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Townships struggle with loss of state aid
By Tom Robertson
Minnesota Public Radio
October 8, 2001
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Some of the smallest local governments in Minnesota, the townships, are getting ready for major changes in the state's tax structure. Many are still trying to work out how the reforms will affect taxpayers. Last summer's special legislative session resulted in a shift in philosophy. The state will now pick up nearly 80 percent in public school costs. But for some cities and townships, the reforms mean the loss of millions of dollars in state aid. Those small governments will have to raise property taxes to maintain services.

Charlotte Rausch is the clerk for Hart Lake Township in Hubbard County. Many small cities and townships have been told they will no longer get any state aid to help pay for local services. That money will go toward public education. Hart Lake Township officials are looking for ways to make up for the loss of state funds, which makes up one-quarter of the town's budget.
(MPR Photo/Tom Robertson)
IN HUBBARD COUNTY IN NORTH CENTRAL MINNESOTA, OFFICIALS ARE still trying to figure out what the bottom line on resident's tax statements is going to look like. This year, the county's 28 townships received nearly $300,000 in government aid from the state. The amount for 2002 will be zero.

"I think it was the timing, and just the way it was done that was just so poor," says Charlotte Rauch, the clerk for Hart Lake Township.

Rauch and nearly 1,800 other township clerks around the state got a letter from the Department of Revenue in August, saying they would no longer receive government aid from the state. In Hart Lake Township, the aids make up one-quarter of their budget.

"I open it up and it says, 'You're not getting anything.' Too bad, so sad. So what are you supposed to do? You're counting on X amount of dollars. So now this money has to be spread out throughout the township," Rauch says.

County auditor Pam Heeren says the state's tax reforms took many small governments by surprise. Minnesota townships hold their annual meetings and set preliminary levies in March. Many townships, already on bare-bones budgets, have had to go back to taxpayers and tell them they'll have to pay more. Heeren says when constituents ask her how the legislative changes will affect them, she doesn't have an answer.

"I honestly don't know. You hear different reports from different sides. One of them is saying, 'The taxes are going to go down for the taxpayers,' and the next group says, 'But they don't realize what it does for this classification.' So, I can't answer that," says Heeren.

Cities and townships will lose about $33 million in state aid. That money will instead go towards funding state education. State Revenue Commissioner Matt Smith says it means a dramatic drop in the amount of taxes that will have to be collected by local school districts.

"Overall, we're reducing the school levy so much that a township can still raise its levy in order to backfill - we call it - for lost aid payments. And for property taxes overall, the bottom line on the tax bill can still be lower," says Smith.

Gov. Ventura and most Republicans supported the tax reform plan, but many Democrats, including Senate Majority Leader Roger Moe, voted against it. Moe calls the plan a shell game, and says though citizens may see some tax relief next year, in the long term it places a greater portion of property taxes on average-valued homes and farms. Moe also says the state is not providing enough for K-12 education, and it's forcing districts to appeal to voters.

"In the past, maybe 50 or 60 school districts might ask for an excess levy referendum," Moe says. "This year, 179 are asking."

At the State Revenue Department, Commissioner Matt Smith admits school districts across the state are seeking nearly twice the amount projected by reform supporters when the tax bill was passed. He says it will be up to voters whether they're willing to give up some of their property tax relief to provide additional funding for their local school district.

"The goal of the property tax reform was to have the property be local and accountable. And there is no tax that is more local and accountable than one that has to face a local voter approval process."

Smith says there's a lot of confusion as local governments and citizens adapt to the tax changes.

"I do sympathize with the county auditors offices and the computer programmers, because one of the real bad things about enacting a tax bill at the 11th hour was that we have more changes to make in the nuts and bolts of the tax system, and less time to do it, in than any previous year," says Smith.

Normally, counties are required to hold truth-in-taxation hearings in early December. But because many counties still don't have the necessary computer software to update changes made by the Legislature in June, that requirement has been waived by the state. Taxpayers should still receive truth-in-taxation statements in the mail before the end of the year.

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