State Legislators have made many successful efforts to reduce property taxes in North Dakota over the last few sessions. Now, going forward, an interim committee is tasked with looking at an area that could lead to one of the most logical tax relief efforts. The Interim Political Subdivision Taxation Committee along with a working group are studying county social service funding in order to develop a funding formula for the transferring of the entire cost of county social services to the state. If the plan ultimately meets Legislative approval, property taxpayers would no longer be responsible for covering the county social service budgets- resulting in true property tax relief.
NDACo’s Assistant Director of Policy and Programs, Terry Traynor, testified before the committee. His presentation emphasized how property tax reform, as well as relief, can be accomplished through this initiative. The message that seems to resonate with legislators is that property tax is a “poor fit” for funding social services.
“Many other local services can more easily be related to the value of a person’s property; like fire protection, police, road and street maintenance, parks and recreation,” Traynor said. “Social services are more of a stretch. Yet, social services consumes a large portion of the total budget for many counties. In addition, counties have little authority over the spending on social services as a majority of the services are mandated by state and federal rules.”
The biggest argument for reform however is how the current system levies a very unequal burden among property owners. Traynor provided lawmakers with three examples of homes for sale of roughly equal value in Mercer, Cass and Ramsey counties to compare what the owners have paid in the past for social services. The owner of a $300,000 home in Ramsey County paid 4.5 times as much in property taxes to support Social Service taxes than someone with a similarly valued home in Mercer County.
“That’s why we think this is true reform,” said Traynor.
The Legislature took an initial step in providing tax relief and reform through social services by taking over the cost of grant and program costs for foster care, adoption and other programs. That move totaled $8.5 million in county costs, or about 12% of the county social service spending. What remains is largely staff costs. With the exception of $3 million in local option services, most costs are driven directly by federal and state required services.
For at least 30 years, counties have been urging the Legislature to reduce the property tax burden of social services. Traynor provided insight to how this could be accomplished. Approximately $110-$120 million would be used to reimburse county costs of state programs including salaries, benefits and space on a caseload/workload basis. The reimbursements should also recognize the cost differences due to county size and rural nature. He highlighted the most important factors of: counties retaining their current administrative role, no counties should see a decrease in funding and maintaining provisions are included for “local-option” services.
“We need to recognize the funding counties are providing for local services like food banks and in-home health care, and ensure that these necessary local services do not erode. We can’t deprive people of services at the local level,” Traynor added.
Legislators shared many questions and concerns. Most of the questions focused on the efficient delivery of services. Traynor addressed their concerns by highlighting how counties have found and continue to look for efficiencies in delivering social services. Nearly every county shares some kind of social service resource. Traynor pointed out that as a funding formula is developed it should provide incentives for counties who do find efficiencies or share resources where appropriate.
Overall, the state and counties together spend $3.1 Billion in a biennium on human services. The state spends $3 Billion and counties spend $120 million. Traynor pointed out that the state has a tremendous investment in this area; the county share is a small, but critical, portion.