Friday, January 15, 2010

More proof that aid cuts to cities = higher local property tax burdens
Yesterday, the Minnesota Office of the State Auditor (OSA) released a report confirming that state cuts to city aids in recent years have created a greater reliance on city property taxes as a source of revenue to pay for vital city services. According to Auditor Rebecca Otto, that trend will continue “If the Legislature and Governor further cut local government aids.”

The data in the OSA report is for 2008, and highlights budget trends for the past 10 years. The city budget-year 2009 data will likely show an even greater city reliance on property taxes because of the Governor’s massive local government aid and credit unallotment administered at the conclusion of the 2009 State Legislative Session.

So if cities just accept their fate and tighten their belts, wouldn’t it be unnecessary for them to respond to aid cuts with tax increases? The report goes on to note that Minnesota cities are indeed cutting back, and have been doing so for at least a decade. Inflation-adjusted total city revenues AND expenditures decreased seven percent between 1999 and 2008, deflating claims made by local government critics that city spending has been out-of-control and is solely to blame for property tax increases.

The OSA report lends further proof to the fact that policy decisions made at the state level have dramatic impacts at the local level, and that the Legislature and the Governor need to consider renewal of an effective state-local fiscal partnership as a top priority.

Additonally, a fact not mentioned in the report is one that city residents know all-too-well: the reduction in state aids and credits has translated not only into higher property tax burdens, but also in service reductions for hundreds of communities. The League of Minnesota cities recently complied a report that details city budget-cutting measures along with service reductions.