to go to the Montana Supreme Court since several legal cases have been filed already.

She expects that the Legislature will also have to take up the issue during the next session.

As of Oct. 11, 38 other counties had opted to mill 77.9 mills instead of the full 95, according to Diane Heikkila, Cascade County Treasurer.

Paige Miller, of the county treasurers office, said she was concerned with levying the full 95 mills since it would be subject to protests and her office could be flooded with protests while they’re trying to collect taxes, overwhelming her office.

Cascade County Commissioners applied the same tax cap methodology to the vocational-technical education levy and opted for the lower amount of 1.3 mills, versus 1.5 as directed by the state.

That means a reduction of $44,596 for the Montana State University, according to the county.

Only five counties are levied for votech as those are funds are only collected in counties with a votech college.

Grulkowski said that since those votech colleges were no longer funded locally but through the state and they also collected tuition, she was fine will levying the lower amount.

If all counties levied 77.9 mills, it would be an estimated $80 million reduction in state education equalization funds, according to the Montana School Boards Association.

Counties asked Montana Attorney General Austin Knudsen for a legal opinion but his office responded in late September that it would be more appropriate to address the question in court. He said in his response that the Montana School Boards Association was also considering litigation over the matter.

Several lawsuits have already been filed in Montana regarding the dispute.

In Yellowstone County District Court, the Montana Department Revenue is being sued for overtaxing.

In Missoula County, the state is suing the county for lowering the mills levied.

On Oct. 10, the Montana Quality Education Coalition filed suit asking the Montana Supreme Court to issue an emergency order requiring counties to collect the full 95 mills.

Justice Laurie McKinnon issued an order Oct. 11 granting counties 30 days to respond.

Cascade County Commissioners met Oct. 4 to discuss whether to levy the full 95 mills or reduce the amount to 77.9.

Phoebe Marcinek, a deputy county attorney, said that there were a number of factors for commissioners to consider, including the risk of litigation, funding for schools and how to make up the money if they mill the lower amount, are sued by the state and loose.

The difference equates to $3.7 million in Cascade County, Marcinek said.

Haight, chief deputy attorney for civil, said that commissioners essentially had two options, levy the full amount and be sued by taxpayers, or levy the reduced amount and be sued by the state.

In Missoula, the state sued for declaratory relief, asking the court to issue a determination on the statutory interpretation. Haight said that decision won’t be issued before Cascade officials have to make a decision and while it would offer guidance, wouldn’t be binding for Cascade County.

“The potential for Cascade County to be sued either way is real and very likely,” Haight said.

Haight and Marcinek said that if the commission levies 77.9 mills, the Montana Association of Counties will provide legal defense.

If the county opts for the full 95 mills, MACO won’t provide a defense and the county would have to handle the matter itself.

MACO is the county’s insurance provider.

If commissioners levied the lower amount and lost a lawsuit from the state, they could use a judgment levy to collect the $3.7 million difference from taxpayers. The county has used that option once before when it lost a lawsuit, the lawyers said. The process for a judgment levy is spelled out in state law, Marcinek said.

Or, commissioners could make up the $3.7 million from existing county funds to give to the state, she said.

The lawyers have considered levying the full 95 mills, keeping the $3.7 million in reserve until the legal issue is resolved, then give it to the state or reimburse taxpayers. Haight said she wasn’t sure of that was possible or how it would work, but it was an idea being discussed internally.

Haight said no matter how the Missoula or Yellowstone cases are decided, the matter will likely end up before the Montana Supreme Court and be addressed in some way during the next legislative session.

The county treasurer’s office is sending tax bills to the printer Oct. 13, so said they need the decision by Oct. 11 to make any updates.

Commissioners were scheduled to make a decision during their regular Oct. 10 meeting but due to a public notice issue pushed it to a special meeting on Oct. 11.

Marcinek said during the Oct. 4 meeting that the state has statutory obligations to fund public schools so if the county levied fewer mills for the equalization fund, schools wouldn’t get less funding, but the state might have to pull funds from somewhere else if there were a shortfall.

Brian Patrick, business operations manager for Great Falls Public Schools, said that up until now the state education equalization funds went into the state’s general fund.

During the last legislative session, the state created a special fund for the equalization mills and if counties levy less than 95 mills, Patrick said it may not impact GFPS this year, but thinks the impact will reduce the guaranteed tax base of school funding long-term.

“Reducing the income to the 95 mills jeopardizes the guaranteed tax base system. If the legislature chooses to drop GTB rates in an attempt to make up the loss of $160 million in revenue, they would have to drop the rate from 254 percent to 154 percent. The difference would be made up by local taxpayers in areas with low taxable value, resulting in the possibility of a lawsuit against the State for underfunding education,” according to the Montana Association of School Business Officials.

Patrick said that the less the state funds of that percentage, the more local taxpayers will have to pay.

Patrick said it would benefit the district to have additional state money to help with bond payments and several other areas that would have lowered local taxes.