Wednesday, February 3, 2010

Governor again downplays link between aid cuts and property tax increases
Last Friday, Governor Tim Pawlenty used his weekly WCCO-AM radio show to once again criticize Minnesota city officials for pointing to cuts in local government aids and credits as a reason for recent increases in city property taxes. The Governor specifically targeted the City of Bemidji referring to it as “a government town, in a lot of ways.”

City officials and others claiming a correlation between aid cuts and property tax increases are doing much more than simply spouting rhetoric—they have facts and statistics on their side. As noted here earlier, the Minnesota Office of the State Auditor (OSA) recently released a report on city finances that confirms 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 OSA report was consistent with one released late last year by MN2020, a public policy think tank, that showed the same trend dating back to 2002. And, a State Department of Revenue chart adds validity to the correlation by showing that since local government aid was introduced as part of the “Minnesota Revenue” in 1971, property taxes as a share of major taxes collected in the state actually declined from 42.3 percent to just under 30 percent before an initial round of LGA cuts in 2002.

Indeed, there are a number of factors that can ultimately contribute to property tax increases. City officials are justified, though, in their claims that the state continues to use cuts in aids and credits to cities to balance its budget on the backs of local property tax payers.