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In a bold first State of the State address on Monday, Gov. Kelly Armstrong said he's aiming to slash property taxes to zero for the majority of North Dakotans within the next 10 years. To do so, he is proposing the state create a fluid, Legacy Fund-dependent property tax credit, a fifth property tax classification and a 3% tax increase cap for local political subdivisions.
Gov. Kelly Armstrong delivered a State of State address to a joint session of the North Dakota Legislature on Tuesday, Jan. 7, 2024, focusing on many issues including property tax reform.
"The state has played an ever-expanding role in trying to reduce the property tax burden through mill buydowns, shifting the cost of social services from local to state, growing the funding share of K-12 education to 80% and approving a $500 primary residence property tax credit last session," Armstrong said. "Like it or not, the state is involved in property taxes," he continued. "To be honest, it hasn’t worked.
I was here. I voted for some of those bills (as a state legislator). But it really is the worst kind of policy.
It’s incredibly expensive, and people are as frustrated as they’ve ever been." Property tax relief "We need to act now to provide real property tax relief and real property tax reform," Armstrong said. The newly elected governor announced a plan that would use $483 million between the state's general fund and Legacy Fund in the first biennium to provide $1,550 in total property tax credits per year during the 2025-27 biennium — relief money he said would grow over time.
Approximately $310 million of the state's general fund dollars would be used to double the primary residential credit amount from $500 to $1,000 at the outset, while $173 million in Legacy Fund earnings would be redirected to fund the remaining $550. Armstrong's plan depends on the $11 billion Legacy Fund to increase at a similar, exponential rate to what it has been since its creation 15 years ago. The fund receives 30% of taxes on oil and natural gas production in the state and has grown nearly 10 times faster than early projections.
Each biennium through 2037-39 would reflect the Legacy Fund tax credit growing, continuously increasing the primary residence tax credit, according to a plan Armstrong shared with Forum News Service and other media. Once the Legacy Fund tax credit reaches $2,000 annually — in the 2031-33 biennium — the general fund tax credit would begin to shrink while the Legacy Fund tax credit would continue to grow. By the 2037-39 biennium, 100% of the primary residence property tax credits would be covered by the Legacy Fund and zero would come from the general fund.
Homeowners would receive a tax credit of up to $4,240 per year by 2037, according to the plan. Creating a fifth "primary residence" property tax class is a component of the plan. According to Armstrong, that would make the property tax credit automatic, meaning homeowners wouldn't have to apply for the credit from the state.
Property taxes would be eliminated for many homeowners who combine the new primary residence tax credit with the existing Homestead Tax credit, Armstrong said. "This plan is aggressive, durable and responsible, meaning it can survive market swings, because our state’s economy is still driven by commodities," he said. "This plan will work even if oil is at $55 a barrel and soybeans are at $6 a bushel.
" Property tax reform In addition to providing homeowners with tax relief, Armstrong proposed reform by capping annual local property tax increases at 3%. If the full 3% isn't used, whatever percentage is left over could be banked by local political subdivisions to be used within five years. For instance, if the city of Fargo raises taxes by 2% in 2025, it would have until 2030 to levy that additional, unused percentage.
"This will encourage cities, counties, schools and park districts to budget prudently and plan ahead," Armstrong said. "To those who say the state shouldn’t be capping local budgets: When this package is approved, the state will be paying over 50% of the local share of property taxes," he continued. "We absolutely have a say in their budget growth.
" Legislators from both sides expressed support for Armstrong’s plan. Josh Boschee Sen. Josh Boschee described Armstrong’s property tax relief and reform package as "progressive.
" A realtor by trade, the Fargo Democrat said he’s excited to hear how the ideas are received by his colleagues. "It'll get the folks who need it the most covered first, and then those of us that pay more in property taxes, it'll catch up over a couple of years,” Boschee said. He said he hopes the changes will spark conversations related to the needs of renters in North Dakota.
“Clearly, Gov. Armstrong has put a lot of thought into a long-term plan and how to fund it fully," Boschee said. Jared Hagert House Finance and Taxation Vice Chair Rep.
Jared Hagert, R-Emerado, said "A lot of buildup is around relief, but the key to this whole package working is reform." House Finance and Taxation Chair Rep. Craig Headland, R-Montpelier, said there are more than 50 property tax bills that must go through the legislative process.
"And (legislators) must try and work with the political subdivisions that are going to be impacted, because it's their tax, not ours," he added. Jonathan Holth is the North Dakota Commissioner of Recovery and Re-entry. New Cabinet position, other proposals In his speech, Armstrong revealed a new Cabinet position: the Commissioner of Recovery and Re-entry.
He appointed Jonathan Holth, director of former first lady Kathryn Burgum's Recovery Invented initiative, to be the first person to hold the position. Holth's role is to strengthen relationships between entities closely tied to addiction and incarceration, including the Department of Corrections and Rehabilitation, county jails, tribal governments, law enforcement and "everybody else who cares about providing services to the people in our communities who need them the most," Armstrong said. While property taxes took center stage at Armstrong's State of the State address, the governor also called on legislators to prioritize a handful of pressing issues.
Those priorities include improving addiction and behavioral health services, increasing funding for higher education grants, and slimming down state boards and commissions. He also emphasized the “opportunity” North Dakota’s energy and agriculture sectors will have under the incoming Trump administration, nodding to developments in enhanced oil recovery and carbon dioxide technologies. Armstrong’s goals for North Dakota will be detailed further in his budget address at 9 a.
m. Wednesday, Jan. 15.
“As we move forward this legislative session, we have a responsibility to our citizens to try new things so they can keep doing what they do best, which is taking care of each other,” Armstrong said. The Bismarck High School Band and the Grand Forks Central High Choir perform at the 2025 North Dakota State of the State Get Government & Politics updates in your inbox!.
