Tax repayment on the chopping block

The Lincoln County Board of Commissioners has proposed a budget for the 2015-2016 fiscal year that may eliminate the anticipated 20-mill overtaxation repayment to Lincoln County taxpayers. The repayment would have returned $632,040 to county property owners this year.

Commissioner Mark Peck said the decision to not proceed with the repayment this year, although not final at this point, is a difficult one.

“We have to make sure basic services are provided and that we maintain reserves to slow down the rate of fiscal decline,” Peck said. “It’s a hard decision, but I just don’t see how we can afford it.”

The county’s budget woes stem from a combination of cost increases and revenue decreases.

The biggest hit on the revenue side of the county budget from last year was the elimination of Payment In Lieu of Taxes (PILT) funding from the federal government. PILT funds are intended to compensate counties suffering from a large percentage of federal land ownership, land that would be taxed were it in private hands. PILT payments have averaged $570,000 annually, but the county is not expecting to receive any funding from the federal government through PILT this year.

“The loss of approximately $570,000 in unrestricted use funds is a pretty big chunk of revenue to help fund county government services,” Lincoln County Clerk and Recorder Robin Benson said. “In another perspective, $570,000 is equal to 18 mills that is not paid by the taxpayer.  We are hopeful Congress recognizes the financial impact to local governments if unable to collect property taxes on federally owned land.”

Another blow to the county’s top-line revenue comes from a decrease in anticipated receipts from the Forest Service. The county receives 25 percent of the monies paid to the Forest Service for timber and mineral harvest on the forest. The 2015-2016 budget anticipates receipts of $4,143,232 this year, a drop of $117,333 from last year.

Forest Service receipts have declined steadily during the past several years. In 2009, the county received nearly $6.3 million in Forest Service receipts, $1,396,793 more than the 2015-2016 budget anticipates.

The county is also struggling from a significant decrease in investment earnings. The drop is attributed to both a reduction in overall rate of return on county investments and a significant decrease in the amount of county cash reserves being invested. The county earned $1,156,415 in investment income in 2008, by last year that number had dropped to $200,542. For 2015, the number is even smaller, at $83,714.

The fourth major revenue hit to this year’s budget comes from the decreased mill valuations, released earlier this month. Last year mills were valued at $35,153. This year, the value has fallen to $31,602. Last year, the commissioners levied 103 mills for a total of  $3,620,759. With the new valuation, the same 103 mills would generate only $3,255,006, a revenue drop of  $365,753.

Montana law allows municipal entities the option to increase the number of mills levied to make up for budgetary shortfalls related to declining mill values, but only up to the total amount of revenue taxed in the previous year. Given the change in value , the county is allowed to levy up to 147.84 mills. The commissioners’ most recent budget proposal, released Monday by Benson, calls for a levy of 143.61 mills.

On the expense side, the cost of insurance for the county increased by more than $600,000 for this fiscal year, jumping from $1,857,886 to $2,436,880. The county pays the entire insurance premium for all county employees and their covered family members. The commissioners decided to maintain the coverage levels this year instead of providing a cost of living allowance (COLA) increase to county employees’ salaries and wages.

The public safety budget has also increased significantly this year, from $3,471,636 to $3,989,411. The increase, more than $500,000 for the current fiscal year, is the single largest department budget increase in the county this year.

Commissioner Peck said the commissioners are taking a hard look at the entire budget this year, trying to make methodical, strategic decisions about revenues and expenses instead of engaging in reactionary, across-the-board cuts.

“I don’t want to just start whacking away at stuff without a good cost-benefit analysis, and that’s what we’re going to spend the next year doing,” he said. “I want to do this methodically and make sure that we don’t cut something now that ends up costing us more in the long run.”

The commissioners have scheduled a budget hearing for Wednesday, Aug. 26 at 10 a.m. at the Lincoln County courthouse in Libby. The final budget is scheduled for vote Sept. 3.

Both meetings are open to the public, with comments allowed.