More Proof State Cuts Causing Property Tax Increases
December 1st, 2009 at 1:41 pm By Jeff Van Wychen
Today’s Minnesota 2020 report documents how state cuts are causing property tax increases. The magnitude of local revenue loss since 2002 have compelled Minnesota local governments to cut their budgets at the same time that they’re increasing property taxes. Thank your “no new tax” state policymakers for this trend; in order to avoid state tax increases, the state has been shifting its budget problems disproportionately on to the backs of local governments and local property taxpayers.
Information from the Coalition of Greater Minnesota Cities demonstrates this trend from a slightly different angle. According to the CGMC analysis of cities with a population over 1,000, the cities that are experiencing the deepest aid cuts in 2010 are also seeing the largest property tax increases. Cities with aid cuts in excess of 3.3% of their revenue base (i.e., the sum of property taxes plus state aids) are expected to have average property tax increases of 6.3% based on preliminary levy information for taxes payable in 2010. Meanwhile, cities with aid cuts of less than 3.3% of their revenue base will be experiencing average property tax increases of 2.4 percent.
It is not surprising that cities with the largest aid cuts will be experiencing the largest property tax increases. Only so much can be cut from city budgets without endangering important public services and infrastructure. During the era of “no new taxes” (i.e., since 2002), cities have cut their budget far more than state government. Some portion of the cut in state aid to cities will of necessity have to be recovered by increases in property taxes.
Incidentally, total city property taxes are expected to increase by $95 million from 2009 to 2010 based preliminary 2010 levy information—well short of what was needed to replace the $128 million that was stripped out of city budgets in 2010 as a result of the Governor’s July unallotments. This $128 million unallotment of city revenue in 2010 comes on top of an unallotment of $64 million in 2009 and $66 million in 2008. These unallotments do not include additional amounts that were stripped out of county budgets and the renters’ property tax refund. All of these unallotments ultimately contribute to higher property taxes.
State policymakers need to stop using the complexity of the state-local fiscal relationship to obscure the fact that the “no new tax” agenda has been contributing to large increases in property taxes at the same time that the real revenue of cities, counties, and schools is falling.
Tags: Coalition of Greater Minnesota, LGA, property taxes, Unallotment
Here’s a fact that you cannot dispute on property tax reform:
1) For four years in a row, the DFL Majority rejected any attempt to reform Property Taxes by placing a property taxes limit of 5% or 6% of family income. This Bill received widespread support from the Republican side but received very little support from the DFL majority.
2) This Bill would have protected the poor, the middle class, our retired seniors and would have protected the cities and counties.
3) Why would the DFL party be opposed to protecting classes of people that they profess to support? This makes absolutely no sense to this writer and demonstrates the adage: “watch what I do not what I say”!
Mike:
I have no interest in engaging in the DFL/GOP squabble. However, I have an inquiry regarding your proposal. You contend that your proposal provides significant property tax relief for seniors while at the same time protecting local governments from revenue loss. How is this accomplished? Are the same legislators who are supporting your proposal also supporting an increase in state taxes in order to pay for the property tax relief that the proposal provides, so that local governments are protected from more revenue losses? I would be surprised if this were the case.
Keep in mind that per pupil public school spending and real per capita city spending in Minnesota has already dropped below the national average. The property tax is a regressive tax and we should be pursuing ways to reduce it. At the same time, we also have to worry about paying for education, infrastructure, and public services.
It is easy for legislators of the minority party (be they DFL or GOP) to support proposals when they don’t have to pay for them. Were the minority legislators who support your proposal now also supporting it when they were in the majority? Were they passing bills? Are they pressuring the Governor to make it part of his agenda? This is the true test of whether they are serious about implementing your proposal or just want to embarrass the opposition party.
I would encourage people to take a look at HF 2362 (http://www.house.leg.state.mn.us/hrd/bs/85/hf2362.html) from the previous legislative session. This bill would have provided significant property tax relief to low-income households; furthermore, this bill would have paid for this property tax relief by increasing income taxes on high income households. It is easy to support property tax relief; the tough part is paying for it without cutting local revenues any more than they have already been cut. HF 2362 did both.