Not a gubernatorial debate goes by without some discussion of government aid to cities and schools.
DFL hopeful Mark Dayton raised the issue during a debate at the University of Minnesota on Oct. 15, 2010, saying state aid cuts are forcing property taxes up.
"For every dollar you cut in local government aids or in school aid from the state, property taxes go up by 67 cents," he said. "That's why property taxes in Minnesota under Gov. Pawlenty have gone from $4 billion to $7 billion."
Dayton's correct that the correlation between cuts in government aid and increasing property taxes is strong. However, it's worth pointing out that there are other reasons school and local property taxes are on the rise.
First, Dayton says that property taxes increase by 67 cents for every dollar the state cuts in aid.
Generally speaking, this is true, though it's important to note that this is a rule of thumb employed by the Minnesota Department of Revenue when estimating how cuts in state aid will interfere with tax revenue, not the law of the land. Eric Willette, who directs property tax research at the revenue department, says recent estimates have been on the high end because many cities are choosing not to raise property taxes in light of the ongoing recession.
The same trend is evident when it comes to per pupil school aid. Based on Department of Education data, when accounting for inflation, per pupil funding has declined by about $1,300 since 2003, and property taxes have increased by about $870 - a two-thirds increase in taxes.
Further, Dayton points out property taxes have increased from $4 billion to $7 billion in recent years. This is also true. Since Pawlenty took office in 2003, local and school property taxes have increased by about that much. (State property taxes have increased over the years, but not dramatically.)
Dayton's underlying point, that a rise in property taxes is the direct result of cuts to state aid, is fuzzier.
By all accounts, the cuts are a major contributor. However, there are other factors at play.
In counties, for instance, property taxes have been on the rise because the state has shifted some of the costs associated with taking care of the Medicaid patients and the mentally disabled to counties, says Keith Carlson, executive director of the Minnesota Inter-County Association.
Meanwhile, cities and towns are grappling with higher health care costs, home foreclosures that erode the tax base, and relatively high energy costs meaning it costs more for police and fire departments to fuel their patrol cars and fire trucks.
Generally, Dayton's claims are correct. It's true that for every dollar that's cut in state aid, property taxes tend to increase by about 67 cents. And these cuts have driven increases in property taxes.
That said, it's important to put this trend in context: The recession, foreclosures, and higher gas prices have all contributed to this increase as well.
All in all, Dayton's claim passes the PoliGraph test.
The UpTake, Gubernatorial Debate at the University of Minnesota, Oct. 15, 2010
Minnesota Department of Revenue, Price of Government: State and Local Government Revenues are Forecast Through 2013, accessed Oct. 19, 2010
State of Minnesota: Office of the State Auditor, Minnesota City Finances, 2008 Revenues, Expenditures, and Debt, Dec. 31, 2008
Minnesota2020, When It Comes to School Finances, No News is Not Good News, by Jeff Van Wychen, Aug. 23, 2010
Interview, Eric Willette, Property Tax Research Director, Minnesota Department of Revenue, Oct. 19, 2010
Interview, Keith Carlson, Executive Director, Minnesota Inter-County Association, Oct. 19, 2010
Interview, Gary Carlson, Director of Intergovernmental Relations, League of Minnesota Cities Oct. 19, 2010
Interview, Jeff Van Wychen, Minnesota2020, Oct. 20, 2010
This is an accurate historical picture, but it's not a direct cause and effect. Someday, local government leaders will have to slow down their spending just like the state has, or risk getting thrown out of office like the Dems in Congress.
Sounds like a tax savings. Give the state $1 dollar less and pay only $0.67 more for similar quality services provided by the county and city governments. This appears to force counties and cities that rely on money from other counties and cities to face reality. Does his math include the property tax refund?
Consider that in 2009 the state gave away $467,170,000 in property tax refunds and special property tax refunds. Look at the current biennium projected shortfall of $994,000,000. Wouldn't it make sense to eliminate the property tax refunds??? The budget would've been almost balanced without the refunds.
Do people really budget around property tax refunds? If they do maybe it's time to cut back on personal expenses. There's a lot of peoople on the public dole that apparently need the welfare system here.
I'm not voting for this fella Dayton. Imagine the people he could help by giving his money to the welfare system instead of running for office...
This appears to force counties and cities that rely on money from other counties and cities to face reality.
theBIGpopi: I don't know where you live, but the problem with this statement is that many cities and counties end up providing services for people who don't live in those places. For example I live in the West 7th neighborhood of St Paul (about 2 miles from the Xcel Energy Center). I work in NE Minneapolis. I see Local Government Aid (LGA) as a way for my tax dollars to help pay the cost of Minneapolis providing services that I need when I'm there. In addition it allows the 18,000 or so hockey fans that come to the Xcel for games to contribute to the services needed to keep them safe and sound when they are in St Paul.
@JackU: I thought that the Xcel Energy Center is a source of revenue for the city of St. Paul - nice to know that it requires additional funding from other cities and counties to allow them to make this revenue. WHY THE #@%* DID WE BUILD A STADIUM FOR PRO HOCKEY IN THIS STATE IF IT IS A MONEY PIT? BTW, Minneapolis should use the taxes they get from you buying lunch and from tax revenues from where you work to provide services. If you don't feel safe, you get a conceal and carry permit... You must work for a non-profit since it appears you don't understand how a city should fund itself. I guess if you consider fat pensions and health coverage for city employees an important service provided to you then good luck on that.