Montana Supreme Court Sides With Governor Gianforte In Property Tax Dispute

After most of Montana’s counties tried to lower your property tax bill, arguing the state was levying too much, the Montana Supreme Court unanimously said Nov. 22 the state had it right after all.

The Montana Supreme Court ordered counties levy the amount calculated by the state for schools in a ruling Nov. 22, the full 95 mills, after most county commissions had decided en masse to levy less than that amid concerns over high property taxes statewide.

“Counties have authority to levy mills according to local interests. They also have authority to bank certain mills and levy them later. In the case of statewide mills, however, that authority rests with the State alone,” the Supreme Court said.

The court found the department’s interpretation of its taxation authority is consistent with the Montana Constitution and the Legislature’s directive to equalize funds for public education across Montana, meaning counties will be required to levy the full amount for schools. The governor issued a statement in appreciation for the court bringing clarity to the issue, however counties are upset the court’s verdict would result in higher taxes.

Beaverhead County Commissioner Mike McGinley, named in the suit, said, the Supreme Court gave the Department of Revenue, “a non-elected agency, the right to raise property taxes.”

“People are going to be furious,” McGinley told the Daily Montanan Wednesday. “I don’t know what they were thinking… they got the black robes and I don’t, so I’ll live with it.”

Gov. Greg Gianforte, however, said the court’s decision reaffirms the obligation to “ensure each Montana child has access to a quality education, and we won’t defund our public schools,” in a statement. “Ultimately, property taxes are too high,” Gianforte said.

The Montana Association of Counties sued the Department of Revenue, arguing the department was wrong in how it calculated statewide mills, which the counties have to administer. Counties said, according to the filing, they had the “exclusive authority to levy statewide school-equalization mills, and the State may not require them to do so.” The department asked the Supreme Court to decide who was right.

A majority of counties – at least 49 of 56 – levied 77.9 mills, as opposed to the full 95 mills, as part of a local solution to help homeowners with anticipated increases in property taxes. One mill is equivalent to $1 owed for every $1,000 of a property’s assessed value.

Valley County was one of the 49 Montana counties that levied the lower amount of mills. This resulted in a tax decrease of $500,000 for Valley County residents. This tax money will now have to be recovered by Valley County and will be assessed in May of 2024.

School equalization distributes money to ensure a quality education for all students, no matter if they live in a taxing jurisdiction with a high population or a more rural one, as required by the state’s constitution.

The state sued Missoula County for levying less than the full 95 mills earlier this fall, and this case is still open.

But in the MACO case, the Supreme Court sided with the Department of Revenue, meaning counties will have to levy the full 95 mills, saying the counties’ reading of state statute was “irreconcilable with the Montana Constitution and clear intent of the Legislature.”

Chief Justice Mike McGrath said in his opinion the court recognized that statewide property evaluations have “increased by 39 percent for all classes of property and 48.5 percent for residential properties.” The court recognized the department responded to the rise in property values by increasing statewide mills, which is estimated to increase tax revenue by $80 million, and counties argued mills should decrease to lessen the impact of property taxes on residents.

In his statement, the governor cited the rebate that was available to property owners for $675 for the next two years, but said he was still committed to long-term reform, “including holding the line on local spending that drives property tax increases.”

Commissioner McGinley said people have come into his office complaining about the property tax increases, he says he’ll have to tell them they’ll be going up in May.

“Whenever you hear the governor or the state legislature say that property tax keep going up because of greedy county commissioners, remember this case when 49 of the 56 counties tried their best to control these increases,” he said. “I cannot believe that a conservative Republican legislature did this to the people in the state of Montana.”

In his opinion, McGrath went back to the 1972 Constitutional Convention, saying the writers’ intent was for the tax structure to be determined by the legislature.

“The delegates had the foresight to envision an occasion, like here, when local jurisdictions would become frustrated by the State’s taxation authority,” he said in the filing.

The court generally defers to a state agency on questions of statutory interpretation, the decision read, when said interpretation has “stood unchallenged for a considerable length of time.”

“Department of Revenue’s methodology has been untested for two decades, and its interpretation of the statute is consistent with the State’s constitutional directives,” the opinion read.