State of MN Financing Local Government in the 1980's

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Special Report of VRT & CO. Page 17 PROPERTY TAX AIDS Property Tax Aids paid by the State include homestead credits, agricultural credits (paid only to local school districts), plus other relatively minor credits. Homestead credits are (by far) the most significant from the State's viewpoint. Homestead credits represents that portion of the local property owners tax bill (homestead property) which is paid directly by the State rather than the local taxpayer. Homestead credits (deducted from property taxes levies) have been as follows for the past several years: Calendar Amount Year (In $1,000's) % Change 1979 $ 254,089 4.15% 1980 371,313 46.14 1981 447,233 20.45 1982 495,706 10.84 1983 521,541 5.21 The substantial increase in 1980 and again in 1981 were the direct result of State actions to limit property taxes paid by homeowners. As a result of such action, pro- perty taxes (on homestead property) generally decreased in 1980 and 1981 from 1979. More important, when these taxes increased in 1982 (when the State "shifted" the cost of local education from State aid to local taxes) the percent increases were substantial primarily because of the decreases of the previous two years. This was a direct rever- sal of prior years (i.e., 1980 and 1981). It should be noted that increased property tax aids do not increase local revenue. These aids merely change the tax burden from local taxpayers to the State and taxes paid to the State rather than to the local taxing jurisdictions.