Projection: Minnesota Cities Will Be Broke by 2015

If current revenue and spending trends continue and no policy changes are made, Minnesota cities of all sizes in all regions of the state will be broke by the year 2015. That is the startling finding of a recently completed projection prepared for the League by the Hubert H. Humphrey Institute at the University of Minnesota, and released on June 24 at the League’s Annual Conference in St. Cloud.

According to this projection, cities overall would see a deficit of 35 percent of city revenues by the year 2025. The projection found that it makes no difference where a city is located geographically, how large or small its population, what its tax base is, what the local economy looks like, or what its unique mix of revenue sources is—all types of Minnesota cities will end up in the red if big changes aren’t made to city services, funding for those services, or both.

City uses League study to make its own projections

According to the Isanti-Chisago County Star, the City of Cambridge used the LMC-HHH Institute projection as a basis for its own city budget projection and found similar results. Other Minnesota cities should consider the same exercise as part of their budget-
planning processes.

League to host community conversations in search of solutions

The LMC study's projection serves as a foundational piece for a new League effort titled “Cities, Services & Funding: Broader Thinking, Better Solutions”—an initiative designed to spur a statewide dialogue about city services and how those services are paid for. As part of the dialogue, the League plans to launch a series of community conversations throughout the state over the next 18-24 months.

To develop the projection, the Humphrey Institute relied primarily on data from the Minnesota Department of Revenue and the Office of the State Auditor. Researchers analyzed 11 years worth of historical city revenue and expenditure data, as well as state aid and property tax data. Based on those historical trends, they projected what overall city revenues and expenditures would look like through the year 2025 assuming no policy changes.

The League has already begun to grow public awareness of the problem through release of an animated video and to collect citizen perspectives on city services and funding through a new blog site called Outside the Ox. The thoughts and ideas gathered from contributors will form the basis for policy proposals and possible legislative action.

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