Updated State Revenue Forecast Could Impact County Road Funds

Governor Jack Dalrymple is expected to hand down an order for state agencies to make budget cuts Monday. That’s when the findings of a new state revenue forecast will be released.  State officials requested an updated forecast due to general fund revenues falling short of projections, hundreds of millions of dollars short. In order for the state to tap into the Budget Stabilization Fund to backfill for lost revenue, state agencies would first have to make across the board budget cuts of up to 2.5%. This is referred to as an allotment. 

 

So what could it mean to counties? Director of the Department of Transportation, Grant Levi tipped off county engineers that the budget cuts will more than likely result in a trimming from the “one-time” road funding non-oil producing counties are expecting to receive as a result of the passage of HB 1176.

 “The $112 million you were expecting to get February 1^st will be impacted by the General Fund reduction. What I’m hearing is not “if” but “how much”, Levi told the group at the Association of County Engineers conference.

Any adjustment made in general fund reductions will be the same percentage those 2016 road funds will be reduced. The road funds approved early in the 2015 Legislative Session, through passage of the “Surge” bill, will not be impacted because those dollars were appropriated from the Strategic Investment & Improvements Fund (SIIF).    

Levi continued, “We are coming off a period of time of historic investments. Those were needed and future expenditures are still needed.”

Counties are already seeing budget impacts due to oil, sales and fuel tax collections being down. Levi said the Highway Distribution Fund is 13-15% behind projections. Those numbers coincide with a drop in truck traffic. Traffic volumes are similar to 2011.

The expected general fund reduction could also impact other county funds as well. NDACo will attend the review of the new revenue forecast and provide updates.

Study to Review ND Correctional System

An exciting step was taken this week at the Capitol. State officials and legislators formally launched an effort to analyze North Dakota's criminal justice system. The state is partnering with the Council of State Governments (CSG) to review data as it relates to prison and jail populations. After after an in-depth study, CSG will present policy options to the Incarceration Issues Committee to review and potentially develop legislation to be considered during the 2017 Session.  North Dakota is the 25th state CSG has assisted in looking for ways to address justice reinvestment. NDACo is encouraged by the study and is working with CSG in collecting county data.

NDACo Surveys County Jails
In anticipation of the interim study, NDACo this fall conducted a survey of the 23 county jail facilities. NDACo presented our findings to the Incarceration Issues Committee. The survey proved to be very insightful, showing that counties are taking major steps to address locally one of the top issues in the state. NDACo discovered nine counties have plans to expand their correctional facilities. It’s simply the result of county jails being at or over capacity across the state. Sheriffs’ deputies are forced to drive three to six hours, across the state, to transport inmates to a facility with availability. In some cases counties have made arrangements with out-of-state facilities to take inmates. The “jail space crunch” is also felt at the state level. Shortly after the state prison expansion was complete, it was full. In response to the issue, the Legislature this interim has formed a specific committee to examine the space issues and explore reform initiatives that could result in proposals for the 2017 Session.  
 

How many are behind bars? Where?

On September 1, 2015, 3,340 people were behind bars in North Dakota. What’s striking to NDACo is that 56% of those incarcerated were sitting in county jails. There were 1,585 inmates serving sentences at the North Dakota State Penitentiary, James River Correctional Center, Missouri River Correctional Center and at the Dakota Women’s Correctional Rehabilitation Center. The number of inmates housed in county jails was 1,754; this includes some state sentenced inmates contracted to be housed in county facilities. 

North Dakota county jails consistently house a greater percentage of our state’s offenders than local jails across the country. Nationwide, local jails house 35% of the total inmates. What’s interesting is the make-up of the county jail population. Only 18% of the county inmates were serving a jail sentence on the survey date. 57% were awaiting trial, revocation or transfer to the state prison.

Data provided by DOCR to the interim committee suggests their facilities have seen a 36% increase since 2005. However, county jails have also seen significant growth in the last ten years of 82% with the most rapid growth occurring in the last couple years. 

Transporting inmates a temporary solution

North Dakota has 23 jail facilities licensed to hold prisoners more than 96 hours.  While the current capacity of all our jails is 1,747; there were 1,754 inmates in those jails on September 1^st.  In 2014, jails in Bottineau, Burleigh, McKenzie and Ward counties transported inmates every day due to the lack of beds. Three other facilities transported inmates 90 or more days last year. Those who transport the most face enormous transportation and housing costs. To give an example, Burleigh County spent more than $700,000 in 2015 housing inmates outside their facility.

Counties plan to increase jail capacity 48%

Several counties have set in motion plans to solve the crowding issues at the local level. Nine counties (Burleigh, Morton, McKenzie, Williams, Mountrail, Ward, Mercer, Bottineau and Rolette) are currently planning or in the construction phase of replacing or expanding their jail facility. In addition, Stutsman County is considering an expansion. Those expansions would increase statewide jail capacity by 840 beds or 48%. A majority of the additions would be operational in the middle of 2017.

Click here to download the NDACo County Jail Presentation

Social Service Working Group Meets

NDACo President, Steve Reiser and Governor Dalrymple during Social Service Working Group Meeting

We captured this great moment during the Social Service Working Group meeting. NDACo President, Steve Reiser and Governor Dalrymple are preparing to go over details of the proposal to shift the funding of county social services to the state revenue sources.

Formula to Fund Social Services Pitched to Lawmakers

Legislators got a first glimpse of a formula that could be used to fund social services. The Interim Political Subdivision Taxation Committee is studying the possibility of transferring the cost of social services from counties to the state; taking over the entire 20-mill social services levy. It is this committee that will move forward any proposed legislation or recommendations to the 2017 Legislative Session. Governor Jack Dalrymple, along with Deputy Tax Director Joe Morrissette, presented the proposed formula for state reimbursement of county social service costs to the committee.

“We have been gathering a tremendous amount of data. There has never been this kind of comprehensive look at what counties pay for social services,” Governor Jack Dalrymple told committee members.

The formula is based on the caseloads for each economic assistance and social service program in each county. There are many factors included in the formula including an inflationary adjustment and adjustments for counties at the high and low end of the caseload spectrum.  The intention of the model is to make sure counties are reimbursed for all their social service costs. Program costs associated with local-option services, not mandated by the state, are also included in the base costs.

Dalrymple added, “It looks promising. The cost to transition is affordable.”

The total cost of the transfer is estimated to be $130 million. The Governor has reiterated the motivation for this action is to provide significant property tax relief. He emphasized that this would be a $130 million savings statewide to property tax payers.

The idea does have support from many committee members, many referring to the fact that property taxes are a poor funding source for social services. Social service programs and services have nothing to do with a property’s value - unlike other services funded by property taxes like roads, parks, and law enforcement. In addition, counties have very little control over social service costs due to the numerous federal and state mandates.

“Justification to do this is on the table. We just have to find the right way to do it,” said Senator Dwight Cook.

Steve Reiser provides testimony to committee

NDACo Board President and Dakota Central Social Services Director Steve Reiser, Traill County Social Service Director Kim Jacobson, Wells County Commissioner Randi Suckut and NDACo Assistant Director Terry Traynor also testified to the committee. They illustrated ways counties are already sharing numerous services and, in some cases, have found efficiencies by forming social service districts. They also addressed some of the unique services they provide in their county.

The legislature actually began the reduction in property tax by assuming $23 million in county costs during the 2015 Legislative Session.  Senate Bill 2206, which prompted the larger study, shifted certain “program” or service costs that prior to January 2016 were billed to the county by the State.  NDACo Assistant Director, Terry Traynor shared preliminary data that reflects that counties were able to reduce their social service levies by an average of 2.83 mills, or an 18% reduction. That legislation has already led to lower property taxes as intended.

“This exceeds our initial projections. It is reflective of what happens when the state cuts costs, the levies will go down,” Traynor added.

Governor Dalrymple met with Social Service Directors during a separate meeting. He provided insight into the formula and answered any questions they had related to the funding plan. He reassured them the plan is to have staff stay 100% county employees, that the county will deliver 100% of the services and that the formula is designed to allow for fluctuations in cases.

“It is our intent the funding mechanism will cover all the costs and the formula will self-adjust.” Dalrymple continued by thanking Social Service Directors for the job they do every week. “You have a difficult job that works with various technical aspects. We want to make sure you have the resources you need to do your job.”

Interim Committee to Consider Changing State Law to Reflect Same-Sex Marriage Ruling

NDACo provided information to the Interim Judiciary Committee regarding the impact of the U.S. Supreme Court Ruling to allow for same sex marriages. North Dakota counties have complied with the high-court's ruling. No couples have been refused a marriage license based on their gender. The ruling has had minimal impact on the county offices who issue licenses and conduct marriages. In 2015, there were 66 marriage licenses issued to same sex couples in North Dakota, that's out of 4,707 total. 16 counties have issued same-sex marriage licenses. 20 were in Cass County, 12 in Grand Forks, 11 in Ward, 6 in Burleigh and the remaining counties had 1 to 3.

This data does not include the first couple weeks after the court ruling. The County Recorders Association estimates approximately 10 marriage licenses were issued to same-sex couples in that time frame. Those marriages were not tracked as such because a new application form had to be developed and distributed to include a check-box to reflect the gender of the applicants.

In counties where a county employee has had personal conflicts with issuing same-sex marriage licenses, the county commission has appointed or transferred those duties to other staff members. There have been three counties who have found alternative employees to assume the responsibility.

NDACo drew committee member's attention to section of state law that defines and refers to marriage as a contract between "one man and one woman" and areas were spouse refers to "a person of the opposite sex". These are areas of the code, lawmakers will need to decide if they should change to reflect the new Constitutional right. Doug Bahr, litigation director for the state Attorney General's office said it could cause confusion for political subdivisions, as well as the state, with regards to taxes, licensing and other types of issues if the Legislature does not make changes to the state statutes that make reference to "husband" and "wife".

The Interim Judiciary Committee took no action during this hearing. They plan to do more research into what other states are doing. Any recommendations for changes would be presented during the 2017 Legislative Session.

NDACo Supports Updated Election Equipment in 2017

DeAnn Buckhouse, Cass Co., shows Sen. Jon Casper new e-poll books

County Auditors have concerns with aging election software and equipment. Ballot scanners purchased with federal funds from the Help America Vote Act (HAVA) are over a dozen years old. Several counties have experienced problems with the scanners, Cass County Auditor, Mike Montplaisir shared his concerns with the aging equipment.

"Some scanners will not pass our rigorous testing requirements and others fail during Election Day and have to be replaced with a spare scanner," said Montplaisir.

An issue of this nature is of great concern to auditors who want to ensure voters that every vote is counted accurately. Electronic poll-books are also out-dated. North Dakota is not alone. According to the National Conference of State Legislatures (NCSL), most states are also in the same dilemma; deciding when and how to fund new election equipment. NCSL held a meeting recently that included county auditors, NDACo, Secretary of State staff and legislators. The discussion focused on the technology involved in administering elections. The group shared insights and ideas for the future need with emphasis on costs and funding. NCSL staff led the conversation, which helped the group identify what a new voting system should include.

Tour of Cass Co. warehouse where election equipment is stored

Cass County has already identified the need for newer equipment by funding new e-poll books and election software in 2015. This was a $320,000 investment by the county. Cass County auditor Mike Montplaisir told the group, "our county commission views elections as a core government service and they are willing to fund what we need. Our big concern is that this equipment is dated and we need ballot scanners that are digital. The equipment is available that addresses these concerns."

The Secretary of State's office says they will include a funding request for new election equipment in their 2017 budget. The preliminary cost estimate is $20 million.

County Auditors will have a major role to play in educating their local legislators on what equipment is used in their county and how it is in dire need of replacement.

NDACo Emphasizes Social Service Funding will Provide Tax Relief

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.