Last week’s release of the mill valuation by the Montana Department of Revenue will have a significant impact on Lincoln County as commissioners work to finalize the new budget. The new mill valuation could cost the county as much as $365,400 in levied revenue.

The 2015 mill value has been set at $31,673, as compared to $35,153 in 2014. While the decrease could be good news to property owners in the form of lower taxes, it is a difficult pill for the commissioners to swallow as they struggle to balance a budget already suffering from decreased revenues and the need to repay taxpayers for overtaxation in previous years.

“It’s a big chunk of revenue,” Commissioner Mark Peck said. “On top of everything else, it’s one more thing to deal with.”

The county levies 105 mills annually, Peck said, which equates to a hit of $365,400 to the county’s bottom line. The commissioners are looking at a number of options to deal with the changing fiscal projections.

One of the options available to the commissioners is to float mills. Under Montana law, municipal governments are limited in the number of mills they can levy, but in cases where the valuation drops, such as this year, county governments are allowed to increase the number of mills levied, commonly referred to as floating mills, to make up the revenue shortfall. The increase in levied mills is limited, however, to the amount of revenue lost by the drop in value from the immediately preceding fiscal year.

Peck said the decision about floating mills is a difficult one, especially given the confusion still circulating around the overtaxation by the county in previous years. The commissioners had intended to repay taxpayers 20 mills of the overtaxation this budget year, but the drop in projected revenue may preclude that repayment this year. Floating the mills to make up the shortfall would eliminate a tax decrease for county property owners, but not doing so could also pose problems for future commissioners to address.

“The one concern I’ve got with not floating the mills is if we don’t do it this year we may not have the option to do it next year,” Peck said.

Personnel changes are on the table as well. The commissioners say they are working to streamline county efficiencies and hope to make up some of the gap that way, but Peck said there just isn’t enough fat to cut in the county budget.

“We’re searching for additional efficiencies,” Peck said. “But we’re not going to make up that amount of money in efficiencies.”

The commissioners already decided to not give county employees a cost-of-living allowance (COLA) increase this year. That decision was made prior to the Department of Revenue’s announcement of the mill valuations, it was based upon an increase of 11 percent in employee insurance costs. The county pays the full premium for employee health insurance and felt the continuation of that policy was worth more than an increase in base pay.

“The benefit to the employees was greater with the insurance than the benefit of the cost-of-living allowance would have been,” Commissioner Mike Cole said. “That was my feeling on it.”

Peck said the commissioners will most likely dip into the nearly $15 million county reserve fund to offset the drop, but that is not a long-term solution.

“Once we use up that reserve, we’ll have to figure out how to run the county on $4 million,” Peck said.

The reserve was created during the heyday of mining and logging in the late 1980s and early 1990s, when the county was paid 25 percent of Forest Service receipts. Cole and Peck praised previous commissioners for banking some of those funds for future use.

The commissioners will be finalizing the budget during the next month, a process Peck said will not be easy.

“There are several major decisions on the table right now,” he said. “The toenail clipping is done. Next year we’re going to have to look at toes, and feet and ankles.”