Associated Press Writer

By DALE WETZELBy DALE WETZEL

North Dakota senators have declined to increase state aid to local governments by 45 percent, despite arguments that doing so would help them avoid raising property taxes.

"If you properly fund local government, if you properly fund K-12 education … you've given people property tax relief," said Sen. Joel Heitkamp, D-Hankinson.

Sen. Dwight Cook, R-Mandan, said state government already provides about $1.2 billion to local governments every two years.

"That is, truly, I believe, a fair balance," Cook said. State property tax relief efforts should be focused more on aid to local schools, which take the biggest share of a homeowner's property tax bill, Cook said.

North Dakota's Senate voted 24-21 on Tuesday to reject legislation, sponsored by Sen. Aaron Krauter, D-Regent, to increase local governments' share of North Dakota's sales tax.

At present, counties, cities and other local taxing districts receive four-tenths of 1 percent of state sales tax collections. Krauter's bill sought to increase the share to sixth-tenths of 1 percent, which was the allocation until the Legislature voted a decade ago to lower it. The change took effect in January 1999.

North Dakota has a 5 percent state sales tax. In addition, 113 cities and three counties - Steele, Walsh and Williams - levy a county sales tax, the North Dakota Tax Department says.

Approval of the change would have increased state aid to local governments from $91.7 million to $133.7 million during the 2007-09 budget cycle. During Senate debate on the bill, Krauter offered an amendment to phase in the change, but it was defeated.

Cook said the legislation did not guarantee property tax relief.

"When we go home, we are going to find a way that guarantees property tax relief," Cook said. "And if we can't guarantee it, then I think we're letting the people of North Dakota down."

The bill is SB2322.