Martin Kidston

(Missoula Current) Gov. Greg Gianforte's proposed tax relief plan for Montana includes a property tax rebate for two years, a cut to the state's income tax rate, and an increase in the child tax credit.

But it also goes deeper, calling for greater “transparency and accountability” in local government spending, and “greater fiscal responsibility” from local governments.

With the 2022 Legislature under way, both the city and county of Missoula are watching closely, looking for measures that address tax reform and take pressure off property owners by finding new sources of revenue. At the same time, the Governor's Office is pushing local governments to be more responsible with the funding they have.

“While the vast majority of local governments are good stewards of taxpayer dollars, some have been spending at a rate far higher than inflation and population growth, driving up the property taxes Montanans pay,” the Governor's Office told the Missoula Current in an email. “Montanans should know what they're paying for and how much their local government spending and tax revenues change year over year.”

The average county budget increase is 17-percentage points over population growth plus inflation, while the average city budget increase is 44-percentage points over, according to The Frontier Institute.
The average county budget increase is 17-percentage points over population growth plus inflation, while the average city budget increase is 44-percentage points over, according to The Frontier Institute.

The Governor's Office cited the latest research conducted by The Frontier Institute and its report, “The 2023 Real Local Budgets.” The report looked at the budgets of Montana's six largest cities and counties and compared them to population growth plus inflation over the last 10 years.

Since 2014, according to the report, Kalispell has led the way in budgetary growth among the state's six largest cities at 124% followed by Bozeman at 110%, Missoula at 105%, Billings at 78%, Helena at 51% and Great Falls at 8%.

Among counties, Gallatin has seen its budget grow by 97% since 2014 followed by Missoula at 54%, Yellowstone at 52%, Flathead at 47%, Lewis and Clark at 39%, and Cascade at 25%. The report summarized its findings by citing a need for “government spending restraint” and an improved budget process to protect taxpayers.

Officials with the city and county of Missoula said they didn't disagree that local governments ought to be fiscally responsible and transparent in how they spend taxpayer money, and both said they already practice such decrees.

But what they need from the state is “meaningful tax reform,” they said. Both local governments in Missoula have been vocal in recent years in suggesting the state's tax system is broken and that it relies too heavily on property taxes.

“Our budget has won awards for being a good local government budget. We have a great credit rating and a very transparent budgeting process,” said Missoula Mayor Jordan Hess. “We routinely take on really incredible projects for local government, and the proof is in the results.”

Hess added, “But we have a broken property tax system in the state of Montana. It's based on an economy that doesn't exist anymore.”

Missoula County commissioners agree that governments should be fiscally responsible, and they've acknowledged that local taxes are on the rise.

But at the same time, they wrote in a recent op-ed that “some folks continue to perpetuate the misconception that local government spending is solely at fault for this (rising taxes), when the real issue is Montana's antiquated tax system.”

“We agree with the governor in property tax relief and believe that figuring out a different way to fund local government is a priority,” said Missoula County CAO Chris Lounsbury. “The commissioners have worked very hard on the fact that giving citizens the option of having a different methodology for taxation would really make sense. We need to figure out a methodology to tap into the number of visitors to our state or find other ways to fund local government.”

Runaway spending or greater demand for services?

The Frontier Institute Report found that Missoula County's budget since 2014 has grown 12.3% faster than the growth of the economy as measured by population growth plus inflation.

attachment-County Budget

In 2022, according to the report, the county listed budget expenditures of $179 million. If it were based instead on population growth plus inflation, the county's FY22 budget would be around $159 million.

At the same time, the county's budgetary growth has slowed since 2019, the report found. The county said it's both fiscally responsible and transparent in its spending.

“The benefit of working in local government, being the closest to the citizens, is the fact that we have good systems in place to do that, including the fact that the public gets to elect an auditor that reviews every single claim the county pays, and publishes that data a couple times of month for the public to review,” said Lounsbury. “But in part we agree with the governor in that fiscal responsibly and transparency is really important.”

If growth in the county budget has slowed since 2019, the report found that growth in the City of Missoula's budget has accelerated, growing 52% faster than growth of the economy as measured by population growth plus inflation.

The Frontier Institute listed the city's budget expenditures in 2022 at $244 million – up from just $119 million in 2014. Based upon population growth plus inflation, the city's budget would be around $161 million in 2022, the report said.

attachment-Budget County

The report suggested that local taxpayers are “footing the bill for a combined $103 million more in spending” during Fiscal Year 2022 than if Missoula and Missoula County had increased their budgets each period since 2014 based on population growth plus inflation.

“Limiting local governments’ budget growth, and even reducing it as many families have done with their budgets when faced with rising costs, will provide more opportunities to provide tax relief,” the report concluded. “Local government officials should focus on holding the growth of budgeted expenditures to less than population growth plus inflation to ensure that the cost of government stays within the bounds of the average taxpayers’ ability to pay for it.”

The six city and counties cited in the report are governed by both Democrats and Republicans, eliminating the mantra that one party spends more than the other. Officials at the City of Missoula, who are primarily Democrats, maintain that they're simply providing essential services to demanding taxpayers.

“We have citizens who request and demand a high level of service. We never get people calling us to plow the streets less or cut the grass less. I think we a provide a really good value,” said Hess.

He added that the city and county will be active in the current legislative session in working toward reform and solutions to property taxes.

“We'll be active in the session with other communities around the state,” Hess said. “There's a lot of common ground to be had. We'll watch it and participate and hope for dialogue. But the proof is in the example of what we've been able to do over the years.”

Lounsbury said the county agrees, especially as the state passes greater costs and responsibilities down to local governments, from dealing with mental health to incarceration.

“We have a serious mental health crisis happening. We have serious challenges around substance abuse leading to overuse of our detention facility. Those are key things at both the state and local level, and also our federal partners,” Lounsbury said.

“The best way to get the best solutions is to include everyone at the table, and that's the state, the feds and local government. At the end of the day, we're all here to provide those services to our constituents.”