This fall, Montana voters may be asked to weigh in on three initiatives aiming to cap property tax increases, a move that members of local governments, lobbyists and experts warn could lead to cuts in local services, increases in other taxes and challenges for homebuyers. After years of rising t ax bills driven by rising residential property values, the 2025 Legislature passed changes backed by Gov. Greg Gianforte to reduce many homeowners’ bills. The legislation shifted property tax rates across the state and lowered the bills sent out last fall for most Montana homeowners. A tax on second homes aimed at wealthy, out-of-state residents that will further shift the tax burden takes effect this year. Supporters of the recent ballot initiatives, however, maintain that more changes are needed to provide meaningful property tax relief.  Two of the three proposals have been cleared by the state, allowing their supporters to gather signatures, and the Montana attorney general’s office is reviewing the third. To make the November ballot, each initiative needs qualified signatures from more than 60,000 Montana voters by June 19. While it’s unclear whether any of the measures will qualify for the ballot this fall, the proposals raise questions about how much of a tax burden should fall on Montana homeowners and whether a property tax cap is in Montana’s future. What would the proposed initiatives do and how would they affect the budgets of local governments and school districts? Montana Free Press’ local team of reporters talked to initiative supporters and critics, local governments and tax experts to find out.    WHAT ARE THE PROPOSED INITIATIVES? Former Republican state legislator Matt Monforton, director of the ballot campaign group Cap Montana Property Taxes, authored the two initiatives that have so far qualified for signature gathering.   CI-129 would amend the Montana Constitution to limit the annual increase in the valuation of a primary residence to 2% unless there are changes to the residence — such as a new deck or garage, or a change in ownership. Upon a change in ownership, the residence would be assessed at fair market value starting Jan. 1 of the following year. Purchases or transfers between spouses or between parents and children would not constitute a change of ownership. Under CI-129, a person may have only one primary residence and must own and occupy it for at least seven months of the year. CI-130 is similar but would limit the annual increase in the valuation of all real property, including commercial, industrial and agricultural property, as well as residential homes, to 2% when assessing property taxes.  Currently, the Montana Department of Revenue assesses residential properties at its best estimate of their market value. As market values have increased in recent years, higher valuations have led to higher bills for most homeowners. Commercial, industrial, agricultural and other property types are assessed differently, typically taking into account the land’s use rather than just the property’s market value.  Sen. Wylie Galt, R-Martinsdale, proposed an initiative in March that would also amend the Constitution to limit property tax increases to 2% per year, except for increases for improvements or for new property. That proposal differs from CI-129 and CI-130 in that the cap would not apply to school district mills or levies, and it would allow voters to approve mill levies that may exceed the cap.  School advocates warn that two of the proposed initiatives will force school districts to push for funding from other sources, like income taxes. Credit: Lauren Miller, Montana Free Press, CatchLight Local/Report for America Galt’s proposal is under review and has not yet been approved for signature gathering. The language will likely be revised based on feedback from the Legislative Services Division, the attorney general and the governor’s budget office, said Travis Hall, a spokesperson for the initiative.  Currently, state law limits how much local governments can increase property taxes annually without voter approval. Jurisdictions are allowed to levy property taxes at the amount assessed the prior year plus the average rate of inflation for the prior three years, not to exceed 4%.  WHAT WOULD THESE PROPOSALS DO TO PROPERTY TAXES? The proposals’ potential impact on property owners could vary depending on how governments respond to the changes and each homeowner’s circumstance, Steven Sheffrin, a property tax expert and professor emeritus at Tulane University in Louisiana, told MTFP. The limit on local property tax increases proposed by Galt could cause local governments to raise other fees to make up for lost revenue, Sheffrin said.   “These things never occur in a vacuum,” he said. “If there is a demand for the service, people are going to try to find a way to pay for them. That will be other taxes.”  Sheffrin said that CI-129, Monforton’s proposal focused on residential property, would shift some of the tax burden from homeowners to other types of property. It would also create inequity among homeowners over time, because people who stay in their homes longer would have their assessments capped over time, while a new homeowner could pay much more because the property is assessed at market value when ownership changes, he said.  “These things never occur in a vacuum. If there is a demand for the service, people are going to try to find a way to pay for them. That will be other taxes.” Steven Sheffrin, professor emeritus at Tulane University in Louisiana CI-130 is less predictable, but Sheffrin said he doubts it would reduce property taxes, in part because it does not limit the number of mills governments can levy to make up the difference. Commercial and industrial properties tend to turn over more slowly than homes, Sheffrin said, giving them the benefit of the cap and potentially moving some of the tax burden onto residential properties.  WHY ARE SUPPORTERS PROPOSING THEM? Monforton and Cap Montana Property Taxes have proposed similar initiatives in the last few years. A 2022 initiative to limit residential property taxes failed to gather enough signatures after it faced litigation and an opposition campaign. A 2023 proposal for the 2024 ballot died in court after the Montana Supreme Court upheld Attorney General Austin Knudsen’s determination that it included too many provisions to comply with the state’s single-subject rule.   That year, Monforton proposed CI-129 for the 2026 ballot, tweaking the language to avoid legal challenges, Monforton previously told MTFP.  Monforton said in a recent interview that he proposed CI-130 last year as a better option because the 2% cap on valuations for all forms of property “makes a lot more economic sense and provides real relief to property owners.”  The 2025 legislative changes, Monforton said, shifted property tax burdens and did not provide reform “in any meaningful sense of the word.”  “The only way Montana property owners will be able to have real tax reform is to have a cap on valuations,” he said. “Skyrocketing valuations are one of the two drivers of increased property taxes.”  According to Monforton, the other driver of higher property taxes is the levies approved by voters at the local level, which Galt’s initiative would allow. Galt’s proposal would “lock in government largess” by continuing to allow local governments to increase property taxes with a simple majority of voters, Monforton said.  “The only way Montana property owners will be able to have real tax reform is to have a cap on valuations.” Matt Monforton, director of Cap Montana Property Taxes Galt, who was instrumental in passing the Legislature’s property tax changes last year, said in a press release that he was proud of the reforms but that a cap is needed, particularly for families and seniors on a fixed income.  “They shouldn’t have to consider selling their home because their property tax bill is too high,” he said. “We need to get property taxes under control so Montanans can afford to stay in their homes.”  WHY ARE SOME CONCERNED FOR LOCAL GOVERNMENTS? Amanda Curtis, president of the Montana Federation for Public Employees, told MTFP that all three proposed property initiatives would significantly reduce the funding for public services. MFPE, a statewide union representing public employees, is affiliated with more than 400 local unions. Curtis worried that the proposed caps would create budget shortages for roads, law enforcement, public defenders and local government operations. “Putting tax policy in the Constitution is just a terrible idea,” Curtis said.  Curtis argued that embedding tax policy into the Constitution would make it difficult to adjust as population and inflation rates change. Curtis pointed out that the Gianforte administration has made sweeping income tax cuts in recent sessions, decisions that have also altered state budget revenue. She bemoaned that the proposed initiatives frame the conversation around property taxes. “So this is a little bit of a false flag, to suggest that this is the answer to solving what you and I are experiencing as a property tax problem,” Curtis said.  Instead, Curtis would like to see legislation that shifts the tax burden from renters and residential homeowners to telecommunication companies, utility businesses and large property owners.  Several Montana cities are already struggling to fund essential government services. Helena needs sustainable revenue for emergency services. Billings and Yellowstone County need money to fund their city law enforcement, courthouse employees and sheriff’s office, Curtis said. She believes those services would be at risk if the proposed tax caps pass. WHAT WOULD THIS MEAN FOR COUNTY BUDGETS? Missoula County Commissioner Josh Slotnick said better options to lower property taxes include reducing tax rates on residential properties, changing how residential properties are assessed or introducing new money into the system, such as a tourist tax. “This isn’t about lowering property taxes,” he said. “This is about knee-capping local government because people just hate government.”  Slotnick said Galt’s proposed cap would likely result in cuts to staff and services, as well as the county asking for new levies from voters to pay for things like vehicles for sheriff’s deputies. If one of Monforton’s proposals were approved, the only way counties would be able to bring in enough revenue to keep up with costs would be through new taxes on new development, he said. However, the existing 4% cap on local property taxes would prevent that, Slotnick said.  “This isn’t about lowering property taxes. This is about knee-capping local government because people just hate government.” Missoula County Commissioner Josh Slotnick “In all these cases, eventually it will catch us, and the only way we’ll be able to move forward as local governments is to reduce services,” he said.  In an eight-page analysis of the proposed initiatives, Cascade County Commissioner Joe Briggs said the caps would lead to difficult decisions. “In general, when revenue is restricted, local governments have several options to reduce costs, all of which are opposed by some group of citizens because it affects them directly,” Briggs wrote. In his assessment focused on Cascade County, that list includes cutting staff, reducing funding for services, getting voter approval on special operating levies, deferring noncritical maintenance, tapping into reserves and borrowing money.  “None of these is an easy solution, but, in my opinion, focusing on providing mandated services and cutting non-mandated services is the appropriate but still painful response. This is something that we are currently doing here in Cascade County to free up more funding for public safety and other mandated services.” Briggs wrote. “Any revenue restrictions coming from these ballot measures or further actions limiting local revenue by the Legislature would require being even more aggressive with this action.” Briggs also said some of the shortfall could be made up by special fees, such as building permit or utility hookup costs, but said it is more difficult for counties than for cities to levy those fees.  The Montana Association of Counties, a group that represents county governments, declined to comment for this story. WHAT DOES THIS MEAN FOR THE BUDGETS OF CITIES AND TOWNS? Great Falls City Manager Greg Doyon told MTFP that a 2% revenue cap that didn’t account for inflation could lead to tough decisions. Doyon, who has worked in city administration since the 1990s, said that the first impact of limited revenue growth is often deferred facility maintenance. For instance, before Great Falls received American Rescue Plan Act (ARPA) money in 2021, the city had delayed improvements to the Civic Center and fire stations. “We knew that there were issues, but we just didn’t have enough money, from a capital perspective, to actually fix it,” Doyon told MTFP. Doyon had a similar concern about Monforton’s proposed CI-129 and CI-130, which he said would create “a false value for your taxable value on the real estate.” He considers that taxable value as the lifeblood of city administration.  “You are a state where your local government is dependent on property taxes to fund the business of government,” Doyon said. “And that’s really one of the few revenue sources out there, and there’s not any alternatives to that being discussed.” Jennifer Olson, the director of government affairs for the Montana League of Cities and Towns, said Galt’s proposal could also create shortfalls in growing cities and towns. Current residents often bear the upfront costs for things like expanded emergency services, and a 2% cap on revenue growth could exacerbate the lag before new development fully contributes to local budgets. “That means the people that were already there, our long-term residents who’ve been paying their property taxes, are paying for that until it catches up,” Olson said.  WHAT WOULD THE PROPOSALS MEAN FOR SCHOOL DISTRICTS? Rob Watson, executive director of the School Administrators of Montana, told MTFP he appreciated that Galt’s initiative wouldn’t affect local school funding, but he said he is concerned CI-129 and CI-130 might create a shortfall for school budgets. “We don’t run a budget based on what the taxable value is; we just run the budget like, ‘This is how much we need to run the school district,’” he said. Watson said education advocates would look to make up for that elsewhere. “Then we’re ending up asking the Legislature to pay for that extra, which it’s gonna end up coming out of income taxes,” he said. “We don’t run a budget based on what the taxable value is; we just run the budget like, ‘This is how much we need to run the school district.’” Rob Watson, executive director of the School Administrators of Montana Watson also noted that CI-129 could dissuade young families and teachers from purchasing new houses. The 2% cap applies only to homes that don’t change hands or remain within a family. That would make moving a lot more expensive, he said. “It’s really hard to get teachers to move to Montana because the property values are so high. If people are not leaving their homes or not vacating those homes, teachers are less likely to move to a community where there’s no housing,” Watson said.  Montana School Board Association Executive Director Lance Melton raised similar concerns about Monforton’s proposals.  Melton said that in fast-growing communities with high-value areas, a tax cap might seem beneficial in the short term. But, in the long term, a constitutional change would ultimately create unequal tax burdens by pitting “taxpayer against taxpayer,” he said. “I think that over time it could end up crashing the system, really creating significant disparities and what two different taxpayers with the same valued property would be paying,” Melton told MTFP. Melton, like Watson, is more neutral on Galt’s initiative because it exempts school mill levies. He called it “the least likely to cause catastrophic disruption.”   ARE TAX CAPS COMMON? WHAT DO THEY MEAN FOR LOCAL GOVERNMENTS BROADLY? Sheffrin, the tax policy professor, said that economists generally favor property taxes as a tax because they provide local decision-making and stable revenue. But Sheffrin said they’re often unpopular with the average person because taxes can increase even if their income remains the same or decreases.  Many states across the country have seen a “mini-revolt” against property taxes, Sheffrin said. Initiatives to limit property taxes are not unique to Montana, and levy limits in particular are not uncommon nationwide, he said.  But decreasing one source of revenue leads local governments to rely on other tax sources, state aid or spending cuts, Sheffrin said. Other states, for instance, have seen sales tax increases to balance property tax cuts, he said.   “If you look across the country, when people have clamped down on property taxes, other fees and charges have gone up,” Sheffrin said. “You can argue that’s not a bad thing, that it’s appropriate because of the costs for the service, but that’s one way cities and communities could deal with that.”  However, it’s unlikely that fee revenue would make up for lost property tax revenue, he said.  Since Montana doesn’t have a sales tax, a decrease in property tax revenue could put pressure on income tax, Sheffrin said. Last year, the Legislature passed Gianforte’s income tax cut, which is expected to reduce state revenues by an estimated $278 million a year by 2028, according to the governor’s budget office.  Sheffrin said California revamped its entire tax system after the fallout from Proposition 13, which Monforton’s original initiative was modeled after. The proposition restricted the rate of assessment increases and limited property taxes to 1% of the assessed value, and reduced property tax revenue, Sheffrin said.  The proposition was different from Montana proposals because it also froze the tax rate, Sheffrin said. In the aftermath, California saw large commercial and industrial properties turn over more slowly than homes, leading to a shift in the tax burden away from businesses and onto homeowners, he said.  Local governments don’t want big reductions in revenue, and changes often lead to a “political tussle” that increases pressure on the Legislature, Sheffrin said. Results of property tax changes are uneven across communities, with some able to generate more revenue or achieve greater savings more easily than others, he said.  Sheffrin said the Montana Legislature has already taken an important step in reducing the tax burden on homeowners.  “I would hope that they would see how that works before making kind of drastic changes, which would be hard to reverse because all these changes end up being quite unpredictable,” he said.  WHAT’S NEXT FOR THE PROPOSED INITIATIVES? To be placed on the November ballot, each initiative must have more than 60,000 signatures by June 19.  CI-129 and CI-130 were approved to gather signatures in 2025. While his group has been focusing on CI-130, Monforton acknowledged it’s unlikely either initiative will have enough signatures to qualify for the ballot.  “Unfortunately, we haven’t been able to get financing to get paid signature gatherers,” he said. “It’s just a simple reality in modern politics that you have to have some paid signature gatherers to have a meaningful chance of qualifying for the ballot.”  Monforton said his group will try to educate voters and legislators over the next year or so and take another shot at a tax cap initiative in 2028.  The state’s legislative services division reviewed Galt’s proposal and this week forwarded it to the attorney general, who has 30 days to check for its legal sufficiency. Galt could hear back from the state with the next steps by early May at the latest. That would leave supporters with a tight timeline to gather signatures by the June 19 deadline.  Hall said Galt is building a strong coalition to get the initiative on the ballot and across the finish line in November.  “Montanans need and deserve relief from rising property taxes, and we’re working hard to get this 2% cap on local property taxes on the ballot,” Galt said in the press release. “I’m talking with Montanans across our state, and their response is enthusiastic. We’ll keep building support, and we’ll get this across the finish line.” In-depth, independent reporting on the stories impacting your community from reporters who know your town. The post What we know about the latest push to cap property taxes in Montana appeared first on Montana Free Press. ...read more read less