Agenda Packets - 1999/08/23 - Laserfiche WebLink

Home Browse Search

the cities. He stated that deal was not honored for more than a year, and in exchange for that they have ended up with the sales tax on city purchases, which, in his opinion, is a tax on a tax. He stated, as will many things in government, once it occurs, it seems to be very difficult to change. He stated it is placed on the books as an expenditure, and it appears to be in tens of millions of dollars,and the process of eliminating this particular provision is not so glamorous,nor does it strike so close to home, as a rebate does. He stated it has become somewhat of a philosophical struggle, and an ongoing issue,which does come up publicly in the Committee discussion. He stated people do attempt to address it,but they have not been successful in changing it at this point in time. He stated the direct answer to Mayor Coughlin's question is that the tax on city purchases is still there, and still being debated, however, it is yet to be resolved. Mayor Coughlin clarified for the residents that this is a provision that requires cities to pay sales tax on purchases. He stated the residents are taxed to fund the City, and out of those funds purchases are made,upon which a state tax is applied. He stated there has been some effort to eliminate that tax on city purchases,which would essentially reduce the cost of local government. Senator Novak stated that it had occurred to him that they have an entire generation of Legislators who have never had to vote for a tax increase. He stated, however, about ten years ago they were in one of the cycles where the state was in deficit. He stated it took about a decade to recover from the depths of the recession, and the budgetary crisis in Minnesota during the early 1980's. He stated that at this time, the state completely lost its credit rating and at one point did not have enough money to pay its employees. He stated, out of all this, from the Perpich administration and through the Carlson administration, and Legislatures of both parties, the have gradually developed a fiscal strategy and a program that has led to not only regaining the credit rating,but a triple A credit rating. He stated this has led to the tax cuts and other changes that most people view to be very positive. However, at that period of time,there were a number of things done to raise money to help stop the "bleeding"at the state level, and the cities paid the price on that particular issue. He stated he agreed that this should be corrected. City Administrator Whiting stated that he was familiar with other City Managers and Council Members who, upon reviewing these activities, were concerned with the anti-city attitude that appears to have developed within the Legislature.He inquired if Senator Novak would speak to this issue. Senator Novak stated that this was not his personal view and that he thought local and municipal government was probably the most effective government, and"the best buy for the buck, with the exception of the legislature." He stated,however, he had heard this expressed by others including Legislators. He stated that over a continuum of 10 to 20 years,going back particularly to the Perpich years,there had been some changes in law. He stated one of these was changes was that the salaries of all local government officials would be frozen at a level no higher than the governor's salary. He stated this seemed to particularly pose a problem for school districts and the hiring of school superintendents, and the districts became pretty creative in working around this. Senator Novak stated what many people do not seem to understand about the state budget,is exactly where the state dollars are spent. He stated he thought there was a perception on a segment of the public, that the vast majority of state dollars collected in state income taxes are spent to pay the 17 C:\ADMIN\MINUTES\CC\8-9-99.CC