Friday, February 27, 2009
Standard Article by Brett Narloch
Issue: Government Transparency
The North Dakota legislature has been trying to provide property tax relief and reform for several years. While their efforts have been honest, legislators are largely missing the point. The debate taking place in Bismarck largely centers on how much more money the state should give to political subdivisions (i.e., school districts, cities, and counties) and what kind of strings the state should attach to such spending. Another debate focuses on whether the state should cap property assessment increases or cap overall property tax increases per property. These solutions are largely attempting to cover up symptoms instead of attacking the disease that is causing property taxes to go up, which is local government spending.
The cure for the disease is increased government transparency. Local government spending has been trending up in a big way over the past decade. Figure 1 shows property tax collections over the last twenty years.
Figure 1
While local taxing and spending is increasing, there does not appear to be a large group of local candidates focused on cutting spending and services to citizens. This phenomenon sends the message to political pundits and state officials that citizens are unwilling to sacrifice local services for lower taxes. Instead, local governments have passed the buck to the state, which, of course, does not actually collect property taxes (and also makes it much harder for the state to provide relief). The state is underfunding schools, or so the argument goes. Local officials further argue that increased state aid to K-12 education will allow school district mills to be lowered and cities and counties could then better fund their local services without raising taxes.
The argument lacks merit because state aid to local governments has increased greatly over the past decade. Figure 2 charts state aid to political subdivisions.
Figure 2
Since 1997, state aid to political subdivisions has increased 46%, which is higher than inflation. The state, it would seem, has provided more than enough aid to political subdivisions.
There are three obvious options to solve the problem of increasing property taxes (besides eliminating property taxes): increase state spending to political subdivisions, lower local spending, or a combination of the both. Since the state appears to be adequately funding political subdivisions, and citizens continue to elect candidates who are not focused on cutting spending, those options do not seem feasible.
The best long-term solution to reducing property taxes is to increase government transparency. Increased government transparency will result in a better-educated citizenry, which should make better decisions about who to put into positions of power in local governments. It will also reduce the amount of government waste and eliminate any other possible wrong-doings. But, first, “increased government transparency” needs to be defined.
A practical way for local governments to become more transparent would be to put every expenditure on an easily searchable website. The most glaring problem that allows local governments to spend so much money is a public that does not know how much local governments are spending and where that money is being spent.
By putting every expenditure on its website, political subdivisions would demonstrate their willingness to be scrutinized by the public. It allows citizens to be informed by putting all government spending at their fingertips. In other words, it makes it easy to learn about what government is doing. Most people do not have time to attend meetings, make phone calls to government offices, or look through piles of paper. Furthermore, some citizens may feel intimidated by requesting information from government officials suspicious of why the information is being sought or may grow frustrated by how long it takes and how much money it takes to get a lot of basic documents from their local government.
Long-term, property tax problems would disappear, as citizens would have a better handle on how money is spent. If certain companies seem to get many large government contracts, that would be exposed. If a lot of money is being directed into certain areas, such as economic development, and people recognize that the area isn’t better for it, they may elect leaders who pledge to end it.
Government transparency is a movement that is sweeping across North Dakota. In April 2008, the North Dakota Policy Council launched Sunshine on Schools, which contains all school district budgets, teacher salaries, and many more items.
HB1377 recently passed the House, which would direct the Office of Management and Budget to put all state expenditures on an easily searchable website.
If local governments are serious about lowering property taxes, long-term, then they should recognize that the key is to provide citizens with more information. A better-educated electorate provides a healthy check against rising taxes. Treating symptoms, such as capping assessments or mills, will only frustrate state officials because, once local governments are limited in how much money they can raise, local governments will lobby heavily for increased state aid. It will frustrate local officials because they will lose some of their control to the state, and there will still be no downward pressure on spending, which is exactly what is needed and exactly what increased government transparency would provide.
