By Michael Howell
Ravalli County officials have been notified by Secretary of the Interior Ken Salazar that, due to failure of Congress to reach a deal on balanced deficit reduction to avoid sequestration, the President issued a sequestration order canceling approximately $85 billion in budgetary resources across the federal government for the remainder of the federal fiscal year. Salazar warned local officials that this will impact the payments made to counties under the Payment In Lieu of Taxes (PILT) program in which counties are compensated for the loss in revenue for property taxes due to federal ownership of land. About 75% of Ravalli County is federally owned and the PILT payments represent a significant portion of the county budget. Last year the county got $1,868,478 in PILT funding that goes into the general fund and may be used at the Commissioners’ discretion.
Based on the President’s report to Congress, there will be a 5.1% reduction in the PILT program, reducing the 2013 payments to counties by this amount. Payments this year will be reduced by 5.1% or a total of $21 million for the entire program. The formula for dispersing the funds is complicated and involves consideration of acreage, population, prior year’s payments and an inflationary adjustment. As a result, precise amounts of the reduction for each county are not yet available.
The reduced payments to Ravalli County will come in June.
“If sequestration is subsequently corrected, we would issue payments to counties with the balance of the PILT payments due to local governments,” wrote Salazar.
Ravalli County also depends heavily on Secure Rural Schools funding for a lot of its road budget. Last year it received $768,000 in SRS funding that can be spent on roads or schools. These funds, too, will be affected by sequestration.
One difference between this and the effects on PILT funding is that some of the SRS funds subject to sequestration have already been dispersed. The state is asking for the money back.
According to USDA officials, the states will receive a bill for collection to return the sequestered amount to the U.S. Treasury.
The program, which is currently expired, received a one-year funding extension in FY 2012 through enactment by Congress. The USDA proposed sequestration cuts to SRS totaling $17.9 million. Over the past six years, funding levels for the SRS program has been reduced by more than $180 million.
“Further cuts to SRS will create dramatic budgetary shortfalls for 729 rural counties, severely impacting their ability to continue providing government services to the public,” according to Harold Blattie, Executive Director of the Montana Association of Counties.
Commissioner Greg Chilcott said that one thing he has heard is that PILT is a kind of “subsidy” and he disagrees.
“This is not a subsidy,” said Chilcott. “It’s an obligation as I see it. It is the federal government’s obligation to the county. Who else gets to determine how much they pay in taxes?” He said that SRS payments are a contractual obligation based on timber receipts and are not a “gift.”
Chilcott also questioned the legality of the state’s claim that some SRS funds already dispersed should be returned.
“We got those payments on January 8 of this year. Sequestration was not invoked until March 1. Those funds were legally distributed at the time. I don’t think they can legally take it back now,” said Chilcott.
“Let them come and get it. What are they going to do, sue us?” he said.
Chilcott said taking it out of next year’s payment would be the best option. “But of course, there may not even be a payment next year,” he said.