Guest column: State budget deficit spells uncertainty

Published 12:00 am Tuesday, September 24, 2002

City councils throughout Minnesota &045; including yours &045; have been faced recently with the difficult task of making budget decisions that will impact city operations for the next 12 months. They are making these decisions at a time of great uncertainty and with a looming state budget deficit currently projected as high as $2.7 billion.

While legislative and gubernatorial candidates can wait to address the deficit until the next budget forecast is released during December and until the start of the 2003 legislative session, your city council was required by law to specify by Monday, Sept. 16, the maximum property tax levy for the next city budget year which starts Jan. 1.

These decisions are never easy, and this year the decisions are more difficult due to factors over which city councils have little control. The legislature may respond to the state budget deficit by reducing intergovernmental revenues shared with cities. Larger cities are hampered by a state-determined cap on property tax levies. Cities also face budget pressures from escalating health care costs and new responsibilities in the area of homeland security.

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During a typical year, your city leaders must make informed guesses about the needs of your community for the next 12 months. Plans for road improvements, sewer upgrades and park renovations must be carefully planned far in advance. Decisions about hiring a police officer or firefighter must be decided months before the budget is implemented. These decisions vary from community to community and hinge upon locally identified needs and issues.

City councils must be mindful and diligent in all their assessments, because cities’ largest source of revenue – the property tax &045; cannot be increased once the levy has been set. Even if a flood or tornado hits the community during that budget year, changes cannot be made once the property tax is set.

To complicate matters, if the Minnesota Legislature decides to balance its budget deficit by reducing intergovernmental revenues already scheduled for city budgets next year, your city council will have to scuttle current budget plans in order to cope with the loss of funding.

The well-publicized projections of a multi-billion-dollar state deficit are not lost on city councils. That’s why your city council has been making tough decisions to prepare for the consequences that could result from the state’s deficit.

Across the state, some city councils are preparing for their city’s uncertain future by making the difficult decision to increase the only tax available to them – the property tax. Others are looking to alternative sources of revenue, such as user fees, to fund specific municipal operations. Still other councils are considering service reductions.

In preparing its 2003 budget and property tax levy, your city council is dealing with this new uncertainty in the best way it knows how. There is no single answer to these challenges. Even with the best judgement of your city councils and best efforts of your city employees, there can be no assurance that circumstances beyond the city’s control may cause disruptions or reductions in city services. In a time of great uncertainty, your city council is working to make the best decisions possible based on the unique circumstances and needs of your community.