On June 13, proponents of Initiative 172 were confident they would get at least 24,175 Montanans to sign their petitions, beat the state’s June 20 signature-gathering deadline and have their proposal placed on voters’ ballots in November. Five days later, however, the initiative’s sponsors ended their campaign and withdrew I-172.
This sudden and surprising turn of events came as a relief to those who had opposed the controversial ballot measure, arguing that it represented a dangerous corporate perversion of the initiative process. But the fight over the future of that process is far from over.
The sponsor of I-172 was Charter Communications, a Connecticut-based company that provides telephone, internet and cable to some 5.7 million customers in 29 states. Last year, after purchasing Optimum from Bresnan, Charter became the primary provider of these services in Montana. Soon after, Charter sued the state in an effort to have its tax classification revised. Rather than being considered a telecommunications services company, as the Montana Department of Revenue classified the company, Charter argued it should be assessed as both a cable television system and a telecommunications company. The distinction was significant. It would mean a dramatic reduction in the company’s tax burden—and in the state’s tax revenue.
Charter won the argument in District Court, but the Montana Supreme Court overturned that decision in early December of last year and ordered the company to pay what it owed.
In March, Charter responded by submitting I-172 for the Montana Secretary of State’s approval. The measure asked Montana voters to do what the courts would not: reduce the company’s tax burden retroactively to 2006 and in perpetuity. In so doing, the measure would have cut the state’s property tax fund by $65 million and by an estimated $7.2 million per year going forward, according to the Montana Office of Budget and Project Planning. After the Secretary of State’s office approved the initiative for signature gathering in May, various critics of the measure emerged. Foremost among them was Eric Feaver of the Montana Education Association and the Montana Federation of Teachers.
“It’s pretty obvious to see what Charter’s doing here,” Feaver says. “It’s trying to buy its tax liability and shift its obligation to you and me and every other property taxpayer in the state of Montana. That ought to outrage everybody.”
Online, a movement called FU 172 emerged to drum up opposition to the initiative. In an atypical trio of editorials, the Billings Gazette urged its readers not to support the initiative. Feaver and the MEA-MFT sought to challenge the “legal sufficiency” of I-172, but the state Supreme Court ruled the measure could proceed.
Opposition to I-172 arose not only from concerns about property taxes but also about the precedent it would set. Montana has allowed voters to pass state law through the initiative process since 1906, then intended to allow citizens to circumvent a state legislature beholden to corporate interests and unresponsive to voter demands.
“Over the years, the initiative process has been an avenue for, basically, citizens to reform the political process when the legislative process is controlled by economic interests,” says C.B. Pearson, a policy consultant who has worked on a number of citizens’ initiative campaigns in Montana.
While those economic interests have periodically interfered in the initiative process, Charter’s attempt to enlist voters in a campaign to overturn a Supreme Court decision and reduce its tax burden struck some as an unprecedented abuse.
“I have never heard ... of a specific institution, organization, corporation or individual seeking to have their tax liability amended downward by a vote of the people,” Feaver says. “I mean, this is a totally unprecedented act. The only way to look at this is, well, if Charter can actually get away with spending a gazillion dollars qualifying this petition for the ballot and then is able to convince voters that, somehow or another, it shouldn’t pay the taxes it’s required by law to pay, and if that passes, well then what’s to prevent other corporate bodies from doing the same thing?”
Charter proved unsuccessful in its effort. On June 18, Charter and the Department of Revenue reached an agreement that ended the initiative campaign, collected most of Charter’s disputed back taxes and preserved the Supreme Court’s ruling on Charter’s tax classification. The state did agree to refund $9 million in protested taxes paid between 2010-2013 and to reduce back taxes owed from 2007-2009 to $8.3 million from nearly $16.5 million.
According to Mike Kadas, director of the Department of Revenue, the agreement was a victory for the state. Sarah Cobler Leow of the Montana Budget and Policy Center also welcomed the settlement, attributing it “undoubtedly” to the public outcry against I-172.
Though I-172 was withdrawn, the involvement of special interests in the initiative process will likely continue.
“So far we’ve been lucky,” Pearson says, “that not a lot of bad policy—economic policy—has advanced in Montana through the initiative process.”
Opponents of I-172 argue, though, that it took more than luck to stop the measure.
“Had nobody challenged Charter from the get-go, what’s the risk to them?” Feaver says. “Had we never raised those questions, there would have been no pause to the process.”