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Budget deal at Capitol could shift tax showdown to cities
by Laura McCallum, Minnesota Public Radio
March 5, 2003

Sen. Pogemiller says if Pawlenty is serious about limiting property tax increases, he should support Pogemiller's proposal to prohibit school districts, cities and counties from raising property taxes for two years. (MPR Photo/Laura McCallum)

As lawmakers debate Gov. Pawlenty's budget proposal, the issue of property taxes is becoming a major focus. DFL lawmakers say the governor's budget would result in significant local property tax increases. They say that violates the spirit of the no-tax-increase pledge on which Gov. Pawlenty campaigned. Pawlenty says his pledge didn't apply to property taxes. He says property taxes are going up with or without his budget.

St. Paul, Minn. — The chair of the Senate tax committee, Minneapolis DFLer Larry Pogemiller, says Gov. Pawlenty's budget does includes a tax increase. He says Pawlenty doesn't increase state sales or income taxes, but property taxes will go up.

"His budget creates -- at a minimum -- $500 million in new taxes next year. In the next couple years. That's just a minimum. That's just if you look at the school piece. If you look at what's going to happen to cities and counties, that number goes up. So I don't know, I will calculate the number, but I bet you it's got to be in the range of a billion dollars," according to Pogemiller.

	Gov. Pawlenty

In fact, Pawlenty's budget doesn't increase property taxes. He points out he can't do that, that's a local decision. But his education budget counts on nearly $1 billion in local school levies approved by voters for the next two years. It also includes a complicated aid formula that would lead to tax increases in more than 70 school districts, if they want to keep per-pupil funding from falling below current levels in the second year of Pawlenty's budget.

The governor would also cut aid to cities and counties by more than $600 million. Pawlenty says he expects local governments to cut spending, rather than simply increasing local taxes to make up the difference. He says his budget, by itself, doesn't raise property taxes.

"I think property taxes will go up, as they usually do, but they won't necessarily go up because of my budget. And we've gone to great lengths to make sure it doesn't happen because of my budget. We've built into our proposal mechanisms to force local units of government to not raise property taxes beyond a certain level," Pawlenty said.

Pawlenty is asking lawmakers to continue levy limits for another year. After that, Pawlenty recommends a switch to reverse referendum. That would allow local units of government to increase property taxes without limits, but voters could also roll back increases. He says his proposal for a two-year freeze on public employee salaries would also help local governments control costs.

Sen. Pogemiller says if Pawlenty is serious about limiting property tax increases, he should support Pogemiller's proposal to prohibit school districts, cities and counties from raising property taxes for two years.

We need to get control of spending at the local level, and until we do, there's nothing that the governor, there's nothing that the legislature can do, there's nothing that the voters can do to stop this escalator from going up. - David Strom

"It's time to be held accountable, governor. You say you want to be held accountable, this is the time. It is not fair to tell people you're not raising taxes, and then to let property taxes go up by that type of margin," Pogemiller says.

Pogemiller acknowledges that property taxes are a local decision. But he says when local governments are faced with the cuts in Pawlenty's budget, they will be forced to raise taxes to avoid cutting essential services such as police and fire.

The group behind Pawlenty's no-tax-increase pledge disagrees. David Strom of the Taxpayers League of Minnesota says local governments have been on a spending spree. He points to a Senate research analysis that found that homeowners' property taxes will go up an average of 15 percent this year, before Gov. Pawlenty's budget would take effect.

"Every time someone looks at the revenue side, they're missing the point. It's the spending, stupid. It's not the taxes, it's the spending. We need to get control of spending at the local level, and until we do, there's nothing that the governor, there's nothing that the Legislature can do, there's nothing that the voters can do to stop this escalator from going up," says Strom.

Strom says instead of a property tax freeze, lawmakers should consider a local government spending freeze. The debate over property taxes demonstrates a philosophical divide among lawmakers. Democrats have long argued that the property tax is the most unfair tax, because it hits Minnesotans regardless of their ability to pay. Republicans have traditionally pushed for cuts in the state's progressive income tax rates.

DFL lawmakers have yet to propose an alternative to the governor's budget, but they'll continue attacking it with property taxes in mind.

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