Tax Commissioner Brian Kroshus presents updated data on the estimated cost of a November ballot measure to eliminate property tax based on assessed value to lawmakers at an Aug. 23, 2024 meeting. Legislative Management voted to ballpark the figure at $3.15 billion for the 2025-2027 budget cycle. Previously, a Legislative Council memo had approximated that number at around $2.6 billion. (Mary Steurer/North Dakota Monitor)
State lawmakers now estimate a ballot measure to eliminate property taxes based on assessed value could cost the state $500 million more than originally expected.
The updated price tag — estimated at $3.15 billion for the 2025-2027 biennium — will appear with the proposal on the November primary ballot.
It’s only a rough approximation. If the ballot measure passes, the state will be required to reimburse local governments annually by an amount no less than the revenue they collect from property taxes for the 2024 tax year.
Since local governments won’t collect property taxes for tax year 2024 until 2025, the state doesn’t yet know what that amount would be.
Tax Commissioner Brian Kroshus at a Friday meeting presented Legislative Management with three different estimates ranging from $3.04 billion to $3.15 billion for the 2025-2027 biennium. Legislative Management voted to use the most expensive estimate.
A previous estimate provided by Legislative Council approximated the cost of the measure to be about $2.6 billion per biennium, not including money saved by cutting property tax relief programs.
“We’ve been working off of a figure of $2.6 billion, and so this is approximately another half a billion dollars that we need to come up with, realistically,” Senate Majority Leader David Hogue, R-Minot, said during the meeting. “We’re not in a good position to wait around until after November, after the election, to figure out if this passes. We have to start planning now.”
Sen. Janne Myrdal, R-Edinburg, noted that the measure comes at a time when many North Dakotans are simultaneously urging their governments to spend more on public health, policing and other community services.
She noted lawmakers will have a difficult time managing the expectations of constituents who want to expand public programs at the same time others are calling for significant tax breaks.
“This just is a sledgehammer of a measure,” she said. “I think we have a lot of work cut out for us in the next 60 days.”
Rick Becker, chair of the committee sponsoring the property tax measure, has said previously that the cost to the state is inflated and that the state has enough in its coffers to pay for the proposal. Proponents of the measure estimate the cost to be $2.32 billion per two-year budget cycle .
Lawmakers on Friday also approved a cost estimate for the ballot proposal to legalize the adult use of recreational marijuana.
State officials told Legislative Management that they expected roughly $2.9 million in revenue and about $8.3 million in expenses for the 2025-2027 biennium. Those numbers were based on information reported by the Department of Health and Human Services, Highway Patrol and the Department of Transportation.
Legislative Management added another approximately $7.3 million on top of that total as a loose estimate of possible sales tax revenue for the upcoming two-year budget cycle. That brought the total estimated revenue to $10.3 million. Kroshus said in an interview that figure is likely a conservative estimate.
Steve Bakken, chair of the ballot measure’s sponsoring committee, had presented some higher sales tax projections. The number the committee adopted came from the Tax Department.
“The worst case, the program will generate enough revenue to cover its cost, ensuring it pays for itself,” Bakken told lawmakers. “Best case, the revenue could help fund other critical areas.”
Lawmakers also included language in the fiscal impact statement clarifying the estimate does not factor in any behavioral health or social costs that the state could incur due to the legalization of recreational marijuana.
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