DFL deficit: Minnesotans face $200 million in property tax hikes to fix the state budget

I’ve been writing for a while about the forces driving increased residential property taxes in Minneapolis and St. Paul. Now, with state government finances in a mess following the DFL “trifecta’s” spending binge starting in the 2023 session, pressures to raise residential property taxes are likely to be felt across Minnesota.

As I noted in February, one way Governor Walz proposes to balance the state government’s books is to punt the financing of certain locally delivered government goods and services onto local governments. So, for example, the governor plans to establish a 5% county share for residential services paid through a state program known as disability waivers. According to his budget, this will save the state about $400 million over the next four years.

If local government is providing these services, shouldn’t local government fund them with taxes on local residents?

Not so fast. As Roger Imdieke, a member of the Kandiyohi County Board who serves on the board of directors of the Association of Minnesota Counties, explained in the Star Tribune recently:

…county government’s primary function is to carry out the mandates of the state and federal government.

We — the county — provide and pay the staff and provide facilities to function, while the federal and state governments provide the funds for the programs.

This includes programs such as Medicaid, veterans’ services, child protection, supplemental nutrition, the courts, law enforcement and more. To pay the costs to administer these programs, counties use the only funding source available to them — property taxes.

Many of the services are mandated by federal or state law and have to be provided whether local residents want to pay the taxes to fund them or not. If federal or state policymakers are going to impose obligations to provide these services on local governments, it is up to those federal and state policymakers to provide the funds to do so.

Other examples include the state’s paid family and medical leave law and the extension of unemployment insurance to hourly workers, both imposed on local governments by that “trifecta.” “[T]he Minnesota African American Family Preservation and Child Welfare Disproportionality Act — MAAFPCWDA,” Imdieke notes, “referred to by those of us in county government as “The Act” — is scheduled to be implemented in 2027 and could add another 5% to 6% to county budgets.”

Stearns County Administrator Mike Williams told WJON:

These cost shifts don’t reduce the size of government or address the deficit with reforms, they simply push the bill onto local property taxpayers.

Under the various budget proposals, cost shifts could raise Stearns County’s tax levy by $9.2-million to $11.6-million. Before accounting for normal cost growth, Williams says that translates to a 9.5% to 11.9% increase in taxes. According to Imdieke:

If legislation is approved in its present forms, this cost-shifting could result in levy increases ranging from 5-9%. Ramsey, Beltrami, Anoka and Dakota counties estimate an average increase of 6.43%. Kandiyohi County estimates the increase for these cost shifts to be 8.1%. And that’s before we consider any labor, construction and inflationary costs.

And, as Dave Beer, chair of the Scott County Board of Commissioners, explained:

We really only have the one lever as the county to raise revenue, and that’s the property tax levy.

KNSI reports that:

Recent estimates suggest property taxes will have to go up statewide by as much as $200 million if the proposal passes.

Back in February, I noted that, according to the Tax Foundation:

…in 2022, the effective rate of property tax paid as a percentage of owner-occupied housing value in Minnesota was 0.98%, ranking us 19th highest in the United States, an unusually low ranking for a Minnesota tax.

How long will that remain the case?