Tax court may trim days in June

The Minnesota Tax Court, which hears property tax appeals brought by homeowners and businesses, is considering closing for five days in June, in another sign of the state court system's mounting budget problems.

Tax Court Chief Judge George Perez said his court is coming off a record number of cases heard. But budget cuts and rising costs, including a 27 percent increase in rent paid for shared space in the state-owned Judicial Center, is forcing Perez to consider unpaid leave for the court's six employees, along with a temporary shutdown.

"That's what we're in the middle of figuring out right now, [how] we're going to handle that," said Perez, who noted that the court's relatively small size has made it difficult to absorb budget cuts -- even the $56,426 rent increase. "We're just being cut to the point where the only way we can meet our budget is by taking voluntary leave -- unpaid leave," he said.

Judge Kathleen Sanberg, another tax court judge, said the judges were informed Thursday that they would be taking two-week furloughs, and that the court could shut down for as long as a month next year unless a budget solution was found.

In his supplemental budget in February, Gov. Tim Pawlenty said the court's employees might be required to take 14 days of unpaid leave in each of the next three years.

The tax court's dilemma comes as many judicial officials, including retiring Minnesota Supreme Court Chief Justice Eric Magnuson, have complained that budget cuts are threatening basic court services and shortchanging the public. Magnuson created headlines last year when he publicly challenged Pawlenty, who appointed him, over state budget cuts to the court system.

Brian McClung, Pawlenty's deputy chief of staff, said that tax court is part of the executive branch, not the judicial branch, and that the court's closing and unpaid furloughs were necessary to close a $20,000 budget gap.

The court, whose annual budget is expected to fall from $818,000 to $793,000 by next year, hears appeals of orders issued by the state revenue commissioner, as well as appeals of local property tax valuations, classifications, equalizations and exemptions.

For 2009, property taxpayers in Hennepin County, the state's most populous county, filed 1,894 petitions, most of which ended up before the tax court.

Property values challenged

Property tax officials say the court's budget problems come as the court has dealt with the lingering effects of the housing market downturn, which has led to more property valuation challenges and a higher caseload. Jim Atchison, the Hennepin County assessor, said the number of petitions in the county has mounted in each of the last three years.

"Technically, what they're filing on is the market value [of their property] is too high or incorrect," said Atchison. "But we all know that the real reason is to get a reduction in tax." Many taxpayers, he said, want an assessor's valuations to better reflect the drop in housing and commercial property values.

Ramsey County Attorney Susan Gaertner, who has also publicly criticized budget cuts to the court system, said the tax court's problems are another example of a troubling trend. "The courts are not just another state agency. ... [they are] critical to the life of society," said Gaertner, a DFL gubernatorial candidate who last year said that after years of cost cuts and underfunding, the state's court system was "on the brink of collapse".

'All we have is staff'

John Kostouros, a spokesman for the state's judicial branch, said that much of the court system was under a two-year wage freeze and had offered a voluntary retirement program to try to cut costs.

He said that tax court, like most court offices, had few options other than to cut employees or salaries. "All we really have is staff," Kostouros said. "We don't own the building. So when we take cuts, it comes right out of the payroll, and that directly relates to our ability to process cases."

A state administration department spokesman said the tax court's rent at the judicial center, located in St. Paul, should decline gradually, as the building's debt is paid off. While the court was charged $22.79 per square foot last year, its cost will drop to $20 per square foot next year, said Jim Schwartz, the department's spokesman.

"The rent is probably the biggest thing," Sanberg said in explaining the court's budget troubles. "That completely blows a hole in the budget."

Rep. Paul Kohls, R-Victoria, a member of a House panel that oversees the court's budget, said he was troubled that state officials were in effect charging a state court rent for office space. "This rent [issue], boy, that's curious," said Kohls, who is the Republican lead legislator on the panel and said he had not heard of the rent problems.

"As somebody who's concerned about the effective use of taxpayer dollars," Kohls said, "I hope that alternatives have been considered."