State Auditor Rebecca Otto Warns of Troubling Trends in Minnesota Finances

State's shift of its fiscal mess onto property taxes continues

ST. PAUL (1/14/2010) – Minnesota cities' revenues from property taxes have risen 102 percent since 1999, State Auditor Rebecca Otto said today as she released a report on Minnesota City Finances for calendar year 2008. In the report, Otto's office examines long-term trends that show a greater reliance on property taxes, just at the very time Minnesotans and the state's economy can least afford it.

"Minnesota cities deliver some of our most essential services like public safety which includes police and firefighters, as well as street and highway maintenance," said State Auditor Otto.

"To put this into perspective, we are in a foreclosure crisis and an economic downturn, Minnesotans have suffered from wage deflation, the state has a large budget deficit, and as of 2008, there was an acceleration in our reliance in property taxes," said Otto. 

"This report clearly shows how the state has shifted its financial problems onto cities, putting more pressure on property taxes at a time when many Minnesotans can least afford it," warned Otto.
 

Otto's report shows that over the last 10 years, as state government and federal government have cut aid to cities, a proportional increase in property taxes has followed. "Governor Pawlenty's no-new-tax mantra, which is a actually a no-new-state-tax mantra, has really impacted Minnesota families," said Auditor Otto.

Some say that cities need to cut their budgets. The report points out that when adjusted for inflation, city expenditures have decreased by 7 percent between 1999 and 2008.

"Cities have definitely been cutting their budgets, which is prudent in tight times. However, some cities are in better shape than others," said Auditor Otto.  "This trend is the same for revenues," Otto said, pointing out how city revenues have decreased by 7 percent after inflation between 1999 and 2008.

Otto's report shows that between 1999 and 2008, actual revenues from property taxes grew by 102 percent, compared to just 10 percent for revenues from intergovernmental sources. 

State Auditor Otto plans on meeting with Legislative leaders and the Governor to share this important information for consideration during budget negotiations. "If the Governor and the legislature further cut local government aid this session, the trend will be further accelerated," Otto reported. "It is important to note that these are 2008 numbers. With what has already happened in 2009, the shift of the state's financial mess onto property taxes will most likely continue as a strong trend in the 2009 City Finances Report," Otto cautioned.