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Pawlenty’s county cuts will lead to higher property taxes

Since last December, Gov. Tim Pawlenty has unilaterally cut state investment in Minnesota’s counties by $144 million using his unallotment authority. After the 2010 unallotment announced in June, general purpose state aid to counties in 2010 will be nearly 20 percent less than the amount certified to counties in 2008 and nearly 29 percent less than the 2002 aid amount. And this is before taking into account inflation and growth in county population.

The executive unallotment authority [PDF]  allows the governor to unilaterally reduce general fund expenditures whenever “probable receipts for the general fund will be less than anticipated, and that the amount available for the remainder of the biennium will be less than needed” (i.e., a deficit exists).  By refusing to compromise with the Legislature, the governor ensured that a deficit would exist, thereby allowing him to use the unallotment authority to cut spending without meaningful legislative input.

In 2002, statewide general purpose aid to counties* was $231.4 million. With an impending state budget deficit, 2003 county aid was cut by $73.5 million relative to the 2002 level and slashed by another $46.3 million in the year after that. While some reduction in county aid was inevitable given the size of the state’s budget deficit during the FY 2004-05 biennium, the scale of the cuts forced deeper budget cuts on counties than state government made. Thus began a trend by which Pawlenty shifted the state’s budget problems disproportionately to counties (along with cities and towns) and property taxpayers.

Since 2003, aid to counties has fluctuated, although the overall trend has been downward, particularly after the large cuts that Pawlenty imposed using his unallotment authority. All general purpose county aid after 2003 (with the exception of taconite aid and disparity reduction aid) was received in the form of County Program Aid (CPA). The total amount of CPA that Pawlenty cut using his unallotment authority — including the 2008 cuts announced last December plus the 2009 and 2010 cuts announced in June — comes to $143.9 million.

Based on cuts announced last June, real per capita general purpose county aid in 2010 will be slightly less than half of what it was in 2002. These aid cuts have not been evenly distributed among counties. Click here [PDF] for a table comparing 2002, 2009, and 2010 per capita general purpose county aid (in both nominal and constant 2010 dollars) for all Minnesota counties.  In this table, the 2009 and 2010 aid amounts are equal to the 2009 and 2010 certified CPA amounts minus the 2009 and 2010 unallotments announced by Pawlenty in June.

Most Minnesota counties saw their real per capita general purpose aid decline by over 40 percent from 2002 to 2010 after unallotment. The aggregate decline in real per capita general purpose aid for all 87 Minnesota counties from 2002 to 2010 was $33. On a statewide basis, the decline in real per capita county aid from 2002 to 2010 amounts to 6.3 percent of the 2009 county revenue base.  (The 2010 revenue base is not yet known.)

This analysis is restricted to general purpose county aid.  Most of the dollars that counties receive from the state is in the form of categorical aids to pay for mandated state programs that counties administer.  Based on projections from the most recent “Price of Government” report from Minnesota Management & Budget, the total cut in state aid to counties from 2002 to 2010 — including both general purpose and categorical aids — will be $104 per capita in constant 2010 dollars.

There have been two major effects of the cuts in county revenue imposed by the state over the last eight years.  First, county budgets have shrunk.  Total real per capita county revenue is projected to drop by 7.1 percent from 2002 to 2009, which is greater than the decline in state revenue net of transfers to local governments.  This is an indication that the budget balancing measures taken by the state have hit counties harder than they have hit state government.

The second effect of the large cut in county revenue has been significant increases in county property taxes.  From 2002 to 2009, real per capita county property taxes are estimated to increase by 11.4 percent.  (Without adjusting for inflation and population growth, the increase is approximately 50 percent.)  Due primarily to changes in state law, these property tax increases have fallen disproportionately on homeowners.

It should be noted that county property taxes are included in total county revenue.  Despite an 11.4 percent increase in real per capita property taxes, total real per capita county revenue is expected to decline by 7.1 percent.  This happened because the real per capita state aid cuts far exceeded real per capita county property tax increases, so the total real per capita revenue of counties declined.

The cuts in county aid are part of a broader pattern that also involves cities and school districts.

A disproportionate share of the state’s budget problems have been shifted on to local governments, causing property taxes to increase at the same time that funding for local services and infrastructure falls. Responsible state leadership is needed to honestly deal with the state’s fiscal mess rather than merely shifting the problem to counties, cities, and schools.

Jeff Van Wychen is a fellow with Minnesota 2020 a nonpartisan, progressive think tank based in St. Paul. This article originally appeared on the organization’s website.

*For purposes of this analysis, 2002 general purpose aids include regular homestead and agricultural credit aid (HACA), family preservation aid, criminal justice aid, and transit replacement aid; not included are mobile home HACA, taconite aid, and disparity reduction aid.  The 2002 general purpose county aid total is reduced by the amount of the HACA court offset in order to make the 2002 aid amounts comparable to aid amounts from subsequent years; without this adjustment, the nominal decline in county aid from 2002 to 2010 would have been $30 million greater than the amount indicated above.  Beginning in 2004, the various general purpose county aid programs (with the exception of taconite aid and disparity reduction aid, which are excluded from this analysis) were folded into a single aid program referred to as County Program Aid (CPA).  The 2008, 2009, and 2010 general purpose aid amounts referred to in this analysis consist entirely of CPA.

Comments (8)

  1. Submitted by Greg Kapphahn on 09/22/2009 - 11:58 am.

    Let’s take it down to ground level. The Minnesota tax system has been purposefully rearranged so that the middle and lower middle class (those making less than $200K per year) are paying far more by percentage of the cost of state and local government than are those at the top. That’s you and me, folks.

    Part of the changes in the statewide property tax system back when Ventura was governor changed the allocation of property taxes, placing limits on what could be charged on the most expensive properties and reducing the level of property taxes paid by business concerns.

    The overall effect of the Republican game plan when it comes to taxes, has been, not only to reduce the income taxes paid by the wealthiest among us, but also to reduce the proportion of property taxes paid by those with the highest priced homes, properties, and the businesses those folks own.

    In other words, the total tax burden of the state, no matter what the form of tax, has been shifted away from requiring those most able to pay bearing an equal share of our total tax burden, toward those in the middle paying for everything, while those at the top pay less and less.

    Friends, for every penny the Republicans and the denizens of the MN tax protester’s league claim to have saved you in taxes, they’ve saved themselves and their wealthiest friend at least $1,000. You and I are working harder, taking home less and still getting less benefit from government services while they get to keep on partying hardily.

    After 20+ years of class warfare, the wealthy against the poor and middle class, it appears the wealthy have won. Whats worse is that they’ve won by convincing those with less to think and act against our own self interest in order to protect those who have more by offering us the false and vain promise that if we do so, we’ll someday have as much as they do. (“A rising tide lifts all boats,” etc. which, although it works in sailing, actually works in the opposite direction in economics.)

    How long before our retired, fixed income friends and neighbors are having to give up their homes because their property taxes have risen beyond what they can afford. How bad will our roads, schools, water systems, sewer systems and local police and fire protection services have to get before we realize how completely we’ve been had?!

    How long before we realize that Gov. Pawlenty and his friends have had one major goal for the past many years… to use control of the government to massively pad their own pockets while impoverishing the rest of us.

  2. Submitted by dan buechler on 09/22/2009 - 01:48 pm.

    Greg, didn’t Ventura’s tax policy head ultimately want to rework the consumption tax by increasing taxes on services/fees and perhaps this would have nicked the well to do more? He met with a lot of resistance and he had no base.

  3. Submitted by Alicia DeMatteo on 09/22/2009 - 03:48 pm.


    Thank you for throwing a spotlight on this issue. Let’s just hope this point isn’t lost when our dear governor runs for president with a “no new taxes” pledge.

  4. Submitted by Thomas Swift on 09/22/2009 - 04:10 pm.


    Dakota County holds the line on levy

    The Board of Commissioners voted unanimously for a zero percent levy increase.The Dakota County Board of Commissioners set a limit of zero percent increase for its 2010 property tax levy

    Commissioners voted unanimously for the zero percent increase. Despite increased demand for many county services, cuts in state aid, a 50 percent reduction in investment revenue, and a 4 percent erosion of the property tax base, the County Board chose cost-cutting over tax increases.

    While tax and spend liberals wet themselves over the impending collapse of the concept of the bottomless pocket, competent fiscal managers are starting to pop to the surface.

    Saint Paul Mayor Chris Coleman and his clueless ilk look pretty stupid running around the state with news that the sky is falling because their state slush fund has been trimmed, while hundreds of cities in Minnesota, large and small, continue to quietly do the people’s business with $0 LGA.

    The economic collapse has, and continues to he hard for families, but the silver lining may be a more prudent, more dedicated system of government…and less Democrats Q.E.D.

    KUDOS to the Dakota County Board of Supervisors. Job well done, ladies and gentlemen!

  5. Submitted by dan buechler on 09/22/2009 - 04:20 pm.

    Dozens and dozens of cities get LGA. Maybe we all should move to Chaska.

  6. Submitted by Greg Kapphahn on 09/22/2009 - 05:09 pm.

    No doubt the taxpayers of Dakota County will be deliriously happy with the pittance the average taxpayer will save ($19.00). Meanwhile, the county board will be trying to make up a $9 million deficit.

    But I’m sure no one will notice the missing firefighters, county sheriff’s deputies, highway workers, nor the slower processing time for permits, and the shrinking possibility of getting the county government to respond to violations of property rights or enforce laws and ordinances.

    Need paperwork for that mortgage transfer? Good luck! Need a construction permit? Good luck? Your neighbor’s building a massive new garage too close to the property line? Good luck getting anyone to check it out?

    No doubt the board responded to political pressure, but there will be consequences for their decision and, as always, it will be the middle and lower middle class who will suffer while the wealthy still get whatever they need, whenever they need it.

  7. Submitted by dan buechler on 09/22/2009 - 05:57 pm.

    You are correct greg. The rich can afford to have lawyers on retainer. Good luck to joe and jane working stiff.

  8. Submitted by Virginia Martin on 09/23/2009 - 10:09 am.

    Greg is absolutely right that the tax policy behind these disastrous cuts is to enrich the rich and further impoverish the poor. But there is another purpose: to cut government until it’s so small it can be drowned in the bathtub, in Grover Norquist’s memorable phrase. Republicans have been fighting what they call “big government (by that, they don’t mean the biggest “big government” expenditures of all: defense, no matter how necessary, wasteful) for years. They have been trying to get rid of social security since 1935 when it began, all New Deal, Fair deal, whatever programs aimed at helping the poor and middle classes, like medicare, medicaid, and other programs that keep many people alive.
    Pawlenty’s just trying to drown the beast in the bathtub. It’ll come back to haunt him, though.

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