We learned this week that the Department of Revenue settled a property tax dispute with NorthWestern Energy, which will lower the overall market value of its centrally-assessed property from what DOR had originally certified as the value for 2016. We thought this would be a great opportunity to do a quick refresher course on property taxes, how they are assessed, and what this will mean for you and your community.
First, let’s go through some basic information on property taxes.
NorthWestern Energy is the state’s single largest property taxpayer, and the company is a centrally assessed taxpayer. Centrally assessed property is property owned by a company operating as a single entity and connected across county or state borders. This includes things like railroads, telecommunication lines, power lines, natural gas or oil transmission lines, and airlines.
How are property taxes calculated?
The Montana Department of Revenue is in charge of appraising – or valuing – property in the state every other year (for centrally assessed, it happens every year). This amount is called the market value. The Department determines the market value for the entire company and then assigns pieces of that value to counties and local jurisdictions based on the percent of property (or mileage) in that jurisdiction. The Legislature has assigned a tax rate to each type (or class) of property, including types of centrally assessed property. The market value is multiplied by the tax rate to determine the taxable value. On a local level, individual local taxing jurisdictions (this would be city and county governments, local school districts, and some smaller special districts, like fire districts) determine the amount of revenue it can levy (with strict limitations) to help fund schools and local government operations, called mill levies. A mill levy is a tax rate per thousands dollars of taxable value of property. Once the taxable value is determined, each local taxing jurisdiction applies the mill levies to the property’s taxable value to determine the property taxes owed.
How each local government and school determines the number of mills it can levy is based on complicated formulas, which are primarily tied to the local government’s or school district’s current budget, the overall tax base in the jurisdiction, and some slight modifications based on inflation and growth. In this case, the Department of Revenue had already certified the total tax base for each local taxing jurisdiction, so counties and local governments had already set their mills.
So what happened with NorthWestern property value?
Toward the end of 2014, Northwestern Energy purchased eleven hydro facilities from PPL Montana for about $870 million. NorthWestern has also reported increased acquisition of natural gas assets and a series of upgrades to its system. All of these changes impact the value of the company. The Department of Revenue took into account this additional value for purposes of 2016 property taxes, and certified taxable values for counties reflecting this increased value.
NorthWestern Energy informally disputed the Department of Revenue’s new market value, and from statements made in the press, it sounded like this could have been headed toward a formal protest, which bottles up a good portion of the tax owed and puts schools and local communities in a very tough spot. The final settlement on this year’s tax bill reduces NorthWestern Energy’s total tax bill by about 8 percent.
What does this mean for local communities?
For those taxing jurisdictions that include NorthWestern Energy property, they will see their overall tax base go down and will generate less property tax revenue (at the current level of mills). Of the 1,300 taxing jurisdictions in Montana, about 900 will be impacted by this settlement. The below chart shows the difference in taxes assessed, for all taxing jurisdictions located in that county. (This is not what the county government gets, but for sake of simplifying the 1,300 taxing jurisdictions, we’ve lumped them together by county to give a sense of where impact is greatest.) For most, the percent change in total taxes assessed is less than one percent. However, for a community or taxing jurisdiction with a large NorthWestern Energy presence, the impact is greater – between two and five percent change.
Because this settlement will have such an impact on some communities, the Department will allow local taxing jurisdictions to request a new certification of the tax base. In that case, it can then go back and change its mills to make up the loss in revenue. This would mean a potential increase in property taxes for all property taxpayers in the jurisdiction.
What are we hearing so far from communities?
Some local jurisdictions have said they will absorb the loss in revenue – through the use of reserves or possibly cutting back services. But for some communities, this loss of tax base will have real implications for budgets and how it provides services in the community, and it may need to request recertification to recoup much-needed revenue.
|Taxing Jurisdictions, by County||Total Taxes Assessed OLD||Total Taxes Assessed NEW||Total Loss in Taxes Assessed|
|Lewis & Clark||$12,317,248.25||$11,289,248.17||$1,028,000.07|
A shortage of teachers in our public schools spells trouble.
The Great Recession caused just that – a dramatic decrease in the number educators available to teach our children. As a result of budgetary cuts on all levels of government, the number of educators in our public school system fell drastically over a four-year period, causing children to be squeezed into overcrowded classrooms and lose opportunities to receive a top quality education.
Recently, the number of teachers at the front of the classroom is back on the rise. But nationwide, we still have 214,000 fewer teachers than we did at the beginning of the recession. Not only that, but during that time, we should have added an additional 158,000 to meet the needs of a growing population.
This trend has tested Montana as well. Last year, the state had over 1,377 open positions, nearly half of which were in critical areas such as special education, English, math, and science. An additional 540 of these were elementary school teachers.
In Indian Country, the shortage is even greater. A ten percent cut to the Federal Impact Aid program during the sequestration of 2013 meant school district on reservations had a tougher time filling positions with deep funding cuts.
It doesn’t help that Montana has the lowest average starting teacher pay in the country at $27,000, an amount too low to attract the number of quality teachers needed, especially in remote, isolated schools districts. The state’s Qualified Educator Loan Repayment program helps attract teachers to rural and high-need schools; however, the program doesn’t fully address teacher shortages across the state.
While Montana has increased our funding to public schools in recent years, we still have a lot of catching up to do in order to guarantee that all of our children are getting the education that they deserve.
Montana’s teachers are at the very heart of a quality education. When the spot at the front of the classroom is left open, our children pay the price.
A new report released today takes a look at states’ tax expenditures that benefit private K-12 schools, revealing that some wealthy taxpayers can actually turn a profit from these tax credits. You’ll recall that the Montana legislature passed one of these measures last session, which went into law in 2015. The bill (SB 410) allows a taxpayer to take a tax credit for a donation to an organization that provides scholarships to private school students. MBPC released a report raising concerns about this – and several other proposals – that divert state taxpayer dollars from investments in our quality public schools to private schools.
But the report by the Institute on Taxation and Economic Policy (ITEP) does more than just raise concerns about taxpayer dollars benefiting private institutions – it reveals that some high-income taxpayers are actually able to turn a profit as a result of this credit. This means that for some wealthy taxpayers, they can actually get a total tax cut that exceeds the size of the original donation.
How is this possible?
ITEP goes into a lot of detail on how this scheme works. In summary, the Montana tax credit is structured to reimburse a taxpayer for 100 percent of the cost of the donation (in Montana, capped at $150, or $300 for a married couple). In other words, for a household with tax liability, a donation up to the cap essentially costs nothing to the donor and is fully-funded by Montana taxpayers. To add to that, IRS also allows taxpayers to take a federal charitable deduction for their private school donation.
While most taxpayers would have a corresponding reduction in their federal deduction for state income taxes paid (and it would then be a wash), taxpayers who are subject to the federal Alternative Minimum Tax (AMT) are under different rules and can use the charitable deduction to lower tax liability and “double-dip” on the tax benefit of the donation. Depending on their marginal tax rate, these households could receive up to $105 in profit on the donation. In Montana, nearly 10,000 taxpayers are subject to the federal AMT, and about 80 percent of those have incomes more than $200,000 a year.
This tax scheme doesn’t benefit students or our education system, but instead benefits high-income households that can take advantage of a sophisticated tax planning technique.
Montana is not alone. Ten other states have similar “profit-making schemes” structured as private school tax credits. In fact, the levels of profit possible in some states are staggering. As ITEP notes, the cap on Montana’s credit limits the amount that one can profit – but profit, nonetheless.
Montana taxpayers and the state legislature should take note of how this credit can be manipulated by a small percentage of wealthy households and consider repeal (or at the very least, refrain from expanding this terrible policy).
Contemporary American Indian health concerns have been the topic of a four-part newspaper series by Billings Gazette journalist Jayme Fraser. The articles shed light on the decades-long issue of health disparities that are largely grounded in the inability of the Indian Health Service to meet the health care needs of American Indians. They also review various efforts to improve Indian health currently being undertaken by tribes, individual tribal health/IHS facility administrators, and public and private entities, particularly through nationwide healthcare reforms made available through the Affordable Care Act.
One of those measures encouraged states to expand the income eligibility requirements for Medicaid, which the Montana legislature did in 2015. After that, people earning less than 138 percent of the federal poverty level could enroll in Medicaid. This extended critical health care coverage to an estimated 19,547 American Indians in Montana.
Between November 2, 2015, when enrollment began, and September 1, 2016, the number of newly eligible American Indians who enrolled in Medicaid stands at 6,737, or 30 percent of the total number eligible. American Indian enrollment steadily increases each month, though the rate at which they are enrolling is beginning to slow slightly, demonstrating the need for a more concerted outreach and enrollment effort.
Our latest report details some of the ways outreach and enrollment workers can maximize their success in Indian Country. It is paramount that those engaged in coverage enrollment efforts understand the intricacies of how American Indians access health care. For example, knowing that American Indians have historically tended not to have health insurance, relying instead on the Indian Health Service, helps explain why American Indians may be less inclined to explore other coverage options.
Likewise, having an understanding of the historical and contemporary basis of IHS and being able to articulate the precise benefits of having Medicaid coverage are also necessary. It is also important to know the barriers the eligible demographic faces in accessing information and completing the enrollment process.
Besides supporting current outreach and enrollment efforts, the single most important thing the state can do to help the remaining eligible American Indians access the critical health care they need is to maintain the current eligibility requirements included in the HELP Act.
This week, the U.S. Census Bureau is releasing new data on health insurance coverage, economic, and poverty information both at the national and state-level. Today we’ll take a look at what new insurance coverage data means for families in Montana.
Based on the new American Community Survey data, we know that health care reform has increased the number of insured by offering people access to health care coverage through the health insurance marketplace. Through the marketplace, people can easily compare prices and benefits of health care plans. For individuals that make too much to get care through Medicaid, but don’t make enough to afford private insurance through the market place, federal subsidies help them pay their premiums and reduce their out-of-pocket health costs.
Health care reform has also strengthened Medicaid, which is good for families, communities, and states. Medicaid has been improving people’s lives by providing affordable health care that has boosted state economies for the last 50 years. In 2015 Montana became the 31st state to expand Medicaid through the Health and Economic Livelihood Partnership (HELP) Act, expanding coverage to individuals making less than 138 percent of the federal poverty level ($27,700 for a family of three).
Many states that have expanded Medicaid have seen higher enrollment levels than originally anticipated, and enrollment figures in Montana suggest the same. It was estimated that 70,000 additional Montanans would receive health insurance coverage through expanded Medicaid. In July, just six months after expansion, over 47,000 individuals had already enrolled in the HELP act. Overall, expanding Medicaid has helped reduce the number of Montanans without health insurance. Over the past several years, the number of uninsured in Montana has fell by about five percent, from 165,000 uninsured in 2013 to 119,000 in 2015.
Medicaid is a cornerstone of health care for people who struggle just to make ends meet. Thanks to Montana’s decision to expand Medicaid to help more people who can’t afford private insurance, more people are getting the care they need to go to work, take care of their kids, and be healthy, productive members of their community.
Today’s blog is the last in a series of four blogs on child care in Montana.
Last week we highlighted the need for affordable and quality child care for low-income families in Montana through several blogs and a more comprehensive report. But, no conversation about child care can stand alone. We must acknowledge the need to invest in our early childhood development system as a whole in order to create opportunities for better education and child care for all Montana families.
Several areas we should consider increasing investment include:
Strengthening the child care profession – Child care workers play a critical role by caring for and teaching our children new skills everyday. However, child care employees are some of the lowest paid workers in Montana. Currently, over 2,500 individuals in Montana are employed as child care workers, earning an average of $20,500 a year. These individuals are earning such low wages that they can’t even afford child care for their own children. Additionally, these workers often go without employer-provided benefits like health insurance and sick days and have few options to build their skills and grow in the child care profession.
Paying child care workers fair wages and benefits and providing them access to professional development and training opportunities will enable them to thrive at work, prioritize care for our children, and be able to provide for their families. Doing what’s right for child care workers can also help child care providers attract and retain the best employees possible – which is good for all kids.
Investing in pre-kindergarten – Statewide pre-kindergarten programs could help offset the child care costs that families struggle to afford, not to mention building children’s skills so they can enter school prepared and able to achieve along with their peers. Further, investing in pre-k can strengthen Montana’s economy by supporting working families and creating good-paying jobs in the early education industry.
Supporting families with high child care costs through tax assistance programs. The federal child and dependent care tax credit (CDCTC) allows parents to report up to $3,000 per child in child care costs (for a maximum of two children) and receive a tax credit worth up to 35 percent of qualifying expenses. A single mom with two children in care, for example, could receive up to $2,100 from the CDCTC to help offset her federal income tax.
Currently, 21 states have enacted state CDCTCs based on the federal credit, and more than half of these states have created refundable state credits that enable low-income families to get the most out of the state CDCTC. Montana could enact a state refundable CDCTC set at a fixed percentage of the federal credit and structure the credit to encourage families to use high-quality care providers by offering larger credits to families who use licensed child care providers or providers who participate in Montana’s STARS to Quality program. The state credit would help offset state income taxes, support low-and middle-income families struggling to afford child care, and promote high-quality care, which helps children learn, grow, and succeed in school.
It’s time for Montana to provide resources to help ensure that all parents can access affordable child care and education opportunities for their children. High-quality child care and educational programs, including pre-kindergarten, are key to developing children’s cognitive, social, and emotional skills and preparing them for school. Additionally, investing in areas that support the professionalization of early childhood educators and child care workers would help child care providers better attract and retain skilled employees.
Montana’s child care assistance program offers low-income families access to affordable and quality child are, but some changes are needed.
Today’s blog is the third in a series of four blogs on child care in Montana.
Yesterday, we released a comprehensive report on child care. In our report, we examine the high costs of child care in Montana and how some low-income families can receive assistance to help cover these costs through Montana’s Best Beginnings Child Care Scholarship program. This program reimburses child care providers who care for families with incomes below 150 percent of the federal poverty line ($30,240 for a family of three) and who meet certain activity requirements.
In 2014, an average of 3,000 Montana families received Best Beginnings Scholarships each month, providing care to 4,600 children. Unfortunately, not all families can receive assistance. Over 34,000 low-income children are potentially eligible for Best Beginnings Scholarships, but coverage remains low across Montana. Only one out of seven eligible low-income children receive a Best Beginnings Scholarship (see map).
The highest proportion of children receiving assistance are in Yellowstone County, mostly because of the number of child care options in and around Billings. For example, 22 percent of eligible low-income children received Best Beginnings Scholarships in Area 7 (Yellowstone County), compared to only eight percent of eligible children in Area 1, which encompasses Lincoln, Flathead, and Glacier counties.
There are several reasons why families are unable to access affordable and quality child care through the Best Beginnings Scholarship program, including the following:
- Some families earn too much to qualify for Best Beginnings, but too little to afford child care on their own. Federal requirements allow states to set maximum income eligibility limits for their child care assistance programs. Montana’s Best Beginnings Scholarship program sets its eligibility limit lower than 33 states – at 150 percent of the federal poverty line ($30,240 for a family of three). As a result, 7,500 families fall into this gap, earning too much to qualify for child care assistance, but too little to afford child care on their own. Montana could increase its income eligibility limit, which would provide an additional 30,000 children access to Best Beginnings Scholarships.
- Best Beginnings Scholarship application processes and activity requirements limit access. Montana families can apply for Best Beginnings Scholarships online or at a local Child Care Resource and Referral (CCR&R) agencies. While CCR&R staff help individuals apply for assistance, workers must rely on their employers to verify employment and submit work schedules. This can be a challenge to get employers to comply and if they don’t, parents are disqualified through no fault of their own. Additionally, single parents must work through an additional process to prove that they either receive regular child support payments or provide evidence for why they do not. This process adds another complexity to the application process and can be very challenging for families. The state should consider changes to the application process that take into account the fact that parents are asked to provide documents that are often not in their control.
Additionally, work requirements can keep parents from receiving consistent support. When an employer cuts back on hours, it can cause parents to become ineligible even if they did nothing wrong. Further, the Best Beginnings program does not recognize individuals who are actively looking for work as an acceptable “activity requirement.” Parents looking for work need access to child care so that they can concentrate on preparing for and attending interviews that land them a stable job. The Best Beginnings Scholarship program should consider changing its activity requirements in ways that are flexible and take into consideration the fact that low-wage workers’ schedules are often not in their control. Also, parents looking for work should be able to apply for child care assistance.
- Stagnant funding makes it difficult for the state to adequately reimburse child care providers, which shifts additional costs onto low-income families. Over the past several years, federal funding for state child care assistance programs has stagnated and state investments cannot fully support programs. As a result, the Best Beginnings Scholarship program cannot reimburse child care providers at an adequate rate. When this happens, child care providers either shift additional costs onto families they serve, including Best Beginnings families, or close their doors to Best Beginnings families altogether. Alternatively, when Best Beginnings families stand to face additional costs, they may choose to look for cheaper and lower-quality care. Significant investments are needed to ensure that Montana’s child care assistance program reimburses child care providers fairly, so they are not forced to shift costs onto low-income families.
In today’s economy, more and more families struggle to get by on low wages and to provide resources that enable their children to succeed. Access to quality and affordable child care is one solution that enables parents to maintain stable employment and provides children with the skills they need to succeed in school and beyond.
While current child care costs are often out of reach for many low-and moderate-income families in Montana, some families can receive assistance through the state’s Best Beginnings Child Care Scholarship program. Unfortunately, because of application and eligibility requirements and inadequate federal and state funding, not all families who need child care assistance receive it. Program changes, like increasing eligibility limits to federally recommended levels, and significant state investments to increase reimbursement rates for child care providers would help ensure that more low-income families are able to receive assistance to pay for child care. It would also ensure that low-income families are not subject to additional costs beyond their means and enable them to access high-quality care options in their communities.
Today’s blog is the second in a series of four blogs on child care in Montana.
Access to affordable child care is key to helping low-income families remain employed, supporting families, and building financial security.
All states operate child care assistance programs through the support of the federal Child Care Development Fund (CCDF). Here in Montana, our child care assistance program is called the Best Beginnings Child Care Scholarship Program. The Best Beginnings Scholarship program reimburses child care providers who care for some low-income children. Studies have shown that such programs help low-income parents maintain employment in the following ways:
- Reducing child-care disruptions that pull parents out of work. Low-income parents often do not have access to stable child care, which forces them to scramble to find care for their children before work. Many low-wage workers also do not have access to paid days off, like sick days or family leave, and must rearrange their work schedules to care for their own children when they are sick, causing them to lose out on a day’s worth of earnings or lose their job altogether. Child care assistance programs offer parents access to reliable care options, enabling them to maintain stable employment. A study in Illinois found that families who receive child care assistance were 25 percent less likely to experience problems like missing work, starting late, or quitting work because of child-care issues.
Alternatively, employers suffer when parents have child care challenges. Estimates suggest that U.S. businesses lose up to $4.4 billion each year when employees miss work for child care needs.
- Increasing work hours and earnings. When parents have reliable child care, they are able to show up to work on time and stay for their entire shift, which allows them to work more and remain employed for longer periods of time. A study by the Economic Policy Institute found that mothers with young children who receive child care assistance are 40 percent more likely to be employed two years down the road.
Further, individuals who work more, earn more. Every dollar counts for low-income families, especially for single parents working hard to support families on their own. One study in South Carolina compared earnings over time between single mothers who received child care assistance and single mothers who did not receive assistance. Researchers found that mothers who received assistance saw annual earnings grow by $7,500 over six years, while mothers who didn’t receive assistance saw annual earnings grow only $3,000 over the same period.
- Supporting individuals looking for work. In Montana, over 9,700 low-income children live in families where both (or single) parents are out of work. Child care assistance enables parents searching for work to focus on preparing for and attending job interviews, which can increase the likelihood of finding a job faster and getting back on the path toward financially stability.
Tomorrow we’ll release a comprehensive report on child care in Montana, including affordability, how Montana’s Best Beginnings Scholarship program helps low-income parents pay for child care, and options to improve access to affordable and high-quality care in our state. Friday, we’ll follow up with the third blog in our series, examining Montana’s Best Beginnings Scholarship program in more depth.