REGIONAL— St. Louis County spending will have increased 14.6 percent over the past five years, based on the 2023 budget approved earlier this month by the county board. At the same time, the county’s levy will have increased by 19.5 percent over that same 2019-2023 period.
That’s according to actual and budgeted county spending along with board-approved property tax levies for that five-year period.
Why is the levy rising faster than county spending?
While the answer is complex, flat state and federal aids are a big factor behind the trend, which means county property owners are paying for a bigger share of the money the county spends each year. Earlier this month, the county board approved a levy increase for 2023 of 4.39 percent.
The county levy, which determines the county’s portion of property tax bills each year, has traditionally made up just about a third of total county spending. The rest comes from a variety of state and federal sources, including grants and various program aids, as well as charges for a variety of county services.
The counties administer a wide range of federal and state programs, including essential services like public safety, human services, and transportation, and they receive a considerable amount of money from the federal and state government to do so.
Among the state aids that St. Louis County relies upon is what’s known as County Program Aid (CPA), a funding source that has been largely flat in recent years, according to St. Louis County Administrator Kevin Gray, even as inflation has eaten into the value of those funds. “Our subsidy for corrections costs has actually gone down,” he said.
Ten years ago, said Gray, the county received a total $25.5 million in aids ranging from CPA to taconite aid, to payments-in-lieu-of-taxes, or PILT. Ten years later, those combined aids amount to $27 million, a slight increase due mostly to a boost in federal PILT payments. Yet, inflation alone has cut the buying power of those funds by more than $5 million over that time, and that means property taxpayers are paying a bigger share of county spending. Ten years ago, county taxpayers were picking up about 29 percent of total county spending. In 2023, they’ll pay 36 percent of the county’s budgeted spending.
It’s a trend that counties in Minnesota have noticed. The Association of Minnesota Counties (AMC) has put increasing CPA funding at the top of its agenda for the upcoming legislative session. According to Matt Hilgart, a government policy analyst with the AMC, County Program Aid was created decades ago as a way for lawmakers to recognize and help fund some of the laundry list of mandates they places on counties in the state. “A lot of what we do is carry out mandates of the state,” said Hilgart. Back in 2002, the Legislature allocated just over $250 million for the program. Twenty years later, while the state budget has doubled in size, the amount allocated for CPA has barely budged. “In inflation-adjusted dollars, we’re seeing $150 million less than we were two decades ago,” said Hilgart.
CPA comprised about 12 percent of a county’s levy 20 years ago, but today it’s down to just seven percent, Hilgart noted.
While the issue has been a hot one for counties for some time, Hilgart notes it’s one that doesn’t get much attention from the public. “Everyone is very familiar with their property tax,” he said. “Most residents aren’t aware of the CPA, and how it interacts with the levy is pretty foreign.”
Counties are undoubtedly eyeing the state’s unprecedented budget surplus and they’ll be actively lobbying for an increase in CPA funds this year. They may find a more receptive audience in St. Paul this year with DFL control of the Legislature. St. Louis County had made progress during last year’s legislative session in advancing a provision that would have boosted state PILT dollars to St. Louis and other northern counties, but when DFLers in the House and Republicans in the Senate couldn’t agree on several critical funding issues, everything fell apart.
“That’s the hand we’re dealt,” said Gray.
Spending on par with inflation
In part because of diminishing federal and state funding, county officials have worked hard to keep spending increases in check even as they’ve invested considerable sums in new facilities as well as maintaining wages and benefits to attract and retain a skilled workforce.
While county spending has jumped nearly 15 percent since 2019, that’s actually somewhat below the rate of inflation, at least according to the Bureau of Labor Statistics’ CPI calculator. County operations don’t take place in a vacuum, so the cost of the goods and services the county purchases go up as they do for everyone else.
And Gray notes that the bulk of the county’s spending is for personnel. The county currently has about 1,880 workers and that jumps to over 2,100 when staff at various regional corrections facilities are added in. And at a time when wages and salaries are rising in most sectors, Gray said the county needs to keep pace. “We’re focused on attracting and retaining our really good core of employees. We continue to be committed to our people.”
Gray noted that many county jobs are more than 9-to-5. For law enforcement to snowplow drivers, to child protection workers, a county job entails availability to respond 24 hours a day, seven days a week. “It’s always tougher to attract people to that kind of shift work,” he said.
The size of the county workforce has been relatively stable over the past decade. For a time, said Gray, the county wasn’t filling some vacancies as workers left or retired. But that eventually became untenable, said Gray, especially as some of the demands for child protective services, mental health, and other issues, increased. Since then, Gray said the county has been adding two or three positions a year on average.
Meanwhile, the county is also making major investments in new equipment and in facilities, according to Gray, particularly in public works. The new Cook facility is one such example and three more county garage facilities are under construction, in many cases replacing facilities that date back 80 years or more. The county garage in Embarrass, which is being closed as part of the consolidation in the new facility being built just south of Tower, still has an outhouse for workers there. Gray said the county has also invested in new equipment, updating its fleet of graders and other vehicles. It’s also updated the technology on county snowplows, utilizing newer brine technologies that eliminate the need for salt, work at lower temperatures, and last longer.
Gray acknowledges that he has advocated for, and the board has supported, similar investments in human services, adding resources for things like mental health supports, chemical dependency treatments, and child protection. The county also changed its medical provider at the jails to improve the level of service, including better mental health and transitional services.
At the same time, Gray said the COVID pandemic and other factors have demonstrated the need for the county to upgrade its technology and security systems, particularly cyber-security. Among the technology upgrades is a relatively new interactive feature on the county website, known as Budget Explorer, which makes it much easier than ever to track county spending and understand where your tax dollars go. That new feature was integral to this reporting.
“We’re not only addressing the inflationary pressures, but we’re making targeted investments that we think better serve our residents,” said Gray.
Most of these investments aren’t funded by federal or state dollars, which means it requires levy dollars to make them.
Higher tax base
The impact of the higher county levy has been limited to some extent by a growing tax base, particularly among residential properties, which saw a 19 percent valuation increase this year. That lowers the overall average property tax rate somewhat, although as in most things related to property taxes, the full story is more complicated.
While values for residential property have increased significantly over the past two years, that’s generally not the case with other classifications of property, which means homeowners are collectively paying a bigger chunk of an increasing tax levy than in the past. At the same time, the county will see about one million dollars less in its fiscal disparities distribution than in past years. That factor alone accounts for about a 0.67 percent increase in the county levy for next year.
Gray said the tax implications of the levy is something of which county officials are well aware. “The board is really conscious of how the levy translates into the taxes residents pay,” he said.
But even as the county’s tax base rises, the Legislature regularly finds ways to shift additional costs onto the levy. Hilgart notes that lawmakers have established a number of property tax reductions and exemptions for some categories of taxpayers, such as disabled veterans and some types of farming property. Hilgart said the exemptions are worthy, but notes that while lawmakers take credit for the exemptions, they haven’t been providing counties the funding to make up for the losses in tax base, which pushes taxes higher for others. “It’s not a benefit the state pays,” he said. “Their neighbors pay for it.”
If there’s a surprise in any of this, notes Hilgart, it’s that counties have somehow managed to get by. “County governments have had to get really creative,” he said.