Yet another right wing organization is spouting “facts” about state aid to Minnesota cities in an effort to undermine the concept of revenue sharing. However, their “facts” are more spin than substance.
The Freedom Foundation of Minnesota wants to eliminate the city local government aid (LGA) program, which was enacted in 1971 in response to an over-reliance on property taxes to fund public services. The LGA program shares state general fund dollars based on each city’s need for revenue versus their ability to generate revenue locally from property taxes.
It is somewhat odd for right wing groups to attack LGA, given that the Pawlenty administration designed the basic components of the current formula in 2003. The major problem with LGA is that funding for it has been slashed over the last six years, causing both property tax increases and reductions in funding for public services. In real per capita dollars, certified LGA has fallen by 35 percent from 2003 to 2009, not counting the 2009 aid unallotment.
The Foundation wants to eliminate LGA so that cities can spend according to their “true needs.” In fact, without LGA many low tax base and high need cities will not be able to fund their “true needs” because they will not be able to generate enough revenue from their property tax base alone.
The Foundation proposal to eliminate LGA would simply be an extension of the Pawlenty policy of the last six years that has produced higher property taxes and deep cuts in real funding for city services. Abolishing LGA would return us to the conditions that led to the property tax revolt that was the impetus for LGA in the first place. The only “freedom” being offered by the Freedom Foundation is the freedom from coherent tax policy.
To prop up its proposal to eliminate LGA, the Foundation “fact checked” three statements from mayors and city officials regarding state aid and the governor’s recent unallotment. Each of the three statements that the Foundation attacked was accurate; the “fact checking” was flawed.
Fact check #1
The Coalition of Greater Minnesota Cities (CGMC) states that “Over the past six years, Minnesota cities have [cumulatively] lost $750 million in local government aid, and as a result property taxes have increased over 65% statewide. This increase in property taxes, however, has fallen short of replacing the lost aid, so essential city services have also been cut.”
In reply, the Foundation claims that city general fund spending has grown by 40 percent from 2003 to 2009 and that spending on public safety, culture and recreation, and streets has risen significantly.
The Foundation’s assertion is flawed for two reasons. First, it completely ignores the impact of inflation and population growth. Second, the Foundation uses unaudited 2009 budget data. According to nonpartisan legislative staff, 2009 city spending data is not comparable to audited data from previous years and should not be directly compared.
The most current year for which audited final city revenue and spending data is available that would be comparable to the 2003 data is 2007. A table from the most recent report on actual city spending from the Office of the State Auditor (OSA) shows that in constant dollars, total city expenditures declined by 6.6 percent from 2003 to 2007.
Adding in four percent population growth from 2003 to 2007, real per capita city spending declined 10.6 percent. Real per capita funding for public safety, streets, and culture and recreation has also fallen from 2003 to 2007.
While statements on growth in city spending through 2009 are problematic due to data problems, it is possible to make reasonable estimates of the change in city revenue using data from Minnesota Management & Budget. From 2003 to 2009, real per capita total city revenue is expected to fall by 6.3 percent.
In every meaningful sense, the CGMC statement is correct. City spending could not have caused the large property tax increases that we have seen over the last six years because real per capita city spending has not grown. The growth in city property taxes is the result of state aid cuts.
Fact Check #2
Wadena Mayor Wayne Wolden states that “The effects of cutting aid from Minnesota communities are as predictable as a Minnesota winter – every year we see higher property taxes and cuts to critical services… The governor’s cuts are wrong and it’s time for state leaders – both Republicans and Democrats – to put their residents first and prioritize funding for safe, affordable communities.”
Mayor Wolden’s comments referred to all Minnesota cities; however, the Foundation’s “fact check” focused exclusively on Wadena. The Foundation claims that from 2004 to 2009 Wadena’s per capita LGA increased from $272.50 to $299.67.
Wait a second, remember in fact check #1 the Foundation had used a base year of 2003. Now in critiquing Wadena’s LGA, its “fact checkers” conveniently switch to a base year of 2004, the year after Pawlenty pushed through massive LGA cuts. In short, rather than using a consistent base year, the Foundation switches to a different base year for its Wadena LGA analysis, ignoring the largest LGA cuts. In addition, the Foundation once again ignores inflation. In constant 2009 dollars, Wadena’s certified 2003 LGA was $330.77–10.4 percent greater than its 2009 LGA.
The bottom line: Mayor Wolden’s statement is correct. Also, it should be noted that the aggregate statewide decline in LGA (the true focus of the Mayor’s comment) is significantly greater than in Wadena. The Foundation ignores the role of inflation and changes its baseline year in order to overlook the largest portion of the aid cuts over the last six years.
Fact Check #3
Following Pawlenty’s unallotment, Saint Paul Mayor Chris Coleman noted that “Minnesota communities were critically hurt today by the governor’s action and nearly every Minnesotan will personally be affected.”
The Foundation argues that the LGA unallotment will affect only 55 percent of the state’s population, so the impact of the cuts is not widespread. However, Mayor Coleman’s comments are clearly directed to all of the governor’s aid and credit unallotments, not just the LGA cut. While many cities do not receive LGA, nearly all receive the market value homestead credit, which is also being cut. In addition, citizens will be affected by the cuts to County Program Aid.
Considering all aid and credit unallotments (which was the focus of the Mayor’s comments), 99.5% of the state’s population reside in communities that will be subject to some cuts.
Furthermore, the benefits of LGA extend beyond residents of cities receiving it. For example, people commute into Minnesota’s core cities and regional centers to work, recreate, or take advantage of other city amenities daily. Even though these commuters may not live in a city receiving LGA, they benefit from the road and public safety systems funded with LGA dollars.
As with every other distortion of fact, the Foundation focused on a single program that did not reflect the breadth of the mayor’s comments in order to create the illusion he was mistaken. Mayor Coleman’s comments regarding the impact of the unallotments were 100 percent accurate.
In summary, the Foundation has taken accurate statements and tried to debunk them using a “fact check” that is based on bogus information, selective information, or by distorting the remarks that it purport to check. The Foundation’s critique is the opposite of fact checking; it is “fact distorting.”
The Foundation’s proposal to eliminate LGA would dump more of the public cost burden on to the property tax, which is regressive. Those families with the least ability to pay would be left with an even more disproportionate share of the tab for public services. Progressives should work to squash this ill-conceived plan.
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