Cascade County taxpayers received supplemental tax bills with a letter from the county over the last week.

The bills and letters stem from a dispute last year between the Montana Department of Revenue and counties over state equalization mills.

The dispute went to the Montana Supreme Court, which ruled in November in favor of the state.

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

The Montana Association of Counties 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.

Montana Supreme Court rules in favor of state in dispute with counties over education mills

The state’s highest court ruled that “Montana counties must levy taxes according to DOR’s methodology for calculating statewide mills. MACo’s reading of the statute is irreconcilable with the Montana Constitution and clear intent of the Legislature and we defer to DOR’s longstanding understanding that it shares authority with local jurisdictions to ‘bank’ mills,” under state law.

MACo and the counties argued that the state was subject to the same cap on increasing property taxes that applied to local government agencies and that the DOR could not bank mills the way local government agencies can.

Forty-nine of Montana’s 56 counties opted last year to levy the lower number of mills, including Cascade County.

County authorizes legal defense for state education mill dispute

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

The difference equates to $3.7 million in Cascade County, Phoebe Marcinek, a deputy county attorney, said during an October county commission meeting.

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, according to county officials.

County opts to levy fewer education mills, likely setting up state lawsuit

Carey Ann Haight, chief deputy attorney for civil, said during an October meeting 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.

Multiple lawsuits were filed across Montana regarding the dispute over the education mills.

Since the Montana Supreme Court ruled in favor of the state, counties have been adjusting their plans to comply with the court’s ruling.

Diane Heikkila, county treasurer, said the county did a supplemental bill that taxpayers will pay in addition to the tax bill they received in November and both bills are due May 31.

Some of the other 49 counties chose to reprint the combined tax bills rather than printing a supplemental bill and that would have voided the bill taxpayers received in November, Heikkila said.

Cascade County officials consider whether to reduce education mills in dispute with state

According to the letter from Cascade County to taxpayers, the Montana Supreme Court determined that DoR has the authority to direct counties to levy above the current mill levy calculation limit annually if reserved mills are available.

The DoR, under the direction of Gov. [Greg] Gianforte and the governor’s budget office, is directing counties to levy extra mills they hold in reserve to generate additional revenue from property taxpayers in Montana. The Supreme Court ordered counties to comply,” the county wrote in it’s letter.

That means the second half of 2023 taxes had to be increased to comply with the state, the county wrote.

The increase is an additional 17.3 mills total, or 7.1 for state equalization aid, 6 mills for county elementary equalization, 4 for high school equalization and 0.2 for votech, according to the county.

“Please remember that the Cascade County Commissioners, Cascade County Treasurer’s Office and Department of Revenue employees did not play a role in Gov. Gianforte’s decision and the work they do requires adherence to and compliance with laws passed by the Legislature,” the county’s letter states.

Brian Patrick, business operations manager for Great Falls Public Schools, told The Electric in October that up until then 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 thought 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 in October.

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.

The county recommends calling the DoR call center at 406-444-6900 or email DORCustomerAssistance@mt.gov or Gianforte’s office at 406-444-3111 for questions or concerns.