Hogan Administration proposes to permanently shift 90 percent of property assessment costs onto county governments.
Governor Hogan’s Budget Reconciliation and Financing Act of 2021 (BRFA) revives an attempt (unsuccessful in previous years) to shift costs of the State Department of Assessments and Taxation (SDAT) onto county governments.
The BRFA is typically introduced to implement a variety of actions such as raising revenues, altering statutory formulas and mandates, and transferring various monies in special funds to the general fund to allow their use for other purposes, such as balancing the budget.
HB 589 / SB 493 proposes to increase counties’ reimbursement of SDAT functions, including costs of real property valuation, business personal property valuation, and information technology. Since 2013, counties have reimbursed the State for 50 percent of these costs, but the BRFA proposes to increase the local share to 60 percent in fiscal 2022, which would swell to 90 percent by fiscal 2026 and each year thereafter.
This proposed permanent cost shift not only imposes a high fiscal burden on counties, but threatens the objective nature of having assessment functions managed and funded by an entity that does not meaningfully, directly benefit from the results of those assessments. Having assessments conducted by the State, rather than the counties, helps assure taxpayers that the assessing body provides objective, unbiased analysis.
The Department of Legislative Services (DLS) has previously recommended against increasing counties’ reimbursement of SDAT functions.
The Department of Legislative Services (DLS) recommended against this proposal when it was offered in 2017. While it is true that local jurisdictions are the primary recipients of revenue based on the work of SDAT, this does not necessarily mean that it is wise to place the cost burden on those local governments. The State and its citizens benefit from the uniformity in procedures and valuations produced by SDAT as well as the unity of the appeals process. Assessors from all jurisdictions benefit from having greater access to support and other resources that may not be available to them otherwise.
As long as budget decisions for SDAT are made at the State level, it is prudent to require the State to pay a large share of these costs to maintain an incentive to make wise budget decisions. While there is no evidence that the current administration of SDAT or DBM would be less careful in their fiscal stewardship if more funding comes from local governments, there is still a risk going forward of creating a large area of expenditure in the budget that the appropriators do not have to fund. DLS recommends that the current 50-50 cost share for assessment expenses be maintained and that the provision increasing the local cost share to 90% be stricken from the BRFA of 2018.
MACo has aggressively resisted this cost shift, and successfully advocated to strike it from the State’s fiscal plan in 2017, 2018, and 2020. A similar effort appears to be required this year.