In the past couple weeks, it’s become all too clear that majorities at the Legislature are intent on “balancing” the State’s budget deficit on the back of the State’s economic engines: the core cities of Minneapolis, Saint Paul and Duluth. The wildly disproportionate, unfair and unwise cuts that they’ve proposed passing down to residents of our cities — cuts to Local Government Aid, public-school funding and transit — are simply unprecedented.
We’ve never seen a Legislature more intent on attacking the very cities that actually generate most of the jobs and most of the revenue for the rest of Minnesota. We know that most Minnesotans from outside our core cities don’t support this approach: they know, as we do, that we’re one Minnesota and depend on each other. (Check out the great comments of the mayors of Granite Falls and Cloquet in support of Minneapolis, Saint Paul and Duluth.)
But for some reason, the leadership at the Legislature doesn’t get it. That’s why just yesterday, Mayor Chris Coleman of Saint Paul, Mayor Don Ness of Duluth and I sent the letter below to House Speaker Kurt Zellers and Senate Majority Leader Amy Koch. In the letter, we laid out the facts of what the disproportionate cuts they’re proposing would do to our cities’ ability to continue to be the jobs generators and economic engines of Minnesota — not to mention how their bills would raise taxes. We asked them to reconsider this unprecedented approach of “balancing” the State’s budget only on the back of the core cities.
Yes, times are tight in Minnesota and we know the pain has to be shared, but we have to get real: the Legislature can either choose to raise revenue unfairly — through higher property taxes on people who can’t afford it — or fairly, through broad-based, progressive taxes. The sooner the Legislature faces that fact, the sooner we can start moving Minnesota forward again.
March 31, 2011
Senator Amy T. Koch
Majority Leader, Minnesota Senate
75 Rev. Dr. Martin Luther King, Jr. Blvd.
St. Paul, Minnesota 55155
The Honorable Kurt Zellers
Speaker of the House
463 State Office Building
100 Rev. Dr. Martin Luther King, Jr. Blvd.
St. Paul, Minnesota 55155
Dear Leader Koch and Speaker Zellers:
We are writing to object to the unprecedented and unwise budget cuts under consideration at the Legislature that amount to an attack on Minnesota’s economic engines – the cities of Minneapolis, Saint Paul and Duluth.
At a time when we all agree that Minnesota’s top priority should be creating and retaining jobs, these disproportionate cuts in many budget areas are not justified by any coherent public policy and make no economic sense. They hurt Minnesota’s economic future and serve to undo years of progress that we have made in the metro area, working cooperatively with the private sector, on region-wide economic growth. They will divide our state and inhibit the effectiveness of our job-creation efforts at a time when we need to move forward together.
Although we have concerns about economically unwise cuts in many budget areas, we would like to draw your attention to three instances where the economic viability of Minneapolis, Saint Paul, and Duluth is disproportionately targeted.
Local Government Aid. In the tax bill that passed the House of Representatives, Minneapolis, Saint Paul and Duluth are singled out for the elimination of Local Government Aid.
Local Government Aid is not a handout. In fact, our cities generate far more in sales tax and commercial-industrial property taxes than they receive in LGA.
- In 2010, the State of Minnesota collected nearly $800 million in Minneapolis, Saint Paul and Duluth from those two taxes, but returned $142 million in LGA.
Nevertheless, the House tax bill singles out only our cities for cuts to LGA in 2011, while all other cities that receive it would be held harmless this year.
- In 2012, Minneapolis, Saint Paul and Duluth’s per-capita cut would be five times higher than other cities’.
- By 2014, the per-capita cut to our cities would be eight times larger than the cut to other LGA cities.
Minneapolis, Saint Paul and Duluth are leading job creators for Minnesotans, and we provide the same core services and amenities to everyone who visits, lives and works in our cities, regardless of where they pay taxes. For example, Minneapolis hosts 208,000 people every weekday who work in the city but do not live or pay taxes there. Saint Paul is home to 2,000,000 square feet of State office space on which it cannot collect taxes.
This bill will raise property taxes, including on business, even after the cuts to core services that we will be forced to make.
- Analysis by the Minnesota Department of Revenue shows that the House tax bill will result in $859 million in property-tax increases over three years.
- The same analysis shows that the House tax bill will raise business taxes by $63 million next year alone, even after offsetting for business-tax reductions.
- Property taxes are already the largest business tax in Minnesota. 36 cents on every dollar that Minnesota businesses pay in State business taxes goes to property taxes.
Most troubling, the authors of this bill have been unable to provide any objective policy rationale for breaking with the longstanding LGA formula and singling out three first-class cities for elimination.
Although the Senate tax bill does not eliminate LGA for Minnesota’s core cities, our cities take a much larger per-capita cut than other cities receiving LGA.
In short, these disproportionate cuts will hurt our cities’ ability to attract and retain jobs, and will raise taxes, including on business. At a time when we must be focused on creating jobs, these cuts take our entire state in the wrong direction.
Public education. Similarly, bills for funding K-12 public education in both the House and Senate disproportionately target Minneapolis, Saint Paul and Duluth schools for cuts — so much so that once the cuts for the three cities’ districts are subtracted from the total, the rest of Minnesota public school districts take no cuts at all, or actually receive increases in funding.
- The Senate cuts K-12 education funding by $30 million — all of which comes from Minneapolis, Saint Paul and Duluth.
- The House of Representatives cuts K-12 education funding by $14 million overall — but cuts $57 million from Minneapolis, Saint Paul and Duluth, leaving an increase of $43 million for schools everywhere else.
As the mayors of Minnesota’s three largest cities, we have regularly expressed our view that the young people of Minneapolis, Saint Paul and Duluth are the key to our region’s future economic competitiveness. Disproportionately targeting cuts to our core cities will hinder our ability to educate and train a workforce that will enable Minnesota’s businesses to create jobs and compete effectively in the global economy.
Transit. Legislation regarding Metro Transit in the House of Representatives also singles out our cities for cuts. The bill eliminates the entire General Fund appropriation for Metro Transit, leaving the system with an estimated $120 million shortfall for the next two years. It would result in:
- Cutting nearly 45% of regular-route bus service.
- Cutting 240 peak rush-hour trips.
- Eliminating most weekend service.
- 22,000,000 fewer rides in 2012 and 2013.
The bill spares suburban transit systems from any cuts and proposes relatively modest cuts to transit systems in greater Minnesota.
Private-sector leaders share with us that one of the keys to growing jobs in Minnesota is unclogging metro-area roads so that goods and commerce can flow efficiently, and giving workers and visitors options for getting to work and the region’s many attractions. By unwisely singling out Metro Transit for cuts, this bill will hinder economic growth in the metro region, which is the principal jobs generator of the state.
These disproportionate and unwise budget cuts amount to an attack on our state’s jobs and economic engines: Minneapolis, Saint Paul and Duluth. Gutting the economic competitiveness of Minnesota’s core cities serves no rational economic purpose, particularly when job creation is our top priority. In addition, in the metro area these cuts would undo the years of progress that we have made with the private sector in unifying our region around a common strategy for growth and job creation.
We are well aware that the State of Minnesota is, once again, facing a large budget deficit, and we agree that everyone should do their part. Our cities have done their part: we have exercised fiscal responsibility and restraint.
- The City of Minneapolis spends 7% less now than it did 10 years ago, after adjusting for inflation, and has 10% fewer full-time positions. It has also paid down $130 million in debt and restored the City’s AAA bond rating.
- Saint Paul achieved fiscal stability through taking a balanced approach to budgeting, resulting in a zero percent levy increase in 2011 based upon the State’s certified commitment to LGA. That LGA commitment is proposed to be cut under current legislation.
- Duluth has made tough and unpopular decisions in the past three years, including staff lay-offs, cutting library hours and park staff, holding police patrol positions unfilled and reducing retiree health care benefits, which cut Duluth’s unfunded liability by $147 million, a 40% decrease.
We want to work with all of Minnesota’s leaders to help solve the budget deficit. We caution you, however, that these targeted, disproportionate and unwise cuts will significantly harm Minnesota’s ability to grow and retain jobs and compete economically. We strongly urge you to reconsider this approach.
Christopher B. Coleman R.T. Rybak Don Ness
Mayor of Saint Paul Mayor of Minneapolis Mayor of Duluth
CC: Governor Mark Dayton
Senator Tom Bakk
Representative Paul Thissen