If a new Humphrey Institute analysis is correct, Minnesota's next governor won't be able to justify cuts in aid to cities by pointing at positive city fund balances, as the last two governors have done. In cities large and small throughout the state, those balances are on the verge of depletion.
A budget deficit is in store for virtually every Minnesota city by 2015, warned the new analysis, commissioned by the League of Minnesota Cities. If spending and taxing patterns are left unchanged, deficits will swell on average to 35 percent of city budgets by 2025, it said.
Of course, spending and taxing trends in Minnesota's 854 cities will not go unchanged. When city costs exceed revenues, an adjustment is mandatory. State law does not permit cities to carry deficits on their books from one year to the next.
What the HHH Institute analysis really says is that the spending cuts and property tax increases that cities imposed over the past decade have not been sufficient to stabilize city finances. More drastic cost-saving and revenue-raising changes are unavoidably ahead.
That's so despite a doubling of city property-tax levies in the past decade, with a growth rate far exceeding the rate of inflation, while virtually every city has reduced government services and cut staff. Many cities have frozen employee wages. Mayors around the state came to the Capitol last month to report that cuts are now taking a toll on police and fire services -- the last things local elected officials want to put on the chopping block.
Those same mayors and their League of Cities counterparts are now enlisting citizens to help devise more lasting remedies. The league has launched a public information campaign that will include community conversations about the future of city services. (See www.outsidetheox.org.)
Those conversations can't happen too soon -- not with another $5-billion-plus state deficit looming in 2012-13, and an election campaign in progress that ought to be all about how government's work can be sustained at an affordable cost.
On his June 25 radio show, Gov. Tim Pawlenty faulted the league "as one of the leading lobby groups for why other taxpayers in Minnesota should give cities more money in state aid." He accused city officials of "scratching their heads, wondering how they can get their revenues up higher," rather than economizing.
That perspective gives cities too little credit for the cost-cutting they've already done, or for the message their league is conveying now. The league's latest effort isn't a plea for higher taxes -- nor should it be. The problems cities face are too big to be solved with tax increases alone.
Rather, city officials seem to be advising Minnesotans that their next fiscal moves will have to be on a different scale, qualitatively and quantitatively, from those the last decade brought. Elected officials see that they now must think about options once thought unthinkable, and they want local voters to see that too.
Some small municipalities should consider dissolution or merger. Some local police and fire forces should give way to regional ones. Some city services should be privatized, or should make wiser use of volunteer labor or online connections. Some should disappear.
And state policymakers should confront this question: If state government cannot keep the 1971 Minnesota Miracle commitment to equitably fund city services, is it fair for the state to forbid cities to impose their own sales and income taxes? The crazy quilt of tax jurisdictions that would result if cities had more revenue-raising options wouldn't be good for Minnesota. But neither are inadequate city services and sky-high property taxes.