Tax levy limits not really limited

Talk about it

Minnesota lawmakers had one thing on their minds last May – budgets.

As they worked feverishly in the waning days of the spring session to trim spending and balance the state’s books, the Legislature, at Governor Tim Pawlenty’s behest, passed a law capping how much counties could increase their annual tax levies.

Starting with their 2009 budgets, counties could only raise their levies by 3.9 percent over 2008, according to the law.

Because such levies are primarily funded by local property taxes, the plan was touted as providing much needed relief to Minnesota taxpayers.

The problem, said Tom Reddick, Douglas County auditor/treasurer, is state lawmakers forgot to put an asterisk at the end of that statement.

“The 3.9 percent limit is good election year rhetoric,” Reddick said. “It’s not the real story.”

Take Douglas County, for example.

Its 2009 preliminary tax levy, approved Friday by county commissioners, marks an 11.6 percent increase over its 2008 levy.

And the way it’s structured, it all fits within the state-imposed limits, Reddick said.

“So the 3.9 percent levy limit is in reality 11 percent,” he said.

How does that work?

Reddick said along with the overall cap, legislators created a provision in the law allowing counties “special levies” for certain services they provide, which are not subject to the limitations rule.

Some areas that don’t count against the 3.9 percent limit include county debt, public safety, which removes the jail project and most of the sheriff’s budget, and state-mandated services, such as those provided by the county’s public health and social services departments.

“Unless the state says you don’t have to do some of these things, you have to pay for them,” Reddick said. “Especially in the area of social services, [it says] you will deliver certain services to citizens.

“If those services are reimbursable by the state, great,” he said. “If not, then the county will pay for them.”

The state requires counties to maintain certain services, Reddick said, but is giving them less money to do so.

Combined with dwindling federal funding and soaring energy and fuel costs, it becomes increasingly difficult to keep local levies down, he said.

“[State lawmakers] make us raise taxes because they won’t,” Reddick said. “I don’t think it’s fair, but what are the alternatives?”

Discounting things like the jail project and state-mandated services, most county departments held their 2009 budget increases to between 2.5 percent and 3 percent.

According to the Association of Minnesota Counties, the working relationship between the state and its counties has soured in recent years, and it is in the best interest of the public that it be repaired.

“It is not acceptable for the state to transfer new costs to counties without presenting clear and convincing evidence that the new costs are a county responsibility,” AMC said in a statement. “The fiscal shell-game being played by the Legislature is bad business and even worse government.”

State Senator Bill Ingebrigtsen, R-Alexandria, was one of the legislators who voted for the levy limit law.

Ingebrigtsen said he was somewhat reluctant to support the measure initially, because he doesn’t think the state should be telling counties how to govern, but he didn’t see any alternative.

“It’s very simple to me that the Legislature was listening to constituents, and the counties and cities weren’t,” he said. “It’s a tough thing for counties to have to deal with, but the bottom line is the state should be cutting spending, as should the counties.”

But Ingebrigtsen said the state should also share some of the blame, calling it “disingenuous” for legislators to brag about supposedly capping property tax increases when there are so many exceptions to the limitations.

Reddick said taxpayers need to know the real deal.

“To have this general statement come out that your real estate taxes are only going to rise by 3.9 percent is just plain wrong,” he said.

Tags: tax, levy, limits