(calm music) - [Anna Rau] Coming up next on Impact.

As property taxes continue their upward trajectory, some Montana homeowners are reaching the breaking point.

- The taxes have gone up so much faster than our income.

- [Anna Rau] We'll explore what Montana lawmakers are hoping to do to provide some much needed relief.

And we'll talk with Mike McGrath, the former longtime chief justice, about maintaining the integrity of the court in the face of political pressure.

- I think it's critical that each branch maintain its own freedoms and independence.

- [Anna Rau] Those stories next on Impact.

- [Narrator] Production of Impact is made possible with support from the Greater Montana Foundation, encouraging communication on issues, trends, and values of importance to Montanans, and viewers like you who are friends of Montana PBS.

Thank you.

(calm music) - Welcome to Impact, I'm Anna Rau.

Montana homeowners have seen their property taxes spike several years in a row.

For some residents, the burden is becoming too much to bear.

Lawmakers have debated numerous tax relief bills this session, but none of them have passed so far.

As Montana PBS's Hannah Kearse reports, with the legislative session winding down, there's concern that lawmakers may not be able to get the job done.

- [Hannah Kearse] Ray and Kay Campeau are the current stewards of this historic Bozeman house, known as the Julia Martin house.

For over a century, this home has opened its doors to artists and community events, a tradition still alive today, as a violin lesson is underway in the living room.

With a couple of loans, the Campeaus paid $24,000 for the house in 1967.

They say they put most of what they earned as an art teacher and a librarian back into their beloved home over the years, maintaining the house and the community value that came with it.

For a time, that meant the family of seven lived with as many as six renters.

- One of the things that used to pay our taxes was we rented the basement.

We rented the basement from when we first, first moved in here.

We tried to keep that as low as we could keep it.

We were lower than anybody anywhere, so we kept it really low.

As a matter of fact, we were recognized a couple times for having our rent so low.

I think we have only raised it once, and we raised it a year ago.

- [Hannah Kearse] They still rent out the three bedroom basement, but it no longer covers the property taxes, which now are almost as much as they bought the house for.

- The last four or five years have been difficult.

We retired in 1992, so our income is not going up.

A little bit more in social security each year and maybe cost of living increase in raised pension.

But the taxes have gone up so much faster than our income that it's difficult.

- [Hannah Kearse] For residents on fixed incomes, the recent surge in property taxes is hitting especially hard.

The state legislature is now grappling with what to do about this statewide issue.

And although lawmakers have proposed a variety of potential solutions, each comes with its own set of complications.

Take Governor Greg Gianforte's favored solution, House Bill 231.

It proposes raising taxes on second homes and short-term rentals to offset lowering taxes for primary homes and long-term rentals.

Supporters say the solution targets out-of-state homeowners who don't pay income tax, but opponents argue it's too complex and shifts about $180,000,000 of the tax burden onto certain other residential properties, which leaves many Montanans with even higher property taxes.

- The only mandate our constituents gave us was property tax relief.

And we're gonna go home and tell a lot of Montanans we raised, raised, your property taxes by 67%.

That is the governor's own Department of Revenue numbers.

This is counterproductive.

- [Hannah Kearse] After failing to pass the Senate, much of House Bill 231 now resides in a new bill, Senate Bill 542.

However many lawmakers are supporting a different approach in Senate Bill 90.

It taps into the state's lodging tax revenue to fund an annual tax credit to homeowners.

- If you think we can fix property taxes, guess again because we are touching on every bill, there are so many problems that we are facing, whether it's billings, whether it's a small business owner, whether it's a second homeowner or whatever, we just really can't fix it.

I keep going back to 90.

If we got $100,000,000 in there, it would benefit a lot of Montana primary residents.

- [Hannah Kearse] And another bill making waves in Helena, House Bill 528.

It proposes a significant cut to residential property tax values.

This would shift some of the tax burden onto other types of property, raising concerns among businesses.

The bill would also reduce the state's school equalization and property tax reduction account, or SEPTR, which is the state's education fund.

- Our concern is primarily with unintended impacts in here, the mechanisms within the existing law.

If you're gonna make sweeping changes like this into the residential rate structure, you probably need to just go in and completely repeal the SEPTR account because what'll happen here is as those rates fall, the 95 mills are gonna bring in less money, and as a result, the mills are gonna be pushed out to local school districts.

- [Hannah Kearse] Residential property taxes have been increasing faster than all other types of tax property in Montana for decades.

- Property tax system where residential values have been growing, especially in the last two reappraisal cycles, and at the same time, there have been legislative decisions made to exempt other types of property, which essentially results in shifting that property tax burden to residential property tax payers.

- [Hannah Kearse] But after the 2023 reappraisal cycle, most counties saw dramatic spikes in home property taxes.

The median statewide residential property taxes increased about 20%.

In Gallatin County, that equated to most residents, including the Campeaus, paying between $500 and $1,200 more in their property taxes than the previous year.

That's because Montana's residential market is exploding.

It's the state's most valuable property tax.

And some say cutting that tax rate would unfairly shift the tax burden onto different property types like businesses and farms.

- Well, we don't like the bills that take the residential rate much below 1% because then you just have a huge disparity in dollars paid per dollar value amongst the various taxpayers.

We don't like the split commercial issue because of the long term effect that's gonna have on medium and large businesses, and we're not just talking about huge business, we're talking about most of the major grain elevators in Montana.

- [Hannah Kearse] Business equipment property is increasing in value too, but not nearly as fast as Montana homes.

Still, the legislature has cut business equipment property taxes nine times in the last few decades.

And another exemption that will remove about 300 more businesses from the tax roll is currently on track to reach the governor's desk.

- The legislature over time chipping away at the property tax base in particular.

Like examples of this would be our intangible personal property tax exemption or the repeated attempts to exempt business equipment tax from taxation, right?

- [Hannah Kearse] If the legislature can't agree on a long-term relief plan for residential property taxes, residents can expect another hike in their tax bills.

And as the debate continues about who should shoulder more or less of the tax burden, a piece of Montana's tax structure hasn't gotten much attention on the legislative floor.

- Most of these reform conversations that have happened over the years are happening without bringing elephant in the room into the conversation in a meaningful way.

But I would argue we're not gonna fundamentally or structurally change our system without having a serious adult conversation about a sales tax.

- [Hannah Kearse] To lower property taxes, the state legislature has considered rebates, tax credits, and shifting property tax responsibility.

But as it continues cutting taxes elsewhere, the cost of public services like schools, police, and roads is increasingly falling on the shoulders of homeowners and local governments.

- You can't keep piling more and more costs on the property tax system.

We need to finally bite the bullet and start looking at what's our economy.

It's no longer a manufacturing export heavy industry economy that you can export the tax.

People that live here have to pay the tax and absorb it.

And so we have tourist economies that coming on that we're losing our main street retail and internet sales are a bigger and bigger part of Montana.

We don't get any revenue off of that.

So we've supported that forever, some type of consumption tax and use that to relieve property taxes and... - [Hannah Kearse] But the last time a sales tax was put to the vote, Montanans widely rejected the idea.

- A sales tax, property tax swap is regressive.

It asks more from lower and moderate income families who spend more of their income on basic goods and services.

And it's also more volatile.

I don't think a sales tax is the solution.

I don't think Montanans think a sales tax is the solution.

I think holding on to the income tax system that we have is a much more stable revenue source and is better for the people of Montana.

- [Hannah Kearse] The legislature could end up with a short term solution like it did in 2023 with a two time rebate of $675.

But for many, this did little to offset the jump in their property taxes.

- I just don't feel there's been thought into a long-term solution that makes it equitable 'cause that's the thing is right now it's not equitable.

- [Hannah Kearse] For the Campeaus, the future of their home is still unclear, as the next generation wrestles with how to maintain their historic home among rising costs.

- What's become a huge burden with the taxes, and it now no longer just weighs on my folks, but we, all five siblings, are now thinking about it and trying to figure out what can we do to make this sustainable.

Because we can't take everything we make and invest it into this home, which is what my folks do.

- We never invested in this house thinking of it would bring us back money.

We invested in this house because it would bring us back memories and cover and... - We do share it with the community.

And it's wonderful because we get to meet so many interesting people.

We've had weddings here, we've had funerals here, and it's given us a rich, rich life.

- [Hannah Kearse] Montanans are holding out that their government can provide meaningful relief on property taxes, and for many, it's a crucial step to staying in the communities they've helped build.

With Impact, I'm Hannah Kearse.

- With just over a week left in the session, lawmakers could come up with a stopgap measure like another rebate if they cannot agree on a long-term solution.

For 16 years, Mike McGrath led Montana's judicial branch as Supreme Court chief justice.

At the start of 2025, he passed the torch to his successor, but not before sitting down with Montana PBS's Stan Parker for a reflection on his long legal career and the current tensions between the court and the other branches of government.

- Raise your right hand.

You got it, repeat after me.

I, Cory Swanson... - I, Cory Swanson... - Do solemnly swear... - Do solemnly swear... - To support... - [Stan Parker] It was Mike McGrath's final act after 16 years as Montana Supreme Court chief justice, swearing in his successor.

- So help me God.

- So help me God.

- Chief, congratulations.

- Thank you.

(audience applauding) - Normally we don't wear pants under these things.

(audience laughing) But we're wearing them today.

- [Stan Parker] And as Montana's new top judge, Cory Swanson donned his robes and addressed his well wishers, McGrath stepped back and into retirement, (audience applauding) ending two terms as head of the judicial branch and a long career in government.

- I've been amazingly lucky.

I've been an elected official for 42 years, and a lot of that is luck and good fortune.

- [Stan Parker] McGrath's career also included eight years as Montana attorney general and a long stint as county attorney for Lewis and Clark County.

The latter part of his tenure was defined publicly by a growing tension between the courts and Republican policy makers.

- So most people in this room probably should already know this, but our judiciary is rogue.

- Do you think that this tension is going to escalate?

- No, I think the court's in good hands.

I think the judicial branch is quite stable.

We have 60 plus trial court judges and appellate judges that work hard, do a good job, continue to decide cases based on the law and the facts of those cases.

- [Stan Parker] This undramatic view of legal work, even as tensions rise, feels more akin to the rolling up of sleeves in a blue collar career.

Perhaps an attitude that rubbed off on him growing up in Montana's working class capital, Butte.

- It was a different era.

I was very fortunate I had the opportunity to work in the mines, worked underground when I was going to college in the summers and at Christmas time.

And that was a great experience.

Learned a lot about dealing with people, learned a lot about water issues.

I worked on the pump crew.

- Do you think that growing up in Butte where the visible reminders of the Copper King legacy are so close and at hand influence the way you think about the present challenges Montana faces?

- Absolutely.

- [Stan Parker] That perspective is a thread that runs through McGrath's career, with his written opinions steeped in history and colored by a suspicion of corporate influence also a perennial watchdog for the environment.

As attorney general, he played a central role in dismantling a giant monument of the Copper King legacy, the Milltown Dam.

- Milltown Dam removal was just a small part of litigation against primarily the Anaconda company at the time for pollution that it caused in the Clark Fork River all the way from Butte certainly to Missoula where the dam was.

But then beyond.

- [Newscaster] Since 1908, the Clark Fork River has been running over, under, and sometimes through the Milltown Dam.

Built to produce electricity, the dam also has another function, collecting sediment, toxic sediment.

- So that is a Superfund site, and it's a massive undertaking in terms of the restoration, but also the cleanup, or remediation if you will, itself.

- [Stan Parker] Here's McGrath in 2008 talking about a settlement with the Anaconda company's successors.

- Before everything is done, ARCO BP will spend $1,000,000,000 in Montana, $1,000,000,000 in Montana in (indistinct) cleanup efforts.

- [Stan Parker] Today, the Blackfoot and Clark Fork Rivers run free and wild at a Superfund site turned state park.

- A lot of groups had strong interests, and so getting all of those people on the same page took years, years of negotiation, years of discussion.

But at the end, everybody concluded this was the way to go.

- [Stan Parker] McGrath was also unafraid to think outside the box on crime.

As Attorney General, he boosted the Montana Meth Project, an awareness campaign with memorable ads and public art projects that still dot Montana roadways decades later.

Once sworn in as chief justice in 2009, he pushed for expanding specialized drug courts.

- Virtually every criminal case you see involves drugs and alcohol.

So things that we can do to reduce recidivism rates by turning those people lives around is important, and it's effective.

- It sounds like there's so much more to the job than deciding what should happen to someone, but it's also about envisioning and administering a system that can accomplish the prescriptions that you've prescribed for people.

- Yeah, it's a great job.

(laughs) I'll miss that.

- [Stan Parker] McGrath's penchant for problem solving led him to another early priority, making sure people with issues before the Supreme Court didn't have to wait so long to get their issues resolved.

"Justice delayed is justice denied," he said during the campaign, and for most of his tenure, more than 90% of judges and lawyers said they were pleased with the court's time to decision, a dramatic difference from the 30% satisfied before he took office.

- We handle cases much differently than they did before, and we issue more opinions that we refer to as memo opinions.

It answers the question before us, it solves the litigant's problem, but it doesn't have any precedential value, it doesn't plow any new ground, it doesn't interpret a statute in a different way.

And some justices write faster than others, frankly.

And so they tend to write more opinions.

- [Stan Parker] But court mechanics don't make headlines, opinions do, and McGrath has penned some big ones.

After the 2010 Citizens United decision unleashed corporate spending in the public square, a Montana law limiting corporate campaign money seemed poised to fall.

But in a high profile case known as Western Tradition Partnership, McGrath wrote that he believed the Montana law could still exist in a post Citizens United world.

That viewpoint ended up roundly rebuked by the US Supreme Court, which struck down the Montana law.

There were a lot of predictions in that opinion about how the influence of money could impact politics in Montana.

You write, "Unlimited corporate money would irrevocably change the dynamic of local Montana political office races."

What thoughts come to mind reflecting on these predictions 13 years later?

- No, it's certainly come to pass.

You look at this past election cycle and the US Senate race, the kind of money that was spent and who spent the money and who knows who spent the money on both sides was...

It was extraordinary.

And that's a dramatic change from the way politics used to be done.

- The judicial races too have gotten caught up in that.

- Right.

- This year at my house, I got a lot of flyers from out-of-state groups, and these issue ads really make it sound like the bulk of the work of a Supreme Court justice is how they feel about abortion or public lands.

And it seems like it misses a lot of what you guys do every day, doesn't it?

- Oh, absolutely.

In the court system across Montana, we get several hundred thousand cases if you count traffic and all those kind of cases.

At the Supreme Court, we get four or 500 cases, some, counting writs, we're up to 700 cases.

Only a handful of those cases involve these sort of hot button issues, if you will.

The rest of it is trying to apply the existing law to the facts of a particular case and resolve a dispute.

- [Stan Parker] The money and polarizing rhetoric in judicial races has also fed the growing tension between the court and top Republicans.

- The ACLU out of New York City dumped more than $1,000,000 into those races.

- [Stan Parker] Who say politicized campaigns go hand in hand with politicized outcomes.

- And our courts, well they've sided with the far left.

- [Stan Parker] Accusing the court of overreach when striking down laws on election rules.

- Yes, those are all common sense election integrity bills.

- [Stan Parker] Gender affirming care for minors.

- These are all common sense laws designed to protect Montana children.

- [Stan Parker] And climate, to name a few.

By McGrath's count, the court struck down 13 laws from 2020 to mid 2024, and only three during the four years before that.

- Which is quite a significant increase, three to 13, in a short period of time.

So what's the difference there?

The court is the same.

This has been the same Supreme Court.

We've had no changes since 2016.

So in my view, what has changed is one party has obtained a more dominant position, if you will, a super majority, and that has changed the balance of power, if you will, or it's certainly changed the tensions.

- [Stan Parker] When the McGrath court sided with youth climate activists in the now famed climate case Held v. Montana in December, 2024, Republican legislators saw that as an escalation.

- Montanans will continue to suffer decades of economic harm and social harm if we don't turn this activist and overreaching courts around.

As the speaker of the house, I'm here to send a clear message to the judiciary.

Buckle up.

- [Stan Parker] Republican leaders went into the 2025 legislative session with a long wishlist of reforms aimed at reigning in the courts.

McGrath says much of this conflict is simply part of the natural tensions between the branches, but cautions against going too far.

- I think it's critical that each branch maintain its own freedoms and independence, but there is that built in tension, which is a healthy thing, and it's designed to keep any branch from getting too powerful.

It's designed to keep the government itself from becoming too powerful.

- [Stan Parker] And now all these big questions are left for a new chief justice to ponder.

- So what do we do about the present and what do we do about the future?

I would personally like to break this cycle and get back to writing more... - What I'll miss in terms of the court is the intellectual stimulation, intellectual discussions that we have trying to resolve a problem.

That's the part I'll miss the most.

- For Impact, I'm Stan Parker.

- Supreme Court justices are elected for eight year terms and are staggered to ensure that only two seats are up for election at any given time.

This is designed to insulate the high court from political pressure and ensure continuity.

That's all the time we have for this episode.

On the next Impact, domestic groundwater wells have become an important tool for developers in high growth Montana counties, but opponents say they've gone too far.

We dig into the perennial debate.

And gateway communities are bracing for an unpredictable summer after federal cuts to the National Park workforce.

Montana PBS speaks with Yellowstone's gateway communities about the uncertainty.

Thanks for watching, we'll see you next time.

(calm music) (calm music continues) (calm music continues) (calm music continues) - [Narrator] Production of Impact is made possible with support from the Greater Montana Foundation, encouraging communication on issues, trends, and values of importance to Montanans, and viewers like you who are friends of Montana PBS.

Thank you.

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