North Dakota looks to end property taxes, slash various state services

BISMARCK, North Dakota: This fall, North Dakota voters could largely end property taxes by approving a ballot measure that opponents say would drastically slash a variety of state services.

Supporters argue that it would provide long-sought relief the state can afford.

If passed, the constitutional initiative would eliminate property taxes based on assessed value and require the Republican-controlled Legislature to replace the lost revenue. A top legislative panel estimated that the total cost would be US$3.15 billion every two years-a huge number 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 the replacement revenue.

According to Republican House Appropriations Committee Chairman Don Vigesaa, funding for Medicaid expansion, hospitals, nursing homes, and education programs could all face cuts. Infrastructure projects might also be impacted, and the Legislature may need to reduce budgets and staffing across state agencies.

Rick Becker, a proponent of the measure, argued that identifying specific funding sources in the initiative wasn't feasible but believes the state has ample resources to address any funding gaps. He suggested the Legislature could draw from the state's $11 billion oil tax savings and eliminate "corporate welfare" for private corporations and special interest groups. He also noted the state's revenue is currently surpassing forecasts.

A coalition of over 100 organizations, including those in agriculture, energy, education, and healthcare, formed the Keep It Local coalition to oppose the measure. Chairman Chad Oban described the initiative as an overly aggressive approach to an issue that demands careful consideration.

A similar measure was overwhelmingly rejected in 2012. Still, Oban anticipates a closer vote this time due to increased frustration and political shifts in North Dakota, though he remains confident it will be defeated.

The measure would cap state replacement revenue at the level of property taxes collected in 2024, but Oban highlighted that tax revenue would need to grow in the future. In response, Becker proposed that local governments could adopt alternative property-related taxes, such as an infrastructure maintenance fee based on road frontage, allowing them additional revenue sources beyond state replacement funds.

Oban noted that the Legislature might consider raising income and sales taxes, introducing new fees, or authorizing different local tax structures. However, sales tax increases could benefit larger cities like Bismarck and Fargo but may fall short in rural areas lacking a sales tax base, which rely on property taxes for schools and law enforcement.

In Fargo, where property taxes constitute about one-third of the city budget and 40 percent of funds support police and fire services, Mayor Tim Mahoney stressed the need for competitive salaries to retain nearly 200 police officers and 150 firefighters in North Dakota's largest city.

Last year, the Legislature passed a package of income tax cuts and property tax credits estimated at $515 million. The state has a glowing financial picture, including robust oil and sales tax revenues.

The bulk of the measure would take effect January 1, 2025, if passed.