BISMARCK, N.D. (AP) — North Dakota voters could largely eliminate property taxes this fall by approving a ballot measure that opponents say would sharply cut a range of government services but supporters argue would provide long-sought relief that the state can afford.
If passed, the constitutional initiative would eliminate the assessed value-based property tax and require the Republican-controlled Legislature to replace the lost revenue. A top legislative panel estimated the total cost every two years at $3.15 billion — a huge figure for a state that passed a $6.1 billion two-year general fund budget in 2023.
Opponents wonder what government services and initiatives would be cut to cover replacement revenue.
“It would be absolute chaos for the Legislature and for the appropriations process, something we’ve never done before,” said longtime Rep. Mike Nathe, a Republican on the House Budget Committee. “We will be blind,” that’s for sure as to how to proceed.”
Money for Medicaid expansion, hospitals, nursing homes and education programs could be on the line, he said. Funds for infrastructure projects would also be at risk, said Republican House Budget Committee Chairman Don Vigesaa. Lawmakers may also need to cut state agency budgets and staffing levels, he said.
Action leader Rick Becker responded that it was not practical to identify sources of funding for the initiative, but that the state had enough money to fill any gaps. He said lawmakers could exploit revenue from the state’s $11 billion in oil tax savings, as well as millions of dollars for “corporate welfare” of private companies and interest groups. The state’s revenues are also better than forecast, he said.
“We are such a rich state per capita that we can actually make this transition and afford it without raising taxes and without cutting services,” said Becker, a former Republican state representative.
More than 100 organizations from agriculture, energy, education, health care and other groups formed the Keep It Local coalition to oppose the measure. Chairman Chad Oban described the initiative as a solution to a problem that deserves a more thoughtful approach.
A similar measure clearly failed in 2012. Oban said he expected a narrower vote margin because of greater frustration and political changes in North Dakota since 2012, but added he was confident voters would reject the measure.
The measure would set the state’s replacement revenue at the level of property taxes collected in 2024, but Oban said tax revenue would need to enhance in future years.
To combat this, Becker said local governments could tax real estate in other ways, since the measure only eliminates the assessed value tax on real estate. Becker has suggested that cities could establish an infrastructure maintenance fee based in part on street frontage, giving local governments the opportunity to generate revenue beyond what the state would replace.
Lawmakers could enhance income and sales taxes, introduce up-to-date or never-before-considered fees or allow local governments to raise taxes in different ways, Oban said. Sales tax increases could aid massive cities like Bismarck and Fargo, but it wouldn’t work for rural communities that don’t have a sales tax base to fund their schools and law enforcement in the future, he said.
Property taxes account for about $45 million, or a third, of the city of Fargo’s budget, and about 40% of the budget is earmarked for police and fire services, Mayor Tim Mahoney said. North Dakota’s largest city has nearly 200 police officers and 150 firefighters, and it must offer competitive pay to retain employees and attract up-to-date ones, he said.
“Even the cost of living or things like that that happen every year, in order to stay competitive, if you have a fixed amount of money, you have to offset it somewhere, and that’s not an easy solution,” Mahoney said.
Last year, lawmakers passed a package of income tax cuts and property tax credits worth an estimated $515 million. The state has a stellar financial picture, including robust oil and sales tax revenues.
The majority of the measure, if passed, would take effect on January 1, 2025.
