Report from state auditor finds as state funding dried up, property taxes made up the gap

With the state sending less money to cities over the past decade, cities have had to significantly increase property taxes to make up the difference. This according to the just-released 2007 Minnesota City Finances Report from our State Auditor. Check out Bob Von Sternberg’s good coverage of the report in the Strib.

This report has some scary numbers in it that really illuminate the state’s “passing the buck” to cities. To quote from the report: “Between 1998 and 2007, actual revenues derived from property taxes for cities grew 98 percent compared to 14 percent for revenues derived from intergovernmental sources.” So with the state sending fewer dollars, cities had to turn to local homeowners to try to make up the difference. Two important points to note:

1) The bulk of spending by cities went to essential city functions like street maintenance and public safety.

2) Cities have not gone on a spending spree – on the contrary, total spending by cities shrunk by 4% from 1998 to 2007, after adjusting for inflation.

The same troubling trend has happened with school districts (see our recently published report, The Lost Decade for a pithy explanation). Per pupil state aid to school districts has fallen since Fiscal Year 2003. The inevitable result – districts have increasingly relied on local referenda to fund schools.  And, just like with cities, the increase in property taxes hasn’t been enough to replace the reductions in state aid, i.e. school districts still have less money.

-Katherine Blauvelt

About Katherine Blauvelt

Katherine Blauvelt served as the Minnesota Budget Project’s policy analyst from 2007 to 2009.
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One Response to Report from state auditor finds as state funding dried up, property taxes made up the gap

  1. esagor says:

    Schools require a huge public investment, and we have a huge deficit. This is not an easy problem to resolve.

    But Pawlenty’s cuts create problems worse than schools simply having less money: they lead to systematic inequality. School districts in wealthy communities have far more means to self-fund through levies than do districts in poor areas.

    One core purpose of centrally funded schools is to equalize school funding for every child. To paraphrase Obama’s inauguration (and change the context), “As for our common [education], we reject as false the choice between our [education] and our ideals.”

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