Management Report and Recommendations 12/31/1982

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I City of Lino Lakes Management Report, Page 8 The means of financing the cost of services provided by local government in Minnesota is a complex process. The public policy of collecting taxes at the State level to finance services being provided at the local level tends to increase the complexity. Remembering the basic purpose or function of local government may help to understand the concept better. The basic function of local government is to collect financial resources (i.e. taxes) and to expend these resources to provide services deemed necessary and beneficial to the local community. From a financial viewpoint, it matters little how these ser- vices are financed (i.e., through taxation at the State level or by direct taxation by the local government unit). It matters only that these services are adequately financed and that they are financed on a current and timely basis. Should the available financial resources decrease (as is now happening), the level and /or cost of services must also decrease or alternative financial resources must be obtained. State and local government cannot expend financial resources which do not exist (i.e., which have not been taxed). To do so is deficit financing. 1981 and 1982 have been pivotal years for Minnesota local government units. The purpose of this Report is to detail the changes which have occurred and to offer a perspective of the meaning of these changes. This however, does not present a solution to the situation. The State of Minnesota has determined a solution to their budget situation. A large part of the State's solution has been to pass the problem on to local government, as follows: A. Reduced local government aid to Cities, Counties and Towns and reduced education aids to local School Districts. B. Reduced or frozen homestead credits and other tax -levy related aids and credits. C. "Lost Revenue" to local government in the form of tax -levy related credits to property owners which are not paid to local government units. D. "Lost Revenue" to local government in the form of local government aid reductions after local budgets are adopted and often during the late months of a budget year.