BISMARCK, N.D. (NORTH DAKOTA MONITOR) – North Dakota can expect a key property tax relief program to cost about $430 million for the 2025-2027 budget cycle — about $20 million more than what the state planned to spend.
The 2025 legislature set aside $408.9 million for the primary residence credit for the two-year budget cycle, State Tax Commissioner Brian Kroshus said.
“That discussion was had during the last session, that I don’t think this is enough,” he told state lawmakers at a Tuesday meeting of the Tax Reform and Relief Advisory Committee. “We were given every assurance that if we need to ask for additional funds, they will be found.”
The credit, created in 2023, subsidizes property taxes for most homeowners. Initially it provided a $500 discount every year, but lawmakers in 2025 increased that amount to $1,600 as part of a major property tax relief package, House Bill 1176.
Kroshus said the cost of the program is outpacing the state’s initial projection for several reasons. First, the credit is becoming more well-known, and more people are persuaded to apply for $1,600 in relief compared to the original $500.
“The $1,600 credit tends to get your attention a little bit more,” he said.
More North Dakotans are also becoming homeowners as the state’s housing supply increases, he added.
The deadline for homeowners to apply for the credit this year is April 1.
House Bill 1176 also sought to provide tax relief by capping annual property tax increases by local governments to 3% annually.
The North Dakota League of Cities, the North Dakota Association of Counties and the North Dakota School Boards Association recently conducted informal surveys of their members to see how communities are responding to the cap.
The associations told lawmakers Tuesday that many members report that the new cap is making budgeting more stressful.
All three organizations found widespread confusion about how the law works, and said the statute is too rigid. They said the law isn’t flexible enough to accommodate their communities, which have varying budgeting processes, scheduling deadlines, population sizes and tax bases.
“Langdon School District, located in the northeast part of the state, was especially direct in their response, saying that the district did not feel confident that it could even determine whether it was in compliance with the 3% cap,” Amy De Kok, executive director of the North Dakota School Boards Association, said during the meeting.
Many local government officials also emphasized in the survey that the costs of basic expenses like emergency services and employee benefits — especially health insurance — are increasing more than 3% a year. They said they’re worried about how they’ll pay for those costs in the long-term under the cap.
Some counties reported being “unable to provide the adequate competitive salary increases” and that “they were limited in their ability to budget for large projects,” said Donnell Preskey, government and public relations specialist for the North Dakota Association of Counties.
Some local governments also say the law makes it harder to qualify for certain state funding opportunities, since some programs require them to tax their communities above a certain threshold to qualify.
“Township officers are being pushed in two different directions,” Larry Syverson, executive director of the North Dakota Township Officers Association, said during the meeting.
Communities suggested increasing the cap or making it proportional to inflation, the informal surveys found. Another common request was for the law to be amended to be more forgiving of administrative deadlines and to make it easier to correct paperwork mistakes, since communities are still getting used to the new system.
They also raised the possibility of allowing costs like public safety, infrastructure and election expenses to be exempt from the caps.
House Bill 1176 allows for local governments to exceed the 3% cap if voters approve it on the general election ballot.
None of the association representations said they were aware of any communities proposing cap increases to voters during the 2026 general election at this time. They said some local governments are dipping into reserves or tapping into other funding sources in order to make up for money lost due to the cap, however. Local governments also have an ability to carry over unused property tax increases from year-to-year in certain circumstances.
Several lawmakers on Tuesday questioned why communities aren’t going to voters to override the cap if it’s putting so much stress on their budgets.
Kory Peterson, former mayor of Horace, in testimony to the committee noted it’s hard for communities to get tax increases approved on the ballot.
“There’s a lot of tax fatigue,” he said. “As a former mayor, I know that it would be very, very difficult to try and bring up a tax increase in the city of Horace.”
Not all of the feedback was negative. De Kok said some school districts said the cap made the budgeting process more predictable and transparent for taxpayers, for example.
The committee expressed interest in exploring legislation to address some of the local governments’ concerns later this year. It’s scheduled to meet again in June.
“We knew after the session that there was going to be some adjustments necessary,” Rep. Don Vigesaa, R-Cooperstown, said during the meeting.
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