This month, House DFL finance committees are unveiling budgets focusing on priorities that make Minnesota a great place to live, work, and raise a family.
Our residents are proud to call Minnesota home because we believe in the value of a good education, safe and sturdy roads, affordable health care, and other quality services.
From the time of our state’s founding, Minnesotans understood that smart investments would lead to growth and shared economic prosperity. They also understood that those investments require all of us to pitch in and support those investments. As the saying goes, you get what you pay for—and Minnesotans have appreciated that relationship.
The 2013 legislative session should be best known for efforts to have transparency and honest communication with constituents and stakeholders about where money comes from and what our tax dollars are spent on. I want to give you some historical context about how we’ve funded Minnesota’s needs as well as the investments that help our state thrive.
According to the Minnesota Department of Revenue, Minnesota’s tax system predates statehood. In 1849, nine years before Minnesota became a state, the first territorial assembly established a property tax levy to support schools. Shortly after in 1862, the Morrill Act, which allowed for the creation of the nation’s land-grant colleges, paved the way for the University of Minnesota to serve our state through teaching, research and outreach.
Property taxes were Minnesota’s main source of revenue until the 1920s. At that time, a rapidly growing number of automobiles boosted our need for a state highway system. In order to pay for it, funding came from an amendment to the state constitution in 1920 authorizing a two percent registration tax on the purchase of motor vehicles. Five years later, lawmakers established a 2 cent per gallon gasoline tax to afford the growing need for additional highway funds.
When the Great Depression hit Minnesota, property taxes became a much less stable source of revenue. In fact, between 1929 and 1933, the number of property tax delinquencies in the state doubled. Families hit by hardship turned to the state for services that local governments and charities were unable to provide.
In order to generate more revenue to meet citizen demand and provide tax relief for property owners, the Legislature established individual and corporate income tax systems in 1933. Over the coming decades, Minnesota began to rely more heavily on the income tax as a major source of state revenue.
In 1967, the state decided to make counties responsible for the collection of property taxes. Doing so caused Minnesota to establish a sales tax to offset the loss in revenue.
With local governments and school districts financed solely through autonomously levied property taxes, disparities in the quality of education between property-tax-rich and property-tax-poor districts became a big problem. In addition, the per capita cost of providing basic services in smaller, poorer communities was higher than in larger, more affluent communities, meaning property taxes in less wealthy areas began soaring.
The solution was the Minnesota Miracle of 1971, which included the creation of Local Government Aid (LGA)—a way of providing property tax relief and ensuring that every city in Minnesota could provide basic services to its citizens. The LGA formula disperses state aid to cities when their needs exceed the amount they can raise in property and local taxes. The Minnesota Miracle continued for 30 years until our property tax structure was changed again by legislative action.
In 2001, Minnesota implemented changes aimed at making the property tax a purely local tax. For example, it provided for full state funding of the general education formula and altered property tax classification rates to establish greater fairness in taxation of different kinds of property.
Fast forward to today. Painful budget cuts over the past decade along with the unwillingness to be transparent about the sources of funding for Minnesota’s core needs have had serious consequences.
Instead of moving forward by investing in our children’s education or repairing our crumbling roads and bridges, middle class families and students have shouldered the burden for our fiscal challenges—and they’re not better off for it.
Property taxes have skyrocketed by 86 percent since 2002. Tuition at our public colleges and universities has more than doubled since 2000. We’ve also slipped from the top ten to 22nd in K-12 education funding.
The House DFL majority plans to put Minnesota back on the path to prosperity by passing a transparent, honest-to-goodness budget that clearly communicates our state’s needs, how we plan to pay for them, and the outcomes we expect to generate through investments in areas like education, property tax relief, and job creation.
At the end of the day, our budget will make sure Minnesota remains a place where people want to live, work, and raise a family.
If you have any questions or comments for me as finance committees continue releasing their budgets, please contact me by phone at (651) 296-4194, by email at rep.jeanne.poppe@house.mn, or by postal mail at 487 State Office Building, 100 Rev. Dr. Martin Luther King Jr. Blvd., St. Paul, MN 55155.