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Rob Port: North Dakota's budget cuts may hike tax bills

MINOT—Some of North Dakota's candidates for governor have promised that the state's falling revenues won't hit taxpayers. They've even gone so far as to promise that they won't raise taxes.

But that doesn't mean that your taxes won't go up. Your local taxes, that is.

"Everyone is taking pledges saying we won't raise any taxes and we won't do this," Democratic candidate Marvin Nelson told Jim Olson of KXNews in a recent interview. "But really what that just means is that they're just going to shove it all back down on the local level."

Nelson has not pledged to avoid tax increases. His Republican opponents—Attorney General Wayne Stenehjem and Fargo businessman Doug Burgum, currently engaged in an increasingly ugly primary competition—have made that pledge.

Nobody running for statewide office, though, is talking about what impact statewide spending cuts may have on local taxes.

For nearly a decade, North Dakota has tried to address angst over rising property tax bills with spending. More specifically, the transfer of local spending obligations into a state budget which has been flush with revenue surpluses.

They've been calling these spending transfers property tax relief, but that's a bit of a canard.

Over the previous four bienniums, major direct assistance to political subdivisions has increased by more than 200 percent, according to data from the Legislative Council.

The bulk of this increase comes from the state taking over a larger share of local school and social service spending, as well as direct property tax buydowns.

This was done in agreement with local governments, which were to reciprocate by lowering property taxes.

That property taxes still are a common complaint from North Dakotans is perhaps an indication that this spending hasn't trickled down into property tax bill savings for many in the state.

But let's set that point aside for a moment, and focus on a more pertinent question for the future.

What happens if the state can't afford to keep up this level of local spending?

Nelson has an idea.

"This is shaping up to be one of the largest property tax increases that people are ever going to be able to remember in history," he told Olson.

The scope of the problem Nelson alludes to might be some campaign trail hyperbole, but his underlying point is a sound one.

Every dollar the state cuts from its spending on political subdivisions—and there will be cuts, because the state simply doesn't have the money any more—is another dollar's worth of upward pressure on local taxes.

For years now, many observers, including this one, have argued that while the state could create the appearance of property tax relief with spending transfers, there one day would be a reckoning when the state no longer had budget surpluses to hide the transfers in.

It seems that reckoning may be upon us.

State leaders may come to rue the day they took the lid off this particular can of worms. Property taxes are a local issue. Rather than pushing back years ago when local elected leaders passed the buck on rising local taxes, our state leaders tried to fix a tax they have little control over.

Back when the state was enjoying a tsunami of tax revenues, it was easy to throw state money at the local property tax problem.

The consequences of that short-sighted decision are here now.

Port, founder of sayanythingblog.com, a North Dakota political blog, is a Forum Communications commentator.

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