Cities are running out of cost-cutting options.
The pattern is well-established: When fiscal trouble strikes at the statehouse, it rolls downhill toward city hall -- often snowballing as it goes.
That metaphor is apt this session in St. Paul for reasons other than local topology. The capital city bore the brunt of Gov. Tim Pawlenty's bonding bill vetoes this week, which the governor defended by saying hard times require as much.
Thus far, though, other cities have been spared the blow they took the last time the state budget was in deep deficit, in 2003. That year, state aid to cities (in Capitol parlance, local government aid, or LGA) suffered a cut proportionately larger than other state services sustained. This year, red ink returned to the state budget, but the Republican governor kept LGA off his list of proposed spending cuts.
But the bad news for the 93 percent of cities that receive LGA is that they haven't recovered from the state's last big hit. They teed up a $70 million annual increase last year, only to see it erased by a Pawlenty veto.
The cities are back this year, proposing a new LGA distribution formula that would reach more cities with a more dependable stream of aid, and a new pricetag -- $90 million more per year.
That's an unrealistic figure. With the state staring at a $935 million deficit, the cities' request is a tough sell, on both sides of the partisan aisle. The Senate DFL budget raises LGA $70 million; the House's LGA allocation isn't expected to hit that mark. It should be possible to give LGA a modest boost without raising state taxes.
It's unrealistic for some state politicians to make the claim that freezing LGA won't necessarily lead to higher property taxes. Clearly it has, and it will.
No city official wants to raise the unpopular, regressive property tax. Evidence abounds that Minnesota cities have economized in this decade, striving to minimize levy increases. Yet city officials attest that to preserve public safety and maintain basic infrastructure, they've had no choice but to send property owners higher bills.
Since 2003, residential property taxes in Minnesota have risen an average of 70 percent. An LGA freeze this session would continue that escalation. Hutchinson Mayor Steve Cook says his city is typical: If LGA is not increased, Hutchinson plans a 6 percent spending cut next year, and will still need to boost levies 5 percent to stay in the black. Handling a shortfall entirely with cuts would damage public safety, Cook said.
An LGA increase isn't the Legislature's only tool for blunting the impact of rising property taxes -- and may not be its best one. Its property tax refund program helps people whose tax burden is disproportionately high relative to their income. Enlarging that program would send relief directly to homeowners who need it most.
But if state government does neither of those things this session, Pawlenty and legislators shouldn't claim that they repaired the state budget without raising taxes. Minnesotans are catching on: Cities have been raising property taxes because state government sent its money problems trickling down to them.