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Major State Aids & Taxes: Aid Descriptions

Education Aid

Education Aid is the total amount of state aid paid to school districts for all K-12 educational purposes. This amount includes state aid for general education, special education, transportation, community education, capital expenditure, secondary vocational, and other miscellaneous programs.

Human Services and Health Care Aid

Human services aid is the total amount of state aid for human services and health care programs, including all income maintenance and social service programs. Although the federal government and the counties contribute money to programs in varying degrees, the amounts in this report reflect only the state's share of the costs. This amount includes state aid for Medical Assistance (MA), Minnesota Family Investment Program (MFIP), General Assistance (GA), MinnesotaCare (MNCare), Social Services (including CCAP and CSSA), Minnesota Supplemental Assistance, Group Residential Housing, Supplemental Nutrition Assistance Program (SNAP), and Title IV Child Support.

Many counties deliver human services programs through one of four county consortia. As of 2015 there were 15 counties participating in a consortium. For these counties, the report and data set allocate human services aid (other than MinnesotaCare) to the counties based on their share of the consortium’s population. Because the report imputes county-level data for human services programs other than MinnesotaCare, the interactive major state aids tool does not display county-level totals for the other human services programs. All of the programs mentioned above are incorporated in the “Total Human Services Aid” amount.

Highway Aid

Highway aid is the total amount of state aid distributed to counties, cities, and towns for highway purposes (including streets, highways, and bridges). It includes four basic types of aid: (1) amounts distributed according to constitutional formula to all counties and eligible cities; (2) amounts distributed to counties, cities, and towns from state bond proceeds; (3) amounts distributed to towns for town roads and bridges; and (4) amounts distributed to counties from motor vehicle lease sales tax revenue. The sources of these funds are the Highway User Tax Distribution Fund (from a portion of the motor fuels tax, motor vehicle registration tax, and motor vehicle sales tax revenues), the sales tax on motor vehicle leases, and proceeds from state bonds.

The Minnesota Constitution sets the distribution formula for 95 percent of the money in the Highway User Tax Distribution fund: 29 percent is allocated to the County State-Aid Highway Fund, 9 percent to the Municipal State-Aid Street Fund for cities with populations over 5,000, and 62 percent to the state Trunk Highway Fund. Allocation of the remaining 5 percent of the fund is determined by the legislature. County and municipal turnback account money is not included in the state totals. This money is used to repair former state highways that have been or are being "turned back" to counties and municipalities.

The 2017 legislature enacted additional funding changes that are not yet reflected in the major state aids data set.

Local Government Aid (LGA)

Local government aid (LGA) is a state program that provides property tax relief by giving general purpose financial support to cities. "Ability to pay" and "need" are the measures used in the formula. Ability to pay is the city's adjusted net tax capacity, multiplied by the average city tax rate.

The legislature enacted a new LGA formula during the 2013 session, effective beginning with aids payable in 2014. The new formula contains three measures of need depending on a city's size:

  • for small cities, with a population less than 2,500, need is based solely on the city size up to a maximum per capita amount;
  • for medium cities, with a population of at least 2,500, but less than 10,000, need is based on (1) percent of housing built before 1940, (2) household size, and (3) population decline from a city's peak population in the last 40 years; and
  • for large cities, with a population of 10,000 or more, need is based (1) jobs per capita, (2) age of housing stock (both housing built before 1940 and housing built between 1940 and 1970), and (3) a sparsity adjustment for cities with a population less than 150 per square mile.

If the aid a city received in the previous year exceeds its "unmet need" (the difference between its needs and its ability to pay), its aid is reduced to its unmet need. (The reduction may occur over a few years since the maximum decrease in any year is limited to the lesser of $10 per capita or 5 percent of its property tax levy in the previous year.) All other cities receive an amount equal to their previous year's aid plus an additional amount based on their unmet need.

Several different LGA formulas were used to distribute aid in years prior to 2013.

Disparity Reduction Aid (DRA)

Disparity reduction aid is a state aid program that is directed to taxing jurisdictions in areas that had inordinately high tax rates in the base year of 1988. The basis for computing the aid amount is the relationship of the area's 1988 tax rate to a benchmark tax rate of 100 percent of tax capacity.

County Program Aid

County program aid (CPA) is a state property tax relief program that provides aid directly to Minnesota counties—CPA is not restricted for a particular purpose . As of 2015, one-half of the funding for county program aid is distributed based on each county's relative shares of (1) persons receiving food stamps, (2) age-adjusted population (population weighted more heavily for the number of persons over age 65), and (3) the reported number of Part I (serious) crimes. The other half is distributed based on a formula that takes into account each county's population and its property wealth. This distribution encompasses some of the distribution factors from the four programs that county program aid replaced in 2004: homestead and agricultural credit aid (HACA), county criminal justice aid (CCJA), family preservation aid (FPA), and attached machinery aid (AMA).

The 2017 legislature enacted a new CPA funding formula that is not yet reflected in the major state aid data set.

Community Corrections Funding

Although counties assume much of the cost of their community correctional services, the state provides direct funding and in-kind services. Counties choose to receive funding and/or services from one of three basic funding systems: the community corrections act (CCA), county probation officer (CPO), and the Department of Corrections (DOC). To keep the counties on a comparable basis, the dollar amount of in-kind services provided by the DOC is included in this report, even though these counties do not receive an "aid payment" per se from the state.

Homestead Credit Refund - Homeowners

The homestead credit refund, formerly called the property tax refund for homeowners, is a program in which the state partially reimburses homeowners for part of their property taxes if the taxes exceed a percentage of household income. Generally, the higher the property tax and the lower the income, the higher the refund. The legislature establishes the income and property tax thresholds, reimbursement rates, and maximum refund amounts for the program. Each qualifying homeowner must apply directly to the state for a refund.

Property Tax Refund - Renters

The property tax refund for renters, also called the "renters' credit," is a program in which the state partially reimburses renters for part of their qualifying property taxes if the taxes exceed a percentage of household income. Generally, the higher the property tax and the lower the income, the higher the refund. The legislature establishes the income and property tax thresholds, reimbursement rates, and maximum refund amounts for the program and sets the amount of rent deemed to represent property taxes. Each renter must apply directly to the state for a refund.

Additional Homestead Credit State Refund (Targeting)

"Targeting" is an additional property tax refund program. The refund targets property tax relief to those homeowners whose property tax increase over the previous year exceeds a threshold percentage set by the legislature. The property tax refund return (M1PR) contains a separate schedule for the targeting refund. The taxpayer files for this refund at the same time and in the same manner as for the regular property tax refund. However, unlike the regular property tax refund, all homeowners qualify for targeting regardless of their household income if the tax increase exceeds the specified percentage.

April 2019