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ND lawmakers question proposed state takeover of county social services costs

BISMARCK - Legislation that shifted the cost of some social services in North Dakota from counties to the state has lowered property taxes as intended, but some lawmakers expressed reluctance Tuesday about a complete takeover and questioned wheth...

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BISMARCK – Legislation that shifted the cost of some social services in North Dakota from counties to the state has lowered property taxes as intended, but some lawmakers expressed reluctance Tuesday about a complete takeover and questioned whether the $150 million price tag is affordable given tumbling state revenues.

"I don't know where the money's going to come from, quite honestly," said Rep. Mark Dosch, R-Bismarck. "I think Christmas is over, and I'm not sure if we're realizing that yet or not."

In a major policy shift last April, lawmakers approved Gov. Jack Dalrymple's recommendation to shift $23.2 million in county social services costs to the state during the 2015-17 biennium.

The bill transferred $19.3 million in costs to the state Department of Human Services and provided $3.9 million in grants to buy down property taxes in nine counties that are in or next to American Indian reservations and have a higher social services burden requiring them to use emergency levy authority.

The bill also directed the interim Political Subdivision Taxation Committee to study a complete state takeover of counties' entire 20-mill social services levy.

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Dalrymple said that would result in an estimated $150 million in property tax relief annually by the time the funding formula is implemented in 2018.

"This is real, significant, permanent property tax relief," he told the committee.

State funding of social service programs was the norm in North Dakota until 1989, when the cash-strapped Legislature approved the 20-mill taxing authority for counties to meet increased demand for services in the wake of the 1980s farm crisis and oil bust.

Advocates of a return to state funding argue that times have changed since county welfare programs took care of the less fortunate within their own borders. They also say it's unfair that counties with lower property values tend to have higher social services costs but less tax revenue to fund them.

Sen. Dwight Cook, R-Mandan, said North Dakota has a more transient population with people moving in from other states, and the social services they need should be funded by the state, not local property taxpayers.

"The justification to do it is on the table. We've just got to find the right way to do it," he said.

A working group developing the funding formula hasn't identified how the state would pay for it.

With depressed oil and farm commodity prices persisting and state revenues falling short of projections by $152 million from July through November, Dalrymple said funding property tax relief will be a greater challenge than in recent years.

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"Ultimately, when you're preparing a budget, you have to prioritize things," he said.

So far, the partial shift approved last session has resulted in roughly $10 million in savings for county taxpayers, said Terry Traynor, assistant director of the North Dakota Association of Counties.

On average, counties reduced their social service levies by 2.83 mills, or 18 percent, based on preliminary figures from a survey answered by 37 of the state's 53 counties, Traynor said.

"I think this is reflective of what happens when you cut their costs. They lower their mills," he said.

But some lawmakers, still miffed by how counties responded to state-funded property tax buy-downs in 2009 and 2011, voiced concerns that if the state assumes all social services costs, counties won't pass the savings on to taxpayers.

"If we're going to do this, we need to have something that also gives protection that it's not going to be utilized somewhere else, that this is a true property tax reduction," said Rep. Mike Lefor, R-Dickinson.

Traynor said the 20-mill authority would be repealed and no longer available to counties.

"They will not backfill," he said.

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Lawmakers also raised concerns about assuming the costs of some counties' "add-on" social services that go beyond state and federal mandates, saying it could lead to the state being challenged to fund similar services in other counties.

The draft funding formula presented Tuesday would be based on a county's caseload and would allow for funding increases or decreases based on changes in its size.

The interim committee plans to discuss the formula at its next meeting and will recommend to the 2017 Legislature whether to pursue the shift to state-funded social services.

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