About $13M in education funding lost due to 4% property tax cap

CHEYENNE — Approximately $13 million in public education funding was lost after a 4% property tax increase cap went into effect earlier this year, according to the Wyoming Department of Revenue.

The Wyoming Legislature successfully passed four bills during the 2024 budget session that provide targeted property tax relief to property owners. House Bill 4 expanded Gov. Mark Gordon’s property tax relief program, and HB 45 provided the 4% cap. 

Both of these bills went into effect immediately. The two other bills go into effect at the beginning of the 2025 tax season. 

Senate File 89 doubles the veterans tax exemption from $3,000 to $6,000 of assessed value, and HB 3 gives qualified long-term homeowners a property tax exemption of 50% of the assessed value.

Revenue Department Director Brenda Henson gave members of the Legislature’s Joint Revenue Committee a property tax update during their Monday meeting at the state Capitol. She reminded lawmakers it’s important to focus on who the intended relief in property taxation is for as they continue to address property tax relief efforts into the 2025 general session.

“Are these bills having the intended impact, and what truly was the result?” Henson said.

Double-digit tax increases

Starting in 2021, counties across the state started to see double-digit percentage increases in residential property tax. 

Twenty of Wyoming’s 23 counties saw a double-digit rise in property taxes in 2022. By 2023, Sweetwater County was the only county that had a property tax increase below 11%. Lincoln and Crook County had the highest increase that year, at 28% and 27%, respectively.

It was around this time that constituents began rallying their lawmakers for tax relief.

But 2024 showed “quite a different story,” Henson said. For the first time in three years, residential property taxes in most counties increased by less than 6% — and some counties saw a decrease.

“Oh, what a difference a year makes,” Henson said.

The 4% cap on property tax increases did contribute to this, but not by much. 

Without the cap, a majority of Wyoming counties still would have fallen back to a single-digit increase, with the exception of Fremont and Crook counties, according to the Department of Revenue.

Nearly $19 million in taxes was exempted in 2024 from the 4% cap on property taxes. Henson said about 40% of homeowners realized some reduction in their burden from the cap. However, almost 139,000 homeowners didn’t realize any benefit, since their property didn’t appreciate above 4% from 2023.

“When we look at the tax amount on that $19 million, obviously the lion’s share of that is education,” Henson said.

She said about $3.6 million was lost from the School Foundation Program account, $7.5 million was lost for school districts, and $1.8 million was lost from county school funds. 

A second provision in HB 45 that provides a property tax cap goes into effect next year.

Henson hypothesized the state’s “going to see a lot more exemptions on the land.”

It’s common to see a $60,000 residential lot go up in value to $65,000, which exceeds 4%, she said.

Long-term homeowner exemption 

As of Friday, approximately 14,500 property owners had applied for the long-term homeowner tax exemption, Henson said. If all of these applicants qualified, this would equate to $16.5 million to $17 million in lost revenue from the tax exemptions so far, said Henson, who noted there’s no funding from the state to cover that loss.

The director said her department expects there will be more applications.

Local municipalities, especially those with a majority senior population, will be impacted the most by this tax exemption, Henson said. Improvement districts with significant senior citizen populations may also be impacted.

“If you exempt a significant amount of assessed value for anybody who has a bond they repay, now what you’ve done is increase the mill levy on those tax code assessed values,” Henson said.

Sen. Bob Ide, R-Casper, asked Henson about a provision in the bill that requires a qualified homeowner to live in Wyoming for at least eight months out of the year.

“I assume that’s just on the honor system,” Ide said. “It seems like it would force people to be maybe less than honest, say they were there for seven months and 15 days? Do you police that?”

Henson noted this was a policy decision made by the Legislature, and a penalty is included for those who provide false information. She also said most of Wyoming’s tax exemption programs require a primary residence for a majority of the calendar year.

“Taxation in Wyoming, everything’s based on an honor system,” Henson said.

The Property Tax Refund Program received over 5,000 more applicants for the 2023 tax year than it did in the previous year, Henson said. There were 13,485 applications that qualified for a refund, or 91% of total applicants.

Refunds totaled around $14.2 million.

The Legislature approved the governor’s request of $20 million to the Department of Revenue to run the expanded refund program. This year, Gordon requested an additional $10.5 million.

“We had more taxpayers take advantage of this program than we’ve ever had before,” Henson said. “And I did not envision that.”

Rep. Dan Zwonitzer, R-Cheyenne, asked Henson if there’s a statutory limit on the number of tax exemption programs a person could apply for. She replied there is not. 

“There are no statutory provisions limiting the number of exemptions of taxpayers. None,” Henson said.

Sen. Stephan Pappas, R-Cheyenne, asked Henson in what sequence tax exemptions are calculated for property owners who qualify for more than one program. She said this is a challenge administrators deal with.

The current sequence, should a homeowner qualify, is calculating the 4% cap on the residential structure, then the 4% cap on residential land, followed by the long-term homeowner exemption. Then the veteran’s exemption is applied to whatever is left, Henson said.

“I’m sure you can imagine how confusing this is starting to get,” she said.

This story was published on November 19, 2024.