A constitutional initiative intended to cap state spending could also prevent the Legislature from passing either of two competing plans to offer property tax rebates, a lawyer for the state Revenue Department says. If enacted, Constitutional Initiative 97 would “substantially limit the ability of the 2007 and future legislatures to provide tax relief from current or accumulated surpluses,” attorney Brenda Gilmer concluded in a two-page memo requested by Revenue Department Director Dan Bucks. Her conclusions mirror comments by Gov. Brian Schweitzer in late June. He told The Associated Press then that he believed if voters approved the initiative, it would prevent him from going forward with a plan to give flat $400 rebates to Montana property taxpayers. Schweitzer, a Democrat who has proposed his “Square Deal for Montana,” and Republicans, through their “Handshake with Montana,” have pledged to offer property-tax relief in 2007. Under CI-97, if the Legislature proposed spending money on tax relief, the cost of the rebates plus the rest of certain government spending couldn’t exceed the spending cap, Gilmer said. As a result, the Legislature couldn’t pass the property-tax relief without a voter referendum unless the tax rebates were “pro rata,” or spread across all classes of property, or unless it refunded user charges or fees.
“While the term pro-rata tax rebate’ is not defined, any form of fixed-dollar tax relief would require voters’ approval,” Gilmer wrote. “The governor’s proposal for a $400 property tax payment would require voter approval. The (Republican) Handshake with Montana proposal for a refundable tax credit of up to $400 would similarly require voter approval as any amount payable from the general fund, whether or not a tax refund’ or rebate’ is an appropriation.” The governor has proposed using $100 million of the general fund surplus to issue $400 property-tax rebates to the 250,000 Montana resident homeowners. Sen. Corey Stapleton of Billings, chairman of the Republican Legislative Campaign Committee, said Republicans began developing their tax plan even before CI-97 qualified for the November ballot. Stapleton said he has taken no position on CI-97. Earlier this week, Republicans announced a three-part plan to provide $194 million in property-tax relief over the next two years. “We would work to the best of our abilities to honor both CI-97 and do what we can,” Stapleton said. “If that meant we could do the first two parts, we would.” The first part of the GOP plan would reduce statewide property-taxes for all classes of property taxpayers, from homeowners to businesses. The second part calls for the Legislature to increase “direct state aid,” the state money paid for K-12 funding, from the current 44.7 percent to 50 percent. The third part of the Republican plan provides for a refundable incometax credit to Montana residents who own and occupy their homes.