State of MN Financing Local Government in the 1980's

Home Search

Imm Special Report of VRT & CO. Page 18 SPECIAL RETIREMENT AIDS Certain State aids are paid for the special and direct benefit of selected local jurisdictions to finance selected retirement programs. They are as follows: (All Amounts In 1,000's of Dollars) Local Police State Minneapolis and Fiscal Year Pensions Fire Pensions Total 1980 - Actual $ 1,110 $ 1,110 1981 - Actual 4,718 $ 1,634 6,352 1982 - Actual 3,889 6,536 10,425 1983 - Actual 5,219 6,537 11,756 1984 - Approp. 6,611 6,537 13,148 1985 - Approp. 7,150 6,537 13,687 As shown above, the State has not reduced its commitment for or to the above special purpose aids and /or special interests. SUMMARY AND CONCLUSION AS predicted three years ago, the financing of Minnesota Local Government in the 1980's will not be the same as in the 1970's. The State's ability to limit property tax increases ended when they increased the maximum homestead credit to $550 in 1980 and $650 in 1981. This State policy decision increased the State's commitment by an esti- mated $250,000,000 per year. This commitment occurred at a time when inflation was driving costs up (C.P.I. -U inflation factors were 12% @ 6/30/79; 11% @ 6/30/80; 12% @ 6/30/81; 10% @ 6/30/82; and, 3% @ 6/30/83) and general economic conditions were limiting the State's primary revenue sources (income tax) to relatively modest annual increases (1% for F.Y. 1980; 10% for F.Y. 1981; and, 9% for F.Y. 1982). When the State budget problem became known, the State was ill- prepared to acknowledge and resolve the problem. For the first year and one -half, it was erro- neously treated as a cash -flow problem. However, when the situation was properly defined, the State did take specific action. The actions taken (and the actions not