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Can Minnesota county budgets survive coronavirus?

Ely, St. Louis County
MinnPost photo by Greta Kaul
Minnesota’s 87 counties have been thrust onto the front lines of the fight against coronavirus.

On Tuesday, St. Louis County Commissioner Michael Jugovich sent a letter to Minnesota legislators asking them to make sure the state shares some of the money sent via the federal CARES Act with counties to help offset some of the expenses they’re incurring during the COVID-19 pandemic.

Commissioner Michael Jugovich
Commissioner Michael Jugovich
Among the costs so far, he outlined staffing an emergency operations center, finding temporary housing for those who need to be quarantined, providing health care for those who need it, buying personal protective equipment at inflated costs, hiring contact tracers, expanding ICU bed capacity and IT infrastructure and paying employees overtime.

“This crisis has impacted counties with a multitude of increased and unexpected costs, combined with decreases in expected revenues causing extreme financial hardships on all Minnesota counties,” Jugovich wrote.

Minnesota’s 87 counties have been thrust onto the front lines of the fight against coronavirus. They’re the local governments doing much of the public health outreach associated with the pandemic. They also work with the homeless, the unemployed and those in need of food assistance, populations whose numbers are likely to rise with the economic fallout of the virus.

While Minnesota’s two largest counties – Hennepin and Ramsey — got direct payments from the federal government, much of the CARES Act money’s use will be determined by the Legislature.

Just as times are uncertain for Minnesotans, they’re also unsure for Minnesota counties, which face increased demands for their services as revenues are threatened.

Increased demand

In the first couple weeks of the pandemic here, Minnesota’s counties were busy getting their employees set up to work remotely, said Matt Hilgart, government relations manager for the Association of Minnesota Counties.

“First it was just the bread and butter of getting procedures written and figuring out what to do with employees, how to set up computers, how to buy software packages, get more storage space, virus and security systems,” he said.

Then came the business of figuring out how to deliver the services counties provide with a largely at-home workforce, and do it safely amid a pandemic. Counties needed to get enough personal protective equipment for law enforcement and other front-line workers, help with increased public health demands associated with outreach and contact tracing, get housing support for those whose living situations have become unstable.

There’s the pandemic, and then there’s the economic fallout. With the stay-at-home order in effect for more than a month now, nearly a third of some counties’ residents are currently out of jobs, and when times are tough, people tend to rely on the social safety net administered by counties more. How much the costs of providing those services will rise is uncertain, Hilgart said: “It’s something we put an asterisk next to because we know these costs are going to rise on the social services end the longer this pandemic lasts.”

Looming property tax losses?

Property taxes make up a significant portion of revenue for Minnesota counties. In a typical year, property owners pay these fees in two sums — due in May and October. But this year, many counties are allowing flexibility with deadlines or late fees in anticipation of residents and business owners struggling to pay.

Among them is central Minnesota’s Crow Wing County. In a normal year, about 98 percent of property owners usually pay their property taxes on time, said County Administrator Tim Houle.

If that share goes down to 96 percent, that will have implications not just for the county, but also for the schools, cities and townships that depend on property tax revenue collected by the county.

County Administrator Tim Houle
County Administrator Tim Houle
Washington County, in the east Twin Cities metro, has extended its property tax deadline for those unable to pay for COVID-19-related reasons, too.

County officials are worried about residents’ financial situation now, and concerned that could only worsen by the second deadline in the fall, said County Administrator Kevin Corbid.

“Some might be in a better position to make the first half than they are to make the second half,” he said.

Other taxes affected

It’s not just property taxes that counties are potentially losing out on amid COVID-19. Some of the shutdowns keeping Minnesotans at home are also keeping counties’ tax revenues down.

County Administrator Kevin Gray
County Administrator Kevin Gray
In Washington County, licensing centers have been closed for weeks. That means a revenue loss from building permits or for documents the county provides to residents at a fee.

People are staying current with vehicle license tabs for the most part, said St. Louis County Administrator Kevin Gray. But sales tax on the purchase and lease of vehicles is down. Likewise, less driving means less money in the state’s fuel tax fund, some of which is distributed to counties to fix roads.

Not all counties have local option sales taxes — a tax on top of the state’s sales tax that goes to support county transportation projects — but many that do are anticipating there could be a drop in revenue with many stores closed and consumers spending less money on taxed goods.

Crow Wing County has a half a percent local option sales tax that supports transportation projects. It usually collects between $6 million and $6.5 million annually, Houle said.

The money for 2020’s projects are already in the bank, and Houle hopes the money will be a good economic stimulus, keeping people in the community working, but said if collections are down this year, it could affect projects down the road.

Uncertain times ahead

Governments, including counties, may not be immune to the economic forces unleashed by the COVID-19 pandemic. In a media briefing Tuesday, Gov. Tim Walz warned that some state, local and county officials could be among the next waves of unemployment applications.

County Administrator Kevin Corbid
County Administrator Kevin Corbid
Whether it’s local layoffs or a natural disaster, St. Louis County’s Gray said counties are good at finding resources to support people who have fallen on tough times. In recent years, St. Louis County residents have seen many hardships, from flooding to windstorms to fires and the Husky Energy refinery explosion.

But a pandemic, and the recession experts say is likely to follow, is a threat to counties’ resources to help residents at the same time it creates more demand for services.

“We’ll try to find resources to support folks, I think everybody’s on that page. The harder thing is that loss of revenue and income. That’s the proverbial double whammy,” he said.

In the meantime, counties are forced to deal with uncertainty.

“I think the uncertainty of it all is the hardest part,” Corbid, of Washington County, said. “We’re preparing for multiple scenarios as far as budget impacts. With no one really having gone through something like this in recent times, it’s a little more difficult, but we’ll do our best.”

Comments (7)

  1. Submitted by T.W. Day on 05/06/2020 - 12:15 pm.

    Having been involved in manufacturing during 4 major economic downturns in the last 50 years, I can say that a well run organization has a plan for when the economy or business heads south and automatically goes into that mode before the business fails and files for Chapter 11 protection. It doesn’t take much of a manufacturing engineer to see that counties like Goodhue desperately need reorganizing and efficiency improvements. I suspect that is true for most of the states counties, also. For taxpayers, this is an opportunity to clean house and get the county ready for the up-turn in 3-4 years. For civil servants, it is an opportunity to prove value to the people paying their salaries.

  2. Submitted by Jim Tingsdale on 05/06/2020 - 12:55 pm.

    If, as many believe, we are headed for a depression, or recession at best, the housing market will take a big hit. People that are able to maintain their homes are going to start demanding a re-valuation of property which will further cut into city and county budgets.

    Many urban cities and counties have multiple layers of fat they can cut, but smaller rural areas don’t. Gonna be a hum dinger.

    • Submitted by lisa miller on 05/06/2020 - 06:08 pm.

      I agree. The larger counties did a poor job prior to covid of spending and now this; the problem is they will blame covid and voters probably won’t look any deeper. So often politicians rely on upper managers and the upper managers are disconnected from what is really going on. Add to it politicians tend to rely on the loudest voices and/or the media and you have lots of spending without much in the way of real results.

    • Submitted by Frank Phelan on 05/06/2020 - 08:07 pm.

      “Many urban cities and counties have multiple layers of fat they can cut, but smaller rural areas don’t.”

      Do you have any data to back that up?

      Can we cut all local government aid to rural cities & counties? Some of them get over 25% of their money from the state, which really means they get over 25% of their budget from the Metro taxpayers. Let’s see how well run they are when the blue counties cut off the welfare payments.

      • Submitted by Jim Tingsdale on 05/07/2020 - 09:06 am.

        “Can we cut all local government aid to rural cities & counties?”

        I think that’s likely across the board, but I don’t think it’s rural cities that will miss it most. The TC metro cities (not counties) account for >60% of the state total.

        https://www.revenue.state.mn.us/sites/default/files/2020-02/2020%20LGA%20Amounts.pdf

        • Submitted by Larry Moran on 05/07/2020 - 11:41 am.

          Maybe. There are other ways to look at LGA than just absolute numbers. For example, Albert Lea (not to pick on Albert Lea) receives about $315 per capita; Minneapolis receives about $200. In addition, Minneapolis receives far less than it sends to the state. Maybe we should just keep some of that from now on.

        • Submitted by Frank Phelan on 05/07/2020 - 06:41 pm.

          Jim, I’ve got a serious question for you. I need to be careful with the mods here, but you DO understand that it’s aid per capita that counts, right? I just want to get that out there. It’s possible that you really don’t understand that. Or, maybe you’re being cute with us. I’d truly like to know which it is.

          For example, when you state, “The TC metro cities (not counties) account for >60% of the state total,” what percentage of the state population is that? Is it over or under 60%?

          Further, what percentage of the state tax receipts is that >60% responsible for? Four counties (Hennepin, Ramsey, Dakota, & Anoka) account for the bulk of the state state treasury. Most of those red counties are net takers. (Just think of New York & California versus Kentucky, and you’ll get the idea.)

          I looked at you link, then did some math with the latest city population numbers. I just picked some that looked like big numbers, then included the evil Twin Cites for comparison. The figures are dollars per capita (or per person.) Looks like some of those rural folks are getting a large slice of the pie.

          MPLS: 188
          St. P: 221

          Virginia: 655 (nice)
          Pipestone: 525
          Hibbing: 505
          Two Harbors: 475
          Mt. Iron: 472
          Warroad: 462
          Wadena: 425
          Ada: 390
          Aitkin: 361
          Thief River: 369

          I recall the Texas budget hawk Sen. Phil Gramm, who once said, “Some people are going to have to get out of the wagon & help push.” I’m lookin’ at you, rural MN.

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