For more information contact: Matt Privratsky 651-296-6860
Property Taxes Projected to Decrease and Credit Rating Improves
Thanks to New State Budget
Moody’s Investors Service has revised Minnesota’s outlook on general obligation bonds from negative to stable. This is big news for our state, as previous fiscal mismanagement led to a downgrade in our rating to negative.
This session, we balanced our budget without gimmicks for the first time in a decade, while solving the $627 million budget deficit and accelerating the payback of money owed to schools. We put Minnesota back on the path towards fiscal responsibility and economic prosperity, and Moody’s rating is proof of that.
In fact, Moody’s released a statement saying the following:
“Minnesota's rating outlook has been revised to stable reflecting the state's strong financial management that has resulted in improved revenue performance, replenishment of budget reserves, and budget balancing solutions that are largely recurring. Moody's expects that the state will continue to exhibit sound financial practices that will lead to further improvement in the state's overall balance sheet.”
I also wanted to write to you because the Minnesota Department of Revenue released new information showing property taxes are projected to decrease for the first time since 2002, thanks to the new state budget.
Increased aid to local governments, sales tax exemptions for cities and counties, and direct property tax refunds for hundreds of thousands of homeowners and renters included in our budget are projected to decrease property taxes next year by an estimated $121 million, or 1.5 percent.
In total, our Budget provides over $300 million in middle-class property tax relief for Minnesotans through the Homestead Credit Refund, retooled renters’ credit and increased aid to counties, cities and townships.
In 2014, the Homestead Credit Refunds will increase by $117 million. Under this program, more than 300,000 homeowners (75% of filers) will see an average refund increase of $212. More than 137,000 additional homeowners will be eligible for a refund.
The previous Legislature raised property taxes on renters who earn less than $55,000 a year by cutting the Renter’s Credit. Our new budget enhances the Renters’ Credit, providing property tax relief to Minnesota renters (including elderly and disabled renters), so that the neediest renters see the greatest benefit. Under the improved Renter’s Credit, 66,000 filers will see a bigger refund, 10,000 additional renters will qualify, and the average renter will see their refund increase by $179.
Our new budget increases Local Government Aid by $80 million, County Program Aid by $40 million, reinstates $10 million in township aid, and provides a sales tax exemption for local governments, allowing them to collect less in property taxes from their residents. This change will provide property tax relief for Minnesota homeowners and renters by reducing local government expenses by an estimated $172 million.
Since 2002, property taxes have gone up 86 percent, placing a huge burden on the middle class. Those increases were due in large part to repeated cuts in aid to local governments, and cuts in direct property tax refunds for Minnesotans. In fact, between 2002 and 2013, County Program Aid was cut by 39 percent, and Local Government Aid was cut by 25 percent – putting pressure on local governments to cut services and raise property taxes.
As a result of the 2011 budget, statewide property taxes increased by $365 million, or 4.5%. An 8 percent increase fell on Greater Minnesota with a 2.6 percent increase in the metro.
A second report from non-partisan House Research found that statewide property taxes are projected to be $181 million (2.1%) less than they otherwise would be if the legislature kept the budget passed in 2011 by the Republican-led legislature in place.
Property tax reductions due to 2014 DFL budget*:
Statewide -$181,311,000 -2.1%
* These figures do not include the additional $135 million in direct property tax relief programs like the new Homestead Credit Refund or expanded Renter’s Credit.
You can find the House Research Tax Simulation Report at the link below.
I hope this positive news can help you have a fantastic rest of the week as we enjoy our last month or so of summer!
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