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The changing picture of Minnesota finances
The
7
charts below show why fees and property taxes are soaring throughout
Minnesota.
The changes are due to the policies of no-new-state-taxes pledge signers,
including State Auditor Patricia Anderson and Governor Tim Pawlenty.
They have made Minnesota a financially weaker, more rigid, and more
regressive state.
Rebecca, by
contrast, has worked to develop
permanent
property tax relief.
The history of "no new taxes" in Minnesota:
how tax gimmicks have weakened state and local finances
Top
History
Property
taxes
Aid
cuts drive taxes increases
Fees
Tuition
School
property taxes
A
property tax grab?
Changing
picture
Conclusion
2002: A
Special interest group takes control of Minnesota finances
Governor Tim Pawlenty, State Auditor
Patricia Anderson, and several legislative candidates sign a "no new taxes"
pledge. The pledge is controversial because it caters to a special interest
group funded by wealthy conservatives rather than to the best interests of
the citizens of Minnesota.
2003:
State Auditor Patricia Anderson sets up the Governors "no new state taxes"
agenda
A month
after taking office, State Auditor Patricia Anderson issues a report
recommending historic cuts to local government aid, "softening
up the opposition" for the Governors controversial 2003 "no new taxes"
budget proposal. Pawlenty spokeswoman Leslie Kupchella says that
the governor "agrees
overall with the results he's seeing in the report."
Minnesota Public Radio says
A report from Republican State Auditor Pat
Awada (Anderson) concluded that local government aid could be trimmed by 43
percent without affecting essential programs or prompting local property tax
increases.
Not included in Patricia Anderson's
"essential programs" are things like public health, parks, and libraries.
The League of Minnesota Cities is harshly critical of Anderson's competence,
saying her report uses
faulty methodology and suspect data to reach
sweeping conclusions.
Nevertheless, the no new state taxes agenda is largely implemented with
the help of a wide Republican majority in the state House of
Representatives, most of whom are also pledge signers who refuse to
compromise. The Governor dismisses critics as "victims du jour."
Unprecedented shifts, gimmicks, and other questionable financial maneuvers
are implemented which undermine financial stability as the administration
twists state and local finance into a pretzel to meet the demands of the
special interest pledge, relabeling taxes as fees, spending down assets,
borrowing heavily, and shifting revenues and expenses from one year to the
next.
Minnesota loses its AAA bond rating and property taxes, fees, and tuition
begin to soar.
The
question:
Is
this sound fiscal policy? Is it the most efficient or honest way to raise
revenue? Is it appropriate for state officials to cede their independent
judgment and place a pledge to a special interest group ahead of their
pledge to serve the best interests of the citizens of Minnesota?
Charting the effects of "no new taxes"
Top
History
Property
taxes
Aid
cuts drive taxes increases
Fees
Tuition
School
property taxes
A
property tax grab?
Changing
picture
Conclusion
The most noticed and wide-spread
effect of giving state fiscal policy over to the dictates of a special
interest group has been an explosion in property taxes.
There are
several reasons this is not smart fiscal policy. It tends to ignore
disparities in income and economic capacity, so it unfairly burdens seniors,
people on fixed incomes, young families, and people living in smaller, less
developed communities with lower tax bases. These are some of the
reasons
Rebecca has worked to develop & promote permanent property tax relief.
What is driving
property taxes up so steeply?
Top
History
Property
taxes
Aid
cuts drive taxes increases
Fees
Tuition
School
property taxes
A
property tax grab?
Changing
picture
Conclusion
The cuts to Local Government Aid recommended in
early 2003 by State Auditor Patricia Anderson were indeed "sweeping."
Using "faulty
methodology and suspect data," she advocated for cuts of 43%, much
larger than those eventually enacted. Her recommendations included
classifying such things as libraries, parks, and public health as
"non-essential" and targeting them for large aid cuts,
arguing that this would not prompt local property tax increases.
However
those cuts, combined with large cuts in block grants to counties for
implementing state programs, caused large increases in property taxes. Local
governments, which generally run more efficiently than the state, struggled
to make ends meet.
As you can see, when Anderson and Pawlenty took
office, state aid and property taxes made up roughly equal shares of local
government revenue, but that is no longer the case. As state aid was
cut, taxes began to rise. Local government costs have been shifted
onto property tax. The average of total revenue from state aid and
property taxes has remained remarkably constant - within 1/100th of 1%.
Rebecca
is supporting a bill that would restore some of these cuts and relieve both
local and school property tax increases.
"No new state tax"
rhetoric drives massive fee increases
Top
History
Property
taxes
Aid
cuts drive taxes increases
Fees
Tuition
School
property taxes
A
property tax grab?
Changing
picture
Conclusion
In the drive to adhere to the rhetoric of the
no-new-state-taxes pledge, revenue has also been shifted onto other
forms, such as "fees." Ronald Reagan once said that another way to
spell "fee" is T-A-X. Nearly every fee you can imagine has been
increased - some astronomically.
Once again, the problem is that this is regressive
- meaning it is unrelated to a person's ability to pay. Regressive
taxes and fees are also less efficient means of generating revenue - and
much less transparent.
Family pocketbooks hit hard by "no new taxes" tuition
hikes
Top
History
Property
taxes
Aid
cuts drive taxes increases
Fees
Tuition
School
property taxes
A
property tax grab?
Changing
picture
Conclusion
In addition
to all those new fees under the no-new-tax policies, families are spending
55% more to send their children (or job-changing mom and dad) to Minnesota
's public colleges and universities.
Making
college less affordable expands the achievement and economic gap between the
haves and have-nots, and makes Minnesota less competitive both economically
and culturally.
School Property taxes nearly double
Top
History
Property
taxes
Aid
cuts drive taxes increases
Fees
Tuition
School
property taxes
A
property tax grab?
Changing
picture
Conclusion
Aside from the financial problems of local
governments, the "no-new-state-taxes" policies have caused large increases
in school property taxes.
Like increasing tuition, increasing school property
taxes tend to be unrelated to the ability to pay. People who live in a
community with a low tax base that does not have a lot of high-value
commercial property will be hit harder by this shift of education funding
onto local property taxes. This disparity is exactly why the
legislature moved in 2001 to reform property taxes. That reform has
been largely undone by "no-new-state-taxes".
The other problem with this shift is that it relies
heavily on schools going out for voter-approved levies, a funding mechanism
that is highly inefficient because it involves a school district spending
time and resources trying to pass levies to fund basic needs instead
of directing those same energies to educating our children. This is
combined with thousands of hours of community volunteer time raising tens of
thousands of dollars to promote a levy - time that should be spent on other
community needs - just to pass basic education funding. This
inefficient cycle must be repeated sometimes annually.
Finally, this approach tends to divide communities,
as seniors cannot afford and tend to oppose property tax increases, while
younger families need basic education for their children.
A
"property tax grab"?
Top
History
Property
taxes
Aid
cuts drive taxes increases
Fees
Tuition
School
property taxes
A
property tax grab?
Changing
picture
Conclusion
Advocates of the no-new-state-taxes policies
embraced by State Auditor Patricia Anderson and Governor Tim Pawlenty
have argued that spendthrift local governments and school districts are
refusing to live within their means after the state tightened their
belts for them, and that there is a consequent "property tax grab."
But as the above chart shows, even after historic property tax
increases, both local government and school district revenues have
actually fallen as a percent of personal income, while state
revenues have grown.
What is
wrong with this picture?
Top
History
Property
taxes
Aid
cuts drive taxes increases
Fees
Tuition
School
property taxes
A
property tax grab?
Changing
picture
Conclusion
Overall, the effect of the "no-new-state-taxes"
policies of Governor Tim Pawlenty and State Auditor Patricia Anderson
has been to make Minnesota a more regressive state. The following chart
shows in a single compelling image how our state and local finances have
shifted since they took office.
As you can
see, state taxes have indeed remained relatively flat. To achieve
this, aid to schools and local governments has been cut significantly.
Fees, tuition, local taxes, local fees, and school property taxes have all
increased.
Conclusion
Top
History
Property
taxes
Aid
cuts drive taxes increases
Fees
Tuition
School
property taxes
A
property tax grab?
Changing
picture
Conclusion
Bad fiscal policy by the adherents of "no new state
taxes" at the state capitol has made state and local finances far more
regressive. Because of this, state and local governments are less able to
respond quickly to changing economic conditions, and so are financially
weaker. Overall, Minnesota finances have moved away from a "One
Minnesota" approach and toward an "every man, woman and child for him or
herself" philosophy that will have negative long-term economic and quality
of life impacts across Minnesota. |
