The Local Control Two-Step
The legislature's desire to protect local control against citizens initiatives while curtailing local control while in session is going to backfire on legislators eventually.
North Dakota’s legislature has a problem - they spend billions and billions of dollars to support local government services, and reduce the impact of property taxes on citizen - but nobody believes it and nobody respects it. State support of local government has itself become an entitlement program.
From 2003 to 2023, state funding assistance increased from just over $1 billion to almost $5.5 billion.
However, the legislature continuously reminds local government political subdivisions (cities, counties, schools, parks, townships, etc.) that they are “creatures of the state” and only exist out of the legislature’s kindness.
In North Dakota, cities and counties have what is called “Home Rule Charter” powers. But this power can be altered or repealed at any time at the will of the legislature if the legislature does not like what local government is doing. And the legislature, during every session, reminds local government of this fact as often as they can. This is why it is said that North Dakota has “weak home rule”.
Some states engrain their local Home Rule Charter powers in the state constitution to limit the legislature’s ability to do this without a vote of all citizens in a state. This would be considered “strong home rule”.
The Legislative Weakening Of Local Control
This session alone, multiple bills exist to alter the ability of home rule cities and counties to retain local control utilizing their home rule charters.
HB 1307 and SB 2324 seek to clarify how home rule charters interact with state law.
HB 1297 seeks to prohibit cities like Fargo that have enacted alternative voting methods from doing so, and to repeal what Fargo voters approved.
HB 1384 sought to restrict home rule counties from using existing powers to convert county auditors from elected to appointed, but it was defeated.
HB 1552 seeks to limit local sales tax in home rule cities and counties to 3% each.
The legislature also is considering many more bills affecting non-home rule local governments.
The most egregious of these is SB 2208 which I branded as the “Blackmailing Local Government" Act.
Senate Bill 2208, as introduced by Sen. Patten, Sen. Bekkedahl, Rep. Brandenburg, Sen. Erbele, Sen. Kessel, Rep. Porter, would seek to muzzle local elected officials attempting to stand up for and advocate for their citizens.
By withholding state funds, this bill would put the State of North Dakota in the same category as the federal government when it comes to blackmailing lower levels of government with funding.
While the ability to do these things is fully within the power of the legislature, the legislature’s willingness, the more they do this the less true the mantra of “Local Control” becomes.
Local governments can only control as much as the state legislature allows them.
The Legislature Getting In The Way Of Local Solutions
Yesterday, during the House Finance and Tax Committee’s discussion of HB 1552, the attitudes of legislators were on full display. You can watch the full video of the hearing here (there was a technical issue that did not allow the video to show up for the first half of the hearing, but the audio is ther)
Below is the section of the hearing between myself and the committee members, followed by a representative of the Association of Counties.
As stated above, HB 1552 seeks to limit home rule charter cities and counties to 3% sales tax.
My testimony was to amend the bill to allow dedicated sales taxes designed to replace the need for property taxes not be counted toward the 3%.
This approach would facilitate the ability of local governments who want to fix their own property tax problems if they want to do so. Which would alleviate the legislature’s need to spend more and more money on local government.
I was a part of the committee that placed the Burleigh County plan to do just this on the ballot, and which voters supported by a vote of just under 60%.
Burleigh County is a case of local government doing things the right way.
If local voters wanted to eliminate the rest of their Burleigh County portion of property tax with another 1% sales tax, and have several million dollars left over.
If local voters wanted to do that, why not let them?
The committee did not consider the amendments, and gave the original bill a 12-1 Do Pass recommendation.
Should Taxpayers And Local Governments Team Up To Go Over Legislators’ Heads?
In my testimony, I spoke of the differences between “weak home rule” and “strong home rule”, and that the time may come for local governments and local taxpayers to team up to do a statewide constitutional initiated measure to limit the state legislature’s ability to remove tools from local governments to solve their own local property tax challenges.
Imagine what could be possible if Rick Becker’s coalition behind Measure 4 and the Keep It Local Coalition against Measure 4 were on the same side?
I think this is where we get into the paradoxical loop of local control, and how locals blame the legislature for high property taxes, claiming they aren't given the tools to fix it. The state, in turn, claims locals control it, even though the state regulates what they can do with that control. As you know, I don't subscribe to the three-legged stool theory. I believe we should eliminate the income tax entirely. I subscribe to the two-legged ladder theory: the lower the overall tax burden, the more competitive you become. Sales tax, as a consumption tax, isn't paid by businesses; it's paid by consumers. It's a pass-through. If a business isn't charging it on top of its product, it's absorbing the cost, which is a voluntary decision. I don't think state competitiveness hinges on sales tax as much as it does on income and property taxes. Our internal struggle in North Dakota centers on property taxes. The legislature needs to decide its narrative. When citizens bring a measure to abolish property taxes, they're told they can't vote for it because it will take away local control. Then, the legislature says, "We'll take care of property taxes." You get to the legislature, and if you get anything other than just more spending, it's a miracle. This session alone, there are at least six bills restricting local control. So, why is local control only a theory used to fight against citizen-initiated measures? When it comes time for the legislature to act—after the citizens have done what the legislature asked them to do and defeated the abolition of property taxes—all of a sudden, the legislature only wants to restrict local control. We have to decide what we want to do, because you can't have your cake and eat it too.
Ultimately, if we continue down this road, there will be discussion about how there are two kinds of Home Rule charters in this country. There's the kind we have in North Dakota, which is the weak version that the state can rescind at any time. Other states have the strong version, which is enshrined in the Constitution and that the legislature can't control. At what point do local governments and local voters decide they want to control these things themselves, enshrine them in the Constitution, and prevent the legislature from pulling any of it back?
Perhaps the need to do that sooner than later is here, if the voters don’t reject continued efforts to make the initiated measure process harder.
(Note: at the end of the hearing, the Vice Chairman Jared Hagert cut me off and did not want to discuss property taxes anymore. After the hearing he apologized to me in the hallway for doing that. I told him this is all about property taxes, even when it is about sales taxes.)