A conference committee on House Bill 1176 on Oct. 12 provisionally agreed to apply a 3% cap to the state’s 60 mills of school levies and to seek gap funding from the state to offset revenue losses for school districts.

The committee’s decision was provisional: Chairman Hedlund asked Adam Tescher, school finance officer at the Department of Public Instruction (DPI), and legislative staffer Megan Gordon to draft specific amendment language and produce an updated cost estimate for the committee’s 4:00 p.m. meeting. Tescher has already circulated a spreadsheet with district ending balances, levies and recent valuation growth.

Why it matters: The change would directly affect school district revenues and property tax statements for residential and commercial taxpayers. Committee members said the cap aims to deliver property tax relief while creating a state-funded “gap” to hold districts financially whole during the two-year trial period.

Committee debate and context

Senator Beckettall cautioned that fully exempting the 60 mills from caps could defeat the bill’s purpose and said he did not know how much taxpayer bills would increase if the provision remained uncapped. "Is that provision gonna add $100 to a property tax bill? Is it gonna add $1,000?" he asked.

Chairman Hedlund and other members described examples of large assessment jumps after long gaps between revaluations. Hedlund cited Jamestown, where a recent revaluation produced a 23% overall assessment increase, and members described commercial assessment notices showing 30% to 90% increases in some places. Several members urged annual revaluations to smooth spikes.

Senator Eberly and others raised a separate concern about districts facing rapid, unpredictable growth—citing Ellendale and the arrival of a large data center with hundreds of employees—asking how gap funding could be administered to keep those districts "whole."

Adam Tescher, DPI school finance officer, told the committee he initially calculated about $17 million annually in gap funding when comparing 2023 to 2024 changes in taxable valuation, but that looking across a longer period could produce a higher number. "If I look at the 1 year, again, I feel that number's pretty accurate," Tescher said, and he later noted an estimate closer to $30,000,000 when broader valuation changes are considered.

Members noted that audited balances often include restricted building funds and sinking funds that are not available for operations. Representative Nathie and others emphasized that the operational ending fund balance (the money districts can use for day-to-day operations) differs from funds restricted for buildings or debt.

Scope of the caps and exclusions

Committee members discussed which levies should be reduced when taxable valuation growth exceeds the cap. Chairman Hedlund said every mill a district levies should be reduced proportionally — not only the general fund — so that voter-approved mills, the 10 mills, the 12-mill miscellaneous levy, building fund mills and technology mills are all adjusted when growth exceeds the cap. The committee also discussed exempting certain levies: members agreed that the tuition fund levy should not be capped, noting state law currently allows districts to levy to pay tuition for students placed out of district or for districts that do not operate certain grade levels.

Next steps and constraints

Rather than adopting final statutory language, the committee directed staff to prepare amendment language and updated cost estimates for the committee's afternoon meeting. Several senators warned that if gap funding proves insufficient, the Legislature may need to return next session to request additional appropriations, possibly with an emergency clause. Members repeatedly stressed the proposal is a two-year trial and likely to require future adjustments.

Votes and formal actions

No formal votes on HB 1176 were recorded during the meeting. The committee did record a procedural attempt to adjourn the meeting; a member moved for adjournment, but the chair ruled the motion out of order and set a reconvening time.

Ending

The committee left the meeting with a provisional agreement on the 3% cap for the 60 mills, a plan to proportionally reduce every mill when valuation growth exceeds the cap, and a direction to DPI and staff to draft amendment text and updated fiscal estimates for the next meeting. Lawmakers said they expect to revisit the policy and funding numbers in subsequent sessions if growth or revaluations generate larger gaps than anticipated.