If adopted, the House GOP plan would cut nearly $75 million in LGA for FY2011, all of the cuts coming from Minneapolis, St. Paul, and Duluth. In FY 2012 there would be total cuts of $177 million, of which $111 million would be from Minneapolis, St. Paul and Duluth. In addition, there would substantial cuts in programs affecting all cities, including changes to the Market Value Homestead Credit and disparity reduction aid.
The result of these cuts would be steep property tax increases across the state as the FY 2012 cuts take place, but astronomical increases in property taxes in Minnesota's largest cities.
A House Research Simulation Report (Simulation #11C4) on property tax increases resulting from the proposed cuts indicates that to make up half of the proposed cuts, cities statewide would have increase property taxes by 4.9%. To replace all of the lost revenue, the increase would be closer to 10%.
But the cities of Minneapolis, St. Paul, and Duluth would be crushed by the increased levies. Replacing the lost LGA in Duluth in 2011 would require a nearly 30% increase in residential homestead property taxes. In St. Paul, there would be an over 20% increase in residential homestead property taxes. In Minneapolis, there would be an 16% increase. And it only gets worse in 2012, with an additional $42 million cut before FY2012.
To give you some context about the size of a cut required by this legislation, according to Mayor Chris Coleman, St. Paul could eliminate the libraries, recreation department, and the city attorney's office and still not balance the budget.
At this morning's hearing, Rep. Tim Mahoney (DFL - St. Paul) was incredulous, asking for some rationale for the cuts. Chair Linda Runbeck (R - Circle Pines) stated that there was a "dependency" on state aid that needed to be fixed.
But the hand of the GOP on LGA has now been revealed, to punish the cities that are the economic engines of our state.
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