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Simulation Policies
Simulations are available for:
- School finances – Aid and levy by spending category by
school district
- Aids to local governments – Aid received by county, city, or
town
- Income tax burdens – Tax burden by income class and filing
status
- Property tax burdens – Tax burden by property type and
geographic area
Simulation Modeling
Lead time. It is difficult to say how much lead time is required to
run a simulation, because it depends to a great degree on the complexity of the
proposal compared to current law and on the availability of extra data that
might be required to properly model the proposal.
Confidentiality of proposal under development. An author of a proposal
may request simulations while a proposal is under development. These simulations
are treated as confidential between the developer of the proposal and the
analyst(s).
Confidentiality of public proposal. Once a proposal becomes public,
whether by being introduced as a bill, through a press release, etc., any House
member may ask to have it modeled, or House Research may model it at its own
initiative if it is thought to be of general interest. Oftentimes, the
simulation results will be posted on the House Research web site.
Special confidentiality policy (aids to local governments and property tax
models). When a simulation of a public proposal is requested, the simulation
results are distributed as follows:
- First: Results are given to the House author, if there is one (even if the
simulation was not requested by the author). The author may disseminate the
simulation results at any time.
- Within 24 hours: Results are given to the requestor. Shortly thereafter,
the results will be disseminated more broadly if they are thought to be of
general interest, such as by posting them on the House Research Department web
site.
- Exception: The delay periods may be shortened or eliminated if the
proposal is being heard in a House committee or on the House floor within 24
hours.
- Others may request simulations that are variations of the basic proposal,
or may request additional analyses of a proposal, and the author would not
automatically get a copy of these simulations or analyses.
Level of detail (city aid model). Although results are provided on a city-by-city basis, the
information is generally grouped by city type (i.e., center cities, older
suburbs, regional centers, small cities, etc.). These groupings make it easier
to generalize about the impacts of aid proposals on different kinds of cities.
Printouts are also available with cities grouped geographically if
specifically requested.
Level of detail (property tax simulation model). Generally, simulation
results are disseminated at the regional level (the state divided into 28
geographic regions). Simulation results may be requested at a finer geographic
level (individual cities, counties or school districts) in certain situations.
For the 2005 legislative session:
| When comparing: |
To: |
|
Fine geographic detail: |
| property taxes payable in 2005 under current law |
hypothetical property taxes payable in 2005 under a
legislative proposal |
|
is available |
| property taxes payable in 2005 under current law |
projected property taxes payable in 2006 under current law |
|
is not available |
| property taxes payable in 2005 under current law |
projected property taxes payable in 2006 under a legislative
proposal |
|
is not available |
| projected property taxes payable in 2006 under current law |
hypothetical property taxes payable in 2006 under a
legislative proposal |
|
is available |
Reason for presenting simulations at a regional level. In addition to keeping
the printouts to a reasonable size, the assumptions used in making future year
projections are more “robust” at a regional level than they are at a finer
geographic level. The levy and valuation projections, which are developed for
each jurisdiction, are based on fiscal and demographic information and standard
assumptions developed in conjunction with Department of Revenue and Senate
staff. We do not take into account special circumstances that might affect
projections in individual jurisdictions.
Although not encouraged, we will model a proposal at the specific
jurisdiction level when the comparison is between current law and a proposed
alternative when both are modeled on property taxes payable in 2006. That is
because the underlying (possibly faulty) levy and valuation projections are
affecting both “sides” of the comparison equally, allowing the proposal’s
effects to be isolated from the flaws in the underlying levy and valuation
projections.
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How to Read and Interpret Simulation Results
The property tax printouts published by House Research Department display the results of
an effort to simulate, or imitate, the behavior of Minnesota's property tax system. While the
Department strives to make the property tax
simulations accurate, bear in mind that the simulations are estimates. Generally the results
are most accurate on a statewide level, and tend to be less accurate as the jurisdiction under
scrutiny gets smaller.
Each set of printouts is organized so as to compare conditions under two situations. One
situation is called the "baseline," the other is called the "alternative." These
two situations are defined at the top of each page of the printout. All figures in the tables are
expressed in $1,000's, except for the tables pertaining to sample homesteads.
- The baseline generally shows results under current law for a certain year.
- The alternative shows results for a succeeding year under current law or for a proposed
change in the law.
- The printout also shows the difference (change) in conditions between the baseline and the
alternative, in dollar amounts and percentage change.
- The baseline or alternative may also be differentiated by the availability of data for the year.
"Final" simulations are based upon final data reported to the Department of Revenue by the
counties. "Preliminary" results are based on data reported by the counties in preliminary form,
along with a few assumptions related more to the distribution of taxes than to the absolute level of
taxes. "Projected" results are based on data and assumptions that represent "best guesses."
Simulation Page Layout
Each printout page displays results of the simulation for a geographic area, which may be the
state, a region, a county, or an individual city. The upper right-hand corner names the area covered on
the page. Examples: the entire state (statewide), a region (metro area
or Northcentral cities), a specific taxing jurisdiction (e.g., Hennepin County),
or a cluster category (e.g., hi-growth areas).
The top center of the page defines the baseline and alternative.
The market value, net tax and
effective tax rate show the change in property value, change in tax burden, and
relationship between tax burden and market value for each property type.
MARKET VALUE
[Table on the upper left] Market value is the total estimated market value of all properties of the type
indicated, as determined by county assessors.
NET TAX BURDEN
[Table on the right] Net tax burden is the tax on each property class after applying class rates, tax rates, and any
credits that apply to the property class.
EFFECTIVE TAX RATE
[Last two columns on far right] The effective tax rate is the net tax for each property class expressed as a
percentage of market value
The change in net tax burden is of interest to legislators, both
for all property in the area and for particular property classes such as ag homestead or
commercial/industrial. At the bottom of the table, the total burden change for the jurisdiction is
shown, both including and excluding tax increment financing.
LEVIES
[Four tables in center of page] Levies for the
baseline and alternative proposals are shown for each type of taxing jurisdiction (county,
city/town, school district, etc.). The local levy is the portion of the jurisdiction's
levy levied against local taxpayers. The fiscal disparities distribution is
the levy received by the jurisdiction(s) from the areawide pool. The total levy is
the sum of the local levy and the fiscal disparities distribution levy. The next line sums state
Homestead and Agricultural Credit Aid (HACA), Local Government Aid (LGA) and Disparity
Reduction Aid accruing to the jurisdiction(s).
TAX BASE
[Lower left of page] This table summarizes the tax base for the area. The taxable tax capacity is the tax base
used to determine each jurisdiction's tax rate. The table also shows how much tax base within the
area is contributed to tax increment financing and fiscal disparities.
Finally, it also shows the amount of tax base apportioned to the area from the areawide pool
TAX RATES
[Lower right of page] This table
shows average tax rates within the area by type of taxing jurisdiction. Net tax capacity tax rates
are shown in percentages. Market value tax rates are shown in mills.
TAX BURDENS ON TYPICAL HOMESTEADS
[Two tables at bottom of page] These tables show the effect of a proposal on four typical
homesteads in the area. The tables show tax burdens on the average value home for the area, as
well as homes with values one-third above and below the average, and on a home with twice the
average value.
The area's average total tax capacity tax rate is used to compute the tax
burdens on these parcels. For this reason, the table accurately portrays only the typical tax change
on homesteads of the values indicated. The tax change on the average valued home is not
the same as the average tax change on all homesteads (which can be accurately determined from
the net tax burden table above).
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