Wonky Word Wednesdays: Protested Taxes

As you may remember, the Montana Budget and Policy Center was heavily involved in the push against I-172 – the Charter Communications ballot initiative. We even did one of our first wonky words on centrally assessed property taxes to help explain the issue. Last week, the Department of Revenue announced a settlement with Verizon (which we will explain in detail tomorrow), and this week the Montana Revenue and Transportation Interim Committee will talk about other pending litigation. These cases involve companies protesting taxes. So lets spend this week’s wonky word digging in to the issue of protested taxes.

Like many Wonky Words about taxation, this explanation begins with Montana’s Constitution passed in 1972.  The Constitution required the legislature to establish an “independent appeal procedure for taxpayer grievances about appraisals, assessments, equalization, and taxes.” Basically, Montana is required to have a system where people or companies can argue they have been taxed incorrectly and seek some sort of solution. So the state created the State Tax Appeal Board, along with County Tax Appeal Boards.  

Now there are formal ways to protest your taxes if you or your company believes your taxes have been assessed incorrectly. Missoula County even has step by step instructions to use. It is important to note that in Montana, when it comes to disputing property taxes, state law requires the taxpayer to pay the taxes, but under written protest. 

Property taxes comprise 12 percent of the revenue collected in Montana. That seems small, but not when you consider that 81 percent of property tax revenue is invested in local governments, including supporting local schools, public safety, and maintaining infrastructure. Property taxes are a critical piece of local government budgets.

When a company like Charter Communications protests its property taxes, the company pays the taxes, but those funds are held in an escrow account by the state. Generally speaking, those funds are unusable until the situation is resolved. This means that those local governments and schools are left with holes in their budgets – sometimes for years – until a settlement is reached.

In the US, individuals and businesses should have a system to dispute when an error has been made regarding taxes or other issues. People and government make mistakes, and there must be systems in place to correct those mistakes. However, it is important to realize the impact of large companies protesting significant portions of its taxes and what that means for our roads, schools, and local governments.

Tomorrow on the blog we will dig into the Verizon settlement and the issues surrounding protesting taxes.

Next week’s word will be back on the state budget. Thanks for being a part of wonky word Wednesdays.

“Getting by” Without a Bank

The Atlantic just published a great article on how difficult it is to handle money issues when you are poor. When You’re Poor, Money Is Expensive raises important questions about the role of traditional banks in our country and how complicated “getting by” can be.

My first thought when reading this article was the impact payday lending has on people’s lives. The subjects of this piece started with a loan of $450 and ended up owing more than $1700 with interest and fees. In 2010, Montana voters passed I-164, setting strict caps on payday lending which virtually eliminated this type of lending in our state. The National Conference of State Legislatures charts how other states handle the issue.

As I continued to read, I thought about how our society judges those who live in poverty and struggle to pay bills. People wonder why it is so hard and how can people fall so far behind. It is important to know that one in four Montanans are either unbanked (meaning they do not have a checking or savings account) or underbanked (meaning they may have a bank account but rely primarily on alternative – and costly – financial services, like payday loans, check cashing services, and nonbank money orders). 

The reasons why individuals do not use traditional bank services are varied. In rural places, especially on reservations, there are few, if any, banking institutions. Traditional banks often don’t fit the needs of low income individuals. People living in poverty need money orders, phone cards, wire transfers, and other services that payday lenders provide. Some do not trust banks, understand the rules and formalities, or are afraid of creditors or the government seizing assets. In addition, the inconsistency of paychecks can discourage employers from offering direct deposit. Then people must rely on paper checks to get paid, but to cash them, these individuals often are charged cashing fees. Adding the complication, without a checking account, cash must be delivered in person to pay bills – wasting valuable time and money.   

The article says that unbanked families spend 10 percent of their money replacing traditional banking services. Can you imagine using 10 percent of your income like that? No wonder families are stuck in poverty – each paycheck is gone as soon as it is received.

As I continue to think about this piece and how too many families are just one emergency away from ending up in these situations, I am glad I work at the Montana Budget and Policy Center. We will continue to work on issues like Medicaid Expansion, earned income tax credit, unemployment insurance, and other policies to help low-income families make ends meet. We want to give all families the opportunity to move ahead and plan for the future.

Wonky Words Wednesdays: General Fund

Did you know that the Montana Office of Budget Program and Planning (OBPP) is in full budget planning for the next Legislative Session in 2015? In order to get everyone up to speed by January, I decided that we need to start working our way though the numerous wonky words contained within the Montana state budget. Aren’t you excited?

Our lead off hitter is (drum roll please) – General Fund. Many people have heard of the general fund and can make a relatively good guess as to what it means. However, wonky word Wednesdays is more than taking a good guess. We want to have a working knowledge of what these words mean. 

The general fund is the money available for the state to use for most of its functions. General fund dollars do not include payments from the federal government or sources that restrict funding for specific purposes. The Legislative Fiscal Division wrote a great report on the budget and has helpful information on this topic if you want to dig deeper.

FY13 general fund

Think of the general fund like your main checking account. You pay for most of your bills out of this account. However, it is not the only money you have. You also have a retirement account, savings account, health and education savings accounts, or other pools of money to pay for specific things.  We will get into the “other pools” of funds the state has at a later date. 

Why is the general fund so important?

The general fund receives the most attention because it is 40% of the entire state budget totaling approximately $1.8 billion in FY15. About half of these funds come from state income taxes. Most importantly, money in the general fund can be used by the state for almost any purpose. So when a legislator wants to invest in a new program, he or she looks to the general fund to support it. The state invests over half of the general fund dollars into education. (We will talk more about how the general fund is used in a future edition of Wonky Word – appropriation.)

There are few wonky words as important to the lives of Montanans as general fund because we are all impacted by these dollars. We hope you will join us in working with legislators to help them balance the needs in our state with the limited resources available.

Keep checking back because we are going to get very wonky moving forward. Some of the budget words we will cover will include: appropriation, HB2, special revenue, ending fund balance, proprietary funds, present law adjustment, and so much more. Do you have other suggestions? Email me at tjensen@montanabudget.org or post something to our Facebook page.

State Tribal Colleges: An Important Investment

Investing state funds in tribal colleges is a smart use of state dollars. Tribal colleges benefit our state by providing a quality, affordable higher education to students regardless of race. The tribal college system in Montana stimulates our economy and increases the pool of individuals who are trained and ready for work. 

Tribal colleges rely primarily on federal funding provided through the Tribally Controlled Colleges and Universities Act. Under this Act, the federal government provides tribal colleges with funding based on the number of students who are members of a federally recognized tribe. These students are referred to as “beneficiary” students, and on average tribal colleges in Montana receive $5800 per eligible student enrolled.   

As we mentioned last week, “nonbeneficiary” students – students who do not belong to a federally recognized tribe but attend a tribal college – do not receive any federal support. This means that tribal schools must cover the costs of these nonbeneficiary students. 

In response to this funding gap, in 1995, Montana policymakers approved the Tribal College Assistance Program (TCAP) to help offset the lack of subsidies for nonbeneficiary students. Yet, while TCAP has provided much needed dollars to the tribal colleges, the per-student funding has fallen well below support of ‘traditional’ Montana schools.

As the graph below shows, per-student funding for Montana’s non-tribal two- and four-year colleges is nearly double the amount provided for non-beneficiary students at tribal colleges.

Tribal College Funding

 

 

Source: Mitchell et al., “States are Still Funding Higher Education Below Pre-Recession Levels,’” Center on Budget and Policy Priorities May 2014 and Montana Legislative Fiscal Report 2015 Biennium. 

*This number includes a one-time-only increase of $523 per student. Ongoing TCAP amount is $2,481 per student.

 

State policymakers should look to change the way the tribal college funding is determined. One potential solution is to align tribal funding with how community colleges in our state are funded.

But the bottom line is the tribal colleges in Montana play a critical role in Montana’s higher education system. Only a handful of other states have taken the opportunity to support tribal colleges – an investment which pays off with a more educated workforce and a stronger economy. Increasing the resources available to tribal college students would only expand that opportunity and push Montana even further ahead. 

The High Cost of Child Care: State Funding for Pre-K Would Benefit Montana Families

State funding for pre-Kindergarten is an opportunity to strengthen our state’s economy and help Montana’s hard working families.

The cost of high-quality child care is a significant obstacle for many working families. Many parents face frustrating choices: pay an excessive portion of their income in child care costs, choose lower-quality care, or quit their jobs. For families working hard to build an economically secure future, none of these choices are good options. Due to the steep cost of child care and incomes lower than the national average, Montana is ranked the 11th least affordable state for child care in the nation.

Quality, state-funded pre-K programs can help offset some of the child care costs that Montana families struggle to afford. Today, Montana is one of only eight states that does not provide any state funding to help pay for pre-K classroom programs. With child care for one four year old costing 13% of the average Montana family’s income, child care costs are a significant struggle for many families. State funding for quality pre-K programs could help offset some of these costs, improving the lives of our families and children.

>> Read MBPC’s full report here.

>> Read our blog post here.

 

On the Blog: US vs Belgium

Last week, we watched US play Germany and throughout the match discussed the various scenarios that would allow us to move on to the knockout bracket. Fortunately, USA made it! So we thought we would make the country comparisons a series as long as the US continues to stay alive at the World Cup. 

So on to our next head to head – US vs. Belgium.world cup soccer ball

Beer

I don’t think we can talk futbol or Belgium without talking about beer. In Montana, we love our beer. According to the Montana Brewers Association, there are 40 licensed breweries operating in the state that generate approximately $26 million of revenue and employ more than 350 employees. However, as proud as we are of our beer, Belgium is known for one thing – beer. And fries. Or chocolate. Anyway, Belgium is home to the world’s biggest brewer – Anheuser-Busch InBev that produces one in five beers sold around the world. (But guess where it gets the barley to make that beer?  Yep – Montana.)  Belgium also makes a bigger range of beer than any other country —1,131! We should also note that it is much cheaper to by beer in Belgium – 42.19% cheaper.

Employment

Thank goodness it is cheap to buy beer in Belgium because there are few jobs to go around. In Montana, our unemployment rate was a 4.8% in April. As proud as we are of this number, we know that there are still too many people struggling to find work and livable wages. However, I was shocked when I started researching Belgium to discover that it has a 17.8% unemployment rate! According to this report, it ranks in the bottom 5% in terms of jobs. Ouch!

Education

In Montana, our high school graduation rate was 84.4% in 2013. According to this report, 91.7% of our workforce has at least high school education compared to only 74.2% in Belgium. There are many factors that influence these numbers.  However, we know that education is important to economic growth, and these numbers seem to back that up. 

So even though Belgium beats us in beer production, we pull ahead in terms of jobs and education. Hopefully we will come away from this match later today victorious as well.

GO USA!!!

Many of our comparisons came to us from Numbeo, an online database of user-contributed information and OECD Regional Well-Being.

State Trust Lands: A Critical Investment for our Schools

Yellowstone National Park is big, covering a vast 2.2 million acres. In my park ranger days, based in Mammoth near the north entrance to the park, I learned the 3,472 square miles of our nation’s first national park is larger than Delaware and Rhode Island combined. However, the federally managed gem is small potatoes compared to the collective size of Montana’s state lands. 

Folks may be surprised to hear that Montana’s Department of Natural Resources (DNRC) manages 5.2 million acres of state land that are held in trust for our public schools, universities and specialized schools. In 2013 these trust lands “provided $400 in funding for each of the 143,000 students enrolled in Montana’s K-12 schools,” according to the “DNRC Economy,” a recent report released by the department

Congress granted land to new states following the Revolutionary War to help establish a source of ongoing support for services states need. Unfortunately, most states sold them off, wooed by short-term profit. Now, nine western states hold most of the remaining 46 million acres of state trust lands, collectively generating billions every year, and primarily for the benefit of public schools.

States continue to struggle with the best use of trust lands, and those uses have changed in the 125 years of state land management. However, the primary function of our state trust lands is to provide a steady flow of cash to invest in Montana’s schools and our children and provide that steady income into perpetuity.

Here at the Montana Budget and Policy Center, we rely on our leaders to make decisions that weigh the short-term economic benefits with long-term stability of budgets. In the case of state lands, Montana made wise choices years ago to hang on to these state lands that now generate approximately $60 million just last year. While state lands are significant and diverse, from the 13,000 acres of trails and recreation land in Whitefish, to the timberlands in the Swan Valley, to the most profitable oil fields in the Bakken, Montana should continue manage state lands carefully, protecting their long-term productivity.

On the Blog: US vs. Germany

Today, staff at MBPC have soccer on the brain because we are geared up for the World Cup match between US and Germany later this morning.

Unfortunately, we aren’t in the business of analyzing soccer. However, we are in the business of analyzing budgetary issues that impact regular people. With that in mind, we decided to do a to do a head to head comparison of US vs. Germany.world cup soccer ball

Getting fit to play soccer? It will cost you 15.41% more to join a health club in Germany than in the US, and your gym shoes will cost you 38.74% more in Germany.

Watching soccer? Playing soccer might be more expensive in Germany but Americans shouldn’t get too excited because watching soccer is a different story. A cable and Internet package will cost you 35.66% more in the US and your beer will cost you 52.85% more for an import. 

But the Germany vs. US comparisons can’t stop at soccer because there are a few things we can learn from our soccer rivals.

Maternity Leave. Germany far exceeds the United States in maternity leave. German mothers get up to 6 weeks before and 8 weeks after the birth of a child. Either parent can take up to 36 months of leave and up to 12 months is paid by the government. The United States is 6-12 weeks depending on the state, size of organization, and company policy.

University Tuition. As of next academic year, attending college in Germany will be tuition free (college was free until 2006 when fees were introduced in some areas). This is in stark comparison to tuition in the United States where tuition varies greatly. In Montana, tuition and fees to attend MSU or UM averages $6,399, and almost two-thirds of Montana students take out loans to pay for college, with an average total debt of $26,440. 

So even though the US could learn a thing or two from the Germans, we are hopeful that the US World Cup team (with our German coach and a few German players) will teach the German team a thing or two on the soccer field.

GO USA!!!

Many of our comparisons came to us from Numbeo, an online database of user-contributed information.

Wonky Word Wednesdays: Fiscal Year

For budget dorks like us at the Montana Budget and Policy Center, there are few days that get us excited enough to celebrate. One is April 15 – Tax Day, the other (and possibly most exciting) is July 1st – the start of a new fiscal year. To honor and celebrate this important day, we decided to dedicate this week’s wonky word to fiscal year. 

If you’ve worked in a business, nonprofit organization, or for the government, you are at least familiar with the term. Fiscal year is a period of time used for calculating yearly financial information. It is basically the period of time a business runs its budget and “opens and closes” its books annually. Seems simple right?

Generally it is, but different entities operate on entirely different fiscal years.

  • Montana and many other states have a fiscal year from July 1 – June 30. HAPPY NEW FISCAL YEAR MONTANA!
  • The federal fiscal year is Oct 1 – Sept 30 each year.
  • Many universities operate on the July 1 – June 30 cycle because it is similar to the school year.
  • Over half of the publicly traded companies in the US follow the calendar year as the fiscal year.
  • Nonprofit organizations have a wide range of fiscal years and can be anytime an organization chooses. The two most popular coincide with the calendar year and the July-June cycle. The third most common is the Oct – Sept cycle like the federal government. (That is how we roll here at the Montana Budget and Policy Center.) However, some choose anniversaries or other programmatic dates as the start and stop of a fiscal year.Fiscal New Year copy

The State of Montana is currently wrapping up fiscal year 2014 or FY14 for short. The Legislature meets in odd numbered years and appropriates funding for the two upcoming fiscal years. For example, this last session (spring of 2013), the legislature funded fiscal years 2014 and 2015. So as we write, agencies are busy reminding staff to turn in receipts and invoices so the state can close the chapter on one year and begin FY15.

So happy fiscal year everyone! We included a cartoon just for you. And remember, be safe and always find a designated driver for your fiscal new year celebrations.  

Check back each Wednesday for more wonky words. If you have suggestions, email me at tjensen@montanabudget.org or post something to our Facebook page.

 

Paid Leave Critical to Working Families

Yesterday, President Obama convened a group of big thinkers to discuss the state of working families in the U.S.  Did you know that 63 percent of children in the U.S. live in families where all parents work? A report released this week shows that of workers with the lowest wages only half are provided some form of paid leave time. This compares to 83 percent of higher income workers.  This means that when a child gets sick or an emergency comes up, many families are forced with a difficult choice of losing much-needed income (or even risk losing their job) or sacrificing the health of their loved ones. 

 Those without access to paid leave are also often the same families that are least able to afford reliable, quality child care.  (Check out our report on this issue too.) Often these parents are forced to give up pay to stay home with a sick child.  In a recent poll in conjunction with the Shriver Report, 96 percent of single mothers said that paid leave at their workplace would help the most.Paid Leave Graphic

The lack of paid leave time for working families hurts our economy.  About 30 percent of private-sector employees taking unpaid leave will incur new debt as a result of this leave. More debt means families have less money to spend in the local economy.

As the new study shows, there is growing evidence that implementing paid leave policies benefit families without imposing a cost on business. A survey of over 250 businesses with paid leave “found the vast majority – over ninety percent – reported either positive or no noticeable effect on profitability, turnover, and morale.” 

Policies that support working families, including paid leave and expanding access to quality, affordable pre-K programs, is a win-win for our children and families and Montana’s economy.